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Heres why the market tanked when Geithner spoke

Written by: Sean Hyman

Article Overview: Traders and investors alike have been waiting for Geithner’s speech. However, what he ended up doing was opening up more questions than answers. Until we get some “light” as to which way this will all go, the markets will continue to be choppy and erratic.

Heres why the market tanked when Geithner spoke

Geithner reenacts Jim Carrey’s Fun with Dick & Jane!

Traders and investors alike have been waiting for Geithner’s speech. It got delayed once, so investors just knew that when he stepped up to the mic that he’d really have something to say.

However, what he ended up doing was opening up more questions than answers. The market promptly showed him what it thought about it too. It reminded me of the movie “Fun with Dick and Jane” where Jim Carrey gets on T.V. to talk about Globodyne’s stock as he watches the stock chart plummet from $100 a share to a penny while he’s on T.V.

It seems like Geithner didn’t know any more than Carrey did at that moment too.

Basically, Geithner ducked the tough questions that investors wanted answered like: Will banks laden with toxic debt be forced to fail? How will illiquid assets be removed from the bank balance sheets? What will be done to “arrest” the decline in house prices?

The risk now is that the plan could fail before it even gets off of the ground because the Treasury basically said, they are going to do something in the coming weeks to months. We don’t know what exactly that’s going to be yet. And we’re going to partner with investors to do it. However, investors are the ones they are leaving in the dark. How are they supposed to step up to the plate when they don’t even know if some of these banks will be allowed to fail.

So Geithner really missed a shot at sending a stronger signal which would have been a great time to distinguish himself from Paulson.

The Dow dropped 382 points. Bank of America dropped 19%. Citigroup dropped 15%.



Geithner makes his first “rookie mistake”!



I guess we’ll get ready for round two as Geithner testifies before the Senate to see if he has anything noteworthy, but don’t count on it. This guy is already making rookie mistakes.

While we don’t know the first detail, at least he painted some broad brush strokes though. The government will be injecting fresh capital into some of the country’s biggest financial institutions. They will establish a public/private fund to buy up to $1 trillion of bad bank assets. They will also start up a credit facility of up to $1 trillion to promote lending to consumers and businesses.

So unfortunately, we know some basics but no details. He should have kept his mouth shut until he really had something concrete to say. The market wants details – a defined plan of action…and the market didn’t get that yesterday.

This “rookie mistake” is about as bad as Maria Bartiromo getting information out of Ben Bernanke. I think she must have gotten him sauced and batted her eyelashes at him or something because he lost his mind just long enough for her to get the information she needed.

Well, just as he had his “rookie mistake”, we’re now seeing it in Geithner.

In the mean time, it could end up being months before a final program is in place. However, right now each day is like “dog years” to the market. Every passing day means so much right now. The market has been in a holding pattern while Obama and Geithner “get it together”. However, if they wait too long, the market may sell off to new levels.

However, if some “rays of hope” could come soon enough, the market could break out of its range into new highs.

Until we get some “light” as to which way this will all go, the markets will continue to be choppy and erratic.

At least, we may know if the stimulus package gets “truly” passed by the end of the week or middle of next week. If so, that might “buy the market some time” while Geithner gets his head out of his butt.

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Article Tags: balance sheets, bank balance, bank of america, broad brush, brush strokes, citigroup, decline, dick and jane, dow, fun with dick and jane, geithner, great time, house prices, illiquid assets, jim carrey, mic, plummet, rookie mistakes, stock chart, tough questions



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