Timmy talks

With due apologies for the poor picture quality I thought it was important to post a picture of Tim Geithner from his interview today with Steve Liesman. Bob Pisani later said that Geithner looked more "comfortable" than he has in the previous months. While Geithner may have been comfortable, I for one was not. Set in what appeared to be a hotel room in France ahead of the G-20, I felt as if I was watching a scene from the Bourne Supremacy, right before someone gets killed. The ugly flowers and lampshade in the background were the only thing that kept me distracted from Geithner's vampire like mannerisms. I did catch Geithner express his joy at the fact that the IMF will be playing a role in the recovery efforts going forward. Hmmmm, Christine Lagarde, director of the IMF is French. French banks have the most negative exposure to Eurozone debt. One is left to wonder when push comes to shove, might she sympathize a bit with the banks of her motherland?




The US of A uses tax payer money to help fund the IMF. Were the IMF to look to bail out French banks, we would effectively be helping to fund Euro-TARP. I will make no value judgments as to whether such a scenario would be a net positive or not. I do however grow a bit concerned when listening to the language Geithner chooses to use in his responses. The following is taken directly from CNBC quoting the interview.

-------------------------------------------------------------------------------------------------------

STEVE LIESMAN: What about this plan that was out there that the BRICs would buy some-- form a substantial portion of European bonds?

TIM GEITHNER: Well, you know, my sense from talking to the-- my counterparts around the world is, you know, what they want to see is Europe move. They want to see a more effective, more comprehensive financial strategy from Europe that they're very support of having IMF play a continuing a role. And they want to make it clear because the world has such a big stake in Europe solving this that we'll be as helpful as we can.

And- I think all of us have the same view, which is again in support of a broader European strategy that's much more forceful, has much more substantial European resources at-- at stake. We're happy to see the IMF play a continuing role.

-----------------------------------------------------------------------------------------

In his bumbling response, aside from not answering the question, Geithner (as he continues to do throughout the interview) gives no specifics about what the plan might be, and simply says he's happy that the IMF will have a role. It would seem reasonable that America, which funds the IMF should therefore have some concept of what that role might be. So maybe he's keeping it secret, but then why do the interview? If you want to calm markets, wouldn't it make sense to show some sense of confidence that there is at least a concept for a plan, or direction? I did not come away feeling re-assured. While Europe has bought itself time, and continues to give more promises of grand plans for which there is no evidence, Geithner provided no reasons to make an onlooker believe that such a plan really exists. Rather, he seemed to indicate how undefined the plan is as it currently stands. Even if we don't have influence over the IMF that we fund, it would seem reasonable to me that the secretary of the treasury might have some concept of what is going on there. Perhaps others feel as uncomfortable as I do when watching Geithner, which makes me wonder if everyone completely missed how disconcerting that interview was. 

Reality aside, the market looks healthy. We hit 1221 (top of range) again today in the S&P, sold off, and now, @ 340 pm are trading above, @ 1224. Sentiment has clearly changed in the markets. While Google had a blowout quarter, we are seeing markets hold strong despite JP Morgan's poor quarter, (which bodes poorly for next week's other financials' earnings). It looks like a lot of bad things may be discounted in this market already. If all of a sudden we choose to remain in denial about Europe, we might just break out to the upside of this trading range (see first post).

Gold, still following equity indices (and the Euro) showed some weakness today despite settling 1683, up 14.5 bucks. We continue to test the mid 80s, but have sold off multiple times this week having achieved those levels; never breaking through to 1700/1705. Volatility got smoked yet again as options drifted lower with no bids in sight.

For both gold and the equity markets, it will be important to see where futures open up on Sunday night. As the equities settle near their highs at the top end of the "1120-1220 range", an open higher could signal the end of the range bound market, though +6% on the S&P this week was a lot of good run in a short span.

Have a great weekend

-Ben