Wednesday, March 11, 2009

Charlie Rose interviews Tim Geithner...

A sequence of events looks set to kick off a small stock market rally starting from yesterday - we had Citigroup CEO Vikam Pandit saying Citibank is 'operationally profitable' best 2 months in more than a year and Barney Frank (House Financial Services Chairman) said yesterday that they might reinstate the uptick rule[Link], a rule that disadvantage short sellers especially abusive shortsellers that drive down stock prices. That was enough to cause a massive 300+ points rally on the DOW. But that is not all - yesterday night Tim Geithner gave a pretty confident interview on the Charlie Rose show and described a workable plan to bailout the banks. Tomorrow (Thursday) there will be hearings to consider suspension of MTM (mark to market) accounting rules that force banks to recognise losses on assets based on market prices even when the market for the asset is illiquid and distorted. US stocks have been pounded down almost everyday for 2 months and short positions have build up over this period. However, given the economy is still in bad shape such rallies may not be sustainable. There were 4-5 of these relief rallies in the last recession and the market made new lows after each of these rallies. However, the lows or bottoms were not too far each other and the final bottom for the previous recession - the recession we are seeing is a lot more serious so past patterns may not hold . The real rally that came in the previous recession looked very much like the sucker's rally before it so it is always hard to guess where these rallies will take us.

Tim Geithner has improved tremendously since his disastrous public appearance a few weeks ago that caused the stock market to tank badly.


The other parts can be found here. I generally agree with Geithner's strategy to do as much as possible as soon as possible and not worry about doing too much. The lessons from past crisis such as the Great Depression and Japan in the 90s tells us that taking a measured approach will result in poor outcomes. But the 'doing a lot' strategy has a downside which is the US govt has to cope with a big debt from all the bailout and stimulus packages later. The worse case scenario is failure to get the economy going and getting saddled with huge debts as the GDP shrinks. That is why the European govts refuse to take the risk preferring to take the pain of a recession and hope the US stimulus will also bail them out. Whatever it is nobody can blame the Obama Administration for doing too little, in this 2 months he has been in office, they have done more than what previous administrations did in their first 2 years.

18 comments:

Anonymous said...

and obama is paid less than 1/5 of the pinkie loong we have that only know how to take cover or sit pathetically praying for usa to recover & pull us along.
pui.

Anonymous said...

Read this:

http://futurefastforward.com/feature-articles/1201

DezzNutz said...

I dunno. This guy seems a bit to overconfident.

The Obama Administrstion actually thinks the economy will be turned around enough in a year to let the Bush tax cuts expire.

This "doing more to help than what previous gvts did..." that Giethner talks about is a huge gamble. If it doesnt work we are in it deep. REAL deep.

As a small business owner I wasnt unimpressed with what Geithner had to say until the very end. When Rose asked him why he was so confident that the Stimulus and the Nationalization of banks and the proposed "market czars" would work. Geithner retorted, "the government"

He didnt say, the will of the American people to see themsleves thru this, or a, I trust the free market will right itself like it always does. Instead he puts all his faith in "the government".

Unfortunately most people dont trust the gvt, nor should we.

Its gunna be a long recession folks...and dont let 1 or 2 day Dow Jones gains fool you. In the next day or so we will be back to losses

DezzNutz said...

I dunno. This guy seems a bit to overconfident.

The Obama Administrstion actually thinks the economy will be turned around enough in a year to let the Bush tax cuts expire.

This "doing more to help than what previous gvts did..." that Giethner talks about is a huge gamble. If it doesnt work we are in it deep. REAL deep.

As a small business owner I wasnt unimpressed with what Geithner had to say until the very end. When Rose asked him why he was so confident that the Stimulus and the Nationalization of banks and the proposed "market czars" would work. Geithner retorted, "the government"

He didnt say, the will of the American people to see themsleves thru this, or a, I trust the free market will right itself like it always does. Instead he puts all his faith in "the government".

Unfortunately most people dont trust the gvt, nor should we.

Its gunna be a long recession folks...and dont let 1 or 2 day Dow Jones gains fool you. In the next day or so we will be back to losses

Anonymous said...

Hi Lucky,
I appreciate your insight, research & opinion on the issues you posted. Let's get back to the credit crisis issue that has plaggued the world. I am curious who are the winners from this credit crisis? Who are hoarding all the money? Surely the $ which was flowing cannot just disappera into thin air.

So far, I have not read any article about where the $ went from the credit crisis. Similarly with madoff's ponzi, where the $ went? So many news about losses&losers, but no reports about the winners.

Maybe u can share Ur insight in an article.

Anonymous said...

Hi Lucky

Obama Admin talks too much but so far delivered nothing except uncertainty and confusion.

Even staunch Democrat, Mr Krugman is disappointed by the stimulus because it is TOO SMALL, TOO SLOW and full of pork.

Geithner's team is not even fully staffed yet.

Team Obama + Pelosi (and to be fair Team Bush) received $$$ from the winners of the Bear\Lehman demise and AIG bailout.

By the time change comes it could be too late. The ones who created the mess (and left standing) will be in a relatively stronger position than ever before.

Anonymous said...

Maybe most of the European countries have seen the futility of pouring money into stimulus packages, having seen the Japanese done that for years and going nowhere.

Furthermore most European countries do not have the kind of resources of the US Government to keep on bailing out banks, insurers, car makers etc, who are coming back for more and more.

Anonymous said...

The old guards are not going to sit around doing nothing when Obama is out to "change the way things get done in Washington".

This is evident in how the Republicans try to limit the size and scope of the stimulus package and block key Treasury appointments.

Anonymous said...

Read this:

http://futurefastforward.com/feature-articles/1206

Anonymous said...

http://articles.moneycentral.msn.com/Investing/CompanyFocus/when-will-bad-bankers-go-to-jail.aspx

part 2 of wayang coming up.

Anonymous said...

not bad but too slow
http://www.cnbc.com/id/29650863

Anonymous said...

Hi Everyone,

I know this is unrelated to this thread, but I was watching the 11pm news on Channel 8 today (Thursday 12th March), and noticed that there was a sudden switch to other news from the segment whereby South Korea announced a stimulus package to help its citizens tide over this crisis by distributing food credits/coupons.

Seems to me someone at Mediacorp slipped up by allowing viewers to see that other governments, unlike you-know-who, are treating their citizens better by giving out welfare and then hastily tried to cover up by abruptly switching to other news.

Can anyone confirm this? It will indeed be a dastardly act by the media and it will certainly convinced me that the media here is you-know-who's propaganda machine.

Just another Lesser Mortal.

Anonymous said...

Hi Lucky,
I appreciate your insight, research & opinion on the issues you posted. Let's get back to the credit crisis issue that has plaggued the world. I am curious who are the winners from this credit crisis? Who are hoarding all the money? Surely the $ which was flowing cannot just disappera into thin air.


My layman understanding:

There is little hoarding of money. Understand these are money that is not earned but created through borrowings and debts. It is a bubble fueled by debt creation. The bubble cannot go on forever. When it pops money or value gets wiped out. It is a correction. Think of a balance sheet, left side being assets right side liabilities. Currently a lot of wealth or assets on the left side are created through liabilities on the right. And then there are the off balance sheet liabilities that the markets do not factor in such as intangibles like environment and resource degradation.

recruit ong

Deity of Big Cannons said...

Here's a small info:
G2000, Wingtai condos, all these is connected to Party indirectly,

The owner is a HK , emigrated b4 1997. Got PR and showered with awards & so on from Ah Kong.

Now you know why Capital land shopping mall got these brands?

People want branded stuff, and indirectly supported ah kong by buying these brands.

There is almost no way to not stop supporting ah kong. Ah kong's business has become part of our lives.

Anonymous said...

Ah kong is not the best Ah kong. He is also not the worst Ah kong. Think Ah kong can easily win us over by declaring a $1 take home pay pa. We should all hope for a slow recovery else we will all lose our jobs soon. Positive hopes will bring positive results.

Onlooker said...

The Republicans have their reason for letting this "Bush" recession get as bad as it is now with more obstacles being placed to trip up the new administration.
But The concern should be how will the republican's action/inaction affect our local economy.
And is it wise to continue pandering to their whims.
BTW the bank will most likely not be nationalized.

Anonymous said...

Anon,12.11pm

The way I loook at it,the winners of this sub-prime crisis are basically still back to Uncle Sams,lots of them.

Not to mention Madoff,who pocketed US$50 billions into his personal pocket,but just the sub-prime.

US banks lent money to those who wre not eligible,they took the money fr their own depositors and on top of thatm,fr ROW(rest of world-as they love to call)

So the money moved fr ROW to US banks to US sub-prime borrowers and then to the US developers,property developers,what hv you.

Those money are still there,with those rich blokes,the houses are still there,under whose titles I am not too sure.So obviously it is not really a zero sum exercise.

So I have my doubt at those brilliant men who proclaimed that US is finished.Yes,some eager US lenders are finished,and those who follow them blindly,but obviously US is still the largest winner of this crisis.

And if you ask me why,then my answer is:

Asian government are really stupid,this includes Japan,Communist fr PRC and of course PAP fr Singapore

Anonymous said...

Dear Frens
I write this out of desperation.
I have never been able to vote tx to perpetual walkover in my GRC.

Although this is damn que4 de2 (immoral), I tak boleh tahan the stupidity of the 66.6%.
If PAP can punish Serangoon Gardens peasant for low voting percentage by locating FT Dorm, if PAP can punish Potong Pasir peasant by refusing to build MRT for many years, we can also punish PAP voters!

I often eat in AMK due to work reasons. Which means I am contributing to economy of Pinky’s Peasants. Now I lan lan cannot puasa. But at least I can harden my heart and refuse to buy tissue paper from the old people who hawk tissues there.

If these old farts like Pinky so much, why they don’t go RC meeting n ask Pinky subsidize their JB retirement home? Why must I pay $1 for 3 pkt of overpriced pangsai chua?

PAP like to threaten don’t upgrade this, delay public works that, if u dun vote for them. I propose we vote with our dollars also.

BOYCOTT NTUC AND SUPPORT WET MARKET/ SHENG SIONG!
DON’T SPEND MONEY IN OVERPRICED CAPITALMALL PROPERTIES!
SPEND LESS MONEY IN CONSTITUTENCIES THAT VOTE PAP!
DON’T BUY ANY FINANCIAL PRODUCTS FROM DumBaSs Bank!
We can’t avoid giving PAP our precious money thanks to ERP/COE/Petrol Tax/PARF/MRT/SBS. But at least we can use our money more efficiently!