Morning Commentary
In Butch Cassidy and the Sundance Kid actor Smother Martin stole the show (just as he did when he hooked up with Newman in "Cool Hand Luke") with his character Percy Garris. Percy is an old school American mining boss in Bolivia who hires the outlaws to escort payroll up and down the mountains. His straightforward candor leads to a telling conversation with Butch and the Kid that maybe we should have had with Ben Bernanke and his team when he took over at the Federal Reserve. While we get the minutes from FOMC gatherings right after, the actual transcript of the entire meeting isn't released to the public until five years later (so much for transparency).
We are now getting a more rounded view of what the thinking was during that period. As it turns out the Fed was clueless. We already know the Fed was flatfooted and slow to act, perhaps displaying a swagger that continues to be the greatest risk to our economy. The players back then are still in charge with Tim Geithner now at the Treasury but back then he was head of the New York Fed. We've heard no mea culpa from the key players, but instead a lot of self-congratulations and backslapping about things like the magical mystery toolbox.
Percy Garris: I'm not crazy; I'm just colorful.
Percy Garris: [singing] Oh don't you remember sweet Betsy from Pike / Crossed the high mountains with her lover Ike / Two yoke of oxen and big yellow dog / Called Shanghai rooster and one spotted hog / Hoodle-dang-hootie-i-doh, hoodle-dang-hootie-ay, hoodle-dang-hootie-i-doh, hoodle-dang-hootie-ay / Shanghai ran off and the cattle all died / last piece of bacon that morning was fried...
Butch Cassidy: [interrupting] I think they're in the trees up ahead.
Sundance Kid: In the bushes on the left.
Butch Cassidy: I'm telling you they're in the trees up ahead.
Sundance Kid: You take the trees, I'll take the bushes.
Percy Garris: Will you two beginners cut it out.
Butch Cassidy: Well, we're just trying to spot an ambush, Mr. Garris.
Percy Garris: Morons. I've got morons on my team. Nobody is going to rob us going down the mountain. We have got no money going down the mountain. When we have got the money, on the way back, then you can sweat.
Percy Garris: Can you hit anything?
Sundance Kid: Sometimes.
Percy Garris: That's what happens when you live 10 years alone in Bolivia: you get colorful...
Seconds later Percy is shot dead.
Ben Bernanke could very well be the reincarnation of Percy Garris who takes over the Fed in March 2006 and seems clueless, but so too his team.
Not Crazy Just Colorful
By the time Bernanke wakes up it's emergency time and the Fed has to begin a series of rate hikes that includes 10 increases over a one year period where even 75bps moves were needed. It was too little, too late, and cemented doom already baked in through a complacent Alan Greenspan. Interestingly, even after the September gathering Tim Geithner said the housing collapse would have no collateral damage on the overall economy. Something tells me that after that meeting Bernanke walked away muttering:
"Morons, I've got morons on my team."
Downgrading Europe...So what or Now what?
America saw its AAA bond rating slashed and it remained the world's top destination for those seeking safety because there is no other viable choice. In some ways it's like being able to take a pill that allows you to imbue on alcohol all night without getting drunk but at the same time it doesn't protect your liver. We are drinking ourselves silly with the false protection of plunging yields and high demand for our Treasuries as proof there isn't a price to pay for excessive debt and political dysfunction. In many ways escaping a harsher initial reaction was the worst thing that could have happened to America but for now those that should know better are knocking them back because it's still happy hour.
Since it wasn't a big deal that our debt rating was lowered then why would it be such a big deal for European countries to suffer the same fate. Outside of Germany nobody considered European debt to be pristine even when some still carried a coveted AAA rating. So, now among its officials there's a collective yawn, but that's exactly how this situation evolved.
Once again what should be a crystal clear call to reform now is being interpreted by the markets as a non-event. Then there's the notion this too shall be papered over. While it's something of a medical marvel to be able to drink a bottle of vodka and not get drunk (marvel in much of the world...lunch in Russia) it requires serious engineering to shut off certain parts of the brain.
It stands to reason that just as engineering continues to advance in other human endeavors, there will be creative ways to hide problems or sweep them away, that would have seen past countries and empires crumble into civil wars or wars with neighbors. Each day more and more marvels of the past seem quaint compared to newer breakthroughs made possible by greater understanding and manipulation of engineering.
Yesterday the European rescue fund EFSF saw its bond rating downgraded. No big deal to the markets yet it really is a big deal, because no matter what kind of engineering feat the papered-over solution to Europe will be its not going to be a modern day marvel unless you consider the world's tallest house of cards something to be in awe of. We sadly were reminded that even modern day ships can crash, mostly through human error, so it is that one day Europe will run aground.
Today's Session
Those calling for China's demise continue to be wrong, at least for now, as the GDP report of 8.9% growth beat consensus and points to a perfect soft landing. It would be very embarrassing if this communist nation navigates a landing that America has botched time after time. The good news is this is good news for Wall Street. Of course, China has been great news for luxury sellers of everything with recent reports saying it was tops for sales of Rolls-Royces and Lamborghinis. Moreover Gucci sales +39% 1H11, and Bottega Ventea +80%, while Prada will open 50 stores over the next three years.
Sure, Chinatown in New York is still the place to get the best knock-offs of luxury handbags, but it appears in China they want and have the cash to pay for the real thing. So, should we really be so myopically focused on the hard landing that may or may not happen there when it's already happened in America?
Earnings reports are mixed but mostly disappointing this morning with Citi missing by a mile, posting $0.38 against consensus of $0.52.
The Empire State region economic data came in better than expected and that probably sealed the deal for a higher start to the session, although, futures are drifting after banks look sluggish.
Comments |
Appropriate advice from President's Job Council would be: RESIGN Mike Breard on 1/17/2012 10:39:42 AM |
RESIGN DR on 1/17/2012 10:42:21 AM |
drop obama care requirements, reduce regulations, stop "pick and choose" bailouts, let capitalism rule who will succeed and who fails, Do not tax the business owners who make money as a punicshment for being successful, entice them with business loans with low interest rates. cathy forrest on 1/17/2012 10:44:46 AM |
Two things are essential: a level playing field and stable rules long term. In other words everyone equal opportunity and known risks rewards. James Carley on 1/17/2012 10:47:23 AM |
Facilitate domestic energy production (oil, gas, coal, nuclear, but not the green fantasies like wind, solar and ethanol). This would create jobs, reduce dependency on unstable/unfriendly suppliers, create jobs, reduce our trade imbalance, and by the way, create jobs. Tim Irving on 1/17/2012 10:48:42 AM |
resign john johnson on 1/17/2012 11:04:41 AM |
Uncertainty is the root problem. That comes from a flaky president and even flakier Congress that is bent on special favors to their rich, ineffective CEO friends. Let's dampen the speculation in the equity market by changing tax code to encourage dividends commensurate with earnings. Make tax on profits paid as dividends by corporations = 10%, and dividends received by individuals = 10%, with provision to shield IRAs to receive the same benefit on withdrawal. Make capital gain tax rate = flat 25% with provision for collection annually based on FMV (rather than deferral until sale of stock). These would highlight performance and return rather than charisma, would lower volatility, and would move the market to investing rather than trading (which is a "no value added" activity). Bob Graham on 1/17/2012 11:24:45 AM |
I would request he re-authorize the Workforce Investment Act that has been on extension since President Clinton's term. Then he has a network already in place throughout every State and region in the country to upgrade the job search/company support job creation efforts. These used to be known as the Private Industry Councils but are now known as Workforce Investment Boards throughout the country. By Federal law, they have private, public, union, and at large membership (volunteer community leadership) locally recruited to implement job creation activities. This Board governs a small paid staff to help the unemployed and those searching for employment in Career Centers. Funding cycles have them one fiscal year behind and "reactive" rather than "proactive". They need to partner with the local community colleges for proactive/current need job creation. Thanks. Kevin Coughlin on 1/17/2012 11:30:59 AM |
I would cancel all welfare (whatever constitutes free money from the government)to all who receive it at the end of one year from the time it is announced. All who receive free money from the government must present visible proof, either on their body or in attendance with their doctor or other professional person who has been INTIMATELY involved for a minimum of 18 months with addressing the recipient's incapacity. This person must swear under oath that the recipient is unable to work to receive living wages. Otherwise, all government funds to the present recipient will be suspended. This would apply to difficult family situations, as well, but the applicant for continuation of government payments would have to engage in a "work-out" process to become independent (ie: "set free"), lasting NO LONGER than 1 year! All the kinks and details are not worked out due to my thinking about this only for the past 10 minutes, but the simpler the better. Carol Harrington on 1/17/2012 11:31:31 AM |
Limit the federal government to the 21 functions and duties enumerated in Article 1, Section 8 of the Constitution. All other actions, rules, laws, agencies, departments, bureaus and regulations are the result of usurpation of state's rights. Stop meddling. Limit yourself to your mandate and let the states and we-the-people determine our own destinies and quality of life. Finally, change the motto of the federal government to "Less is More". George on 1/17/2012 11:32:34 AM |
Repeal the DAVIS BACON ACT of 1935 get rid of the prevailing wage and watch this economy roar ! s. Mack on 1/17/2012 11:38:51 AM |
Limit the federal government to the 21 functions and duties enumerated in Article 1, Section 8 of the Constitution. All other actions, rules, laws, agencies, departments, bureaus and regulations are the result of usurpation of state's rights. Stop meddling. Limit yourself to your mandate and let the states and we-the-people determine our own destinies and quality of life. Finally, change the motto of the federal government to "Less is More". michelle on 1/17/2012 11:51:14 AM |
With all due respect to the office of the president, Obama has done very little that deserves respect. After 3 years at the job he still slithers around to avoid accountability and man up; instead he points to others. The ome half who don't pay any taxes may buy this crap but those of us who do create opportunity, jobs, wealth,and pay taxes don't buy it for a second. His policies / schemes are almost like a vendetta against the values that make our Country great. Now my comments to the question: DROP OBAMA CARE... As an example, it is going to cost my company 300 k when it is implemented; we either pass this on to our clients or it comes off of our bottom line. STOP MEDDLING IN BUSINESS GET RID OF THE REGULATIONS THAT ARE CRIPPLING OUR ECONOMY LOWER IINCOME TAX RATES (personal and corporate) LIVE / OPERATE WITHIN YOUR MEANS The other major one is this: "Obama, own up to your utter failure to lead this country, you don't have it, quit! Tim Abbott on 1/17/2012 11:57:03 AM |
Open up drilling offshore and on federal land to stimulate jobs, growth and energy independence. Dane Roth on 1/17/2012 12:12:28 PM |
Basically, do....nothing. Stop making changes. Business needs some stability and certainty -- whatever it may be. seethedolphins on 1/17/2012 12:18:07 PM |
1. Announce a 1-yr lifting of oil & gas drilling moratoriums (secret: extend it next year for 9 more years). 2. Delay any PPACA actions for one year (+ same secret as above). 3. Start winding down the Federal Reserve. 4. Push for some kind of flat tax. 5. Fire myself from this ridiculous Council job. George Stelzenmuller on 1/17/2012 1:07:35 PM |
Step down !!!!! Mike on 1/17/2012 1:25:13 PM |
The PJC should recommend that Obama immediately resign and hand over the reins of job creation (and his presidency) to a republican. Susan Wilson on 1/17/2012 2:18:43 PM |
Resign, today. diane on 1/17/2012 3:55:42 PM |
Open up all fields of energy for work, when energy cost are low America works, revise the tax code to flat tax for all David mays on 1/18/2012 5:49:40 AM |
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3/28/2024 9:50 AM | LISTEN TO THE MARKET |
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3/12/2024 9:25 AM | ROTATION IN FULL SWING |
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