Preview from Europe: Geithner Fails to Deliver

“Don’t believe the hype” crooned Public Enemy and they were right as, after all the fanfare, US Treasury Secretary Timothy Geithner underwhelmed in spades. The Dow Jones fell 200 points from the start of his 30 minute speech to the end and finished yesterday 382 points behind. It reminded me of the Stonehenge sketch from Spinal Tap when it turns out that singer Nigel Tufnel's design for massive mock standing stones is built not to scale but to his original paper drawings by the set designer.

Today’s Market Moving News

• So thumbs down then for a plan that had a nifty name but not much else. The devil was in the LACK of details. Indeed it was alarmingly sketchy in key areas, long on rhetoric but toothless. Investors should realise now 18 months into this debacle that there is no quick fix, no silver bullet. Welcome to the job from hell Timothy. The upshot as I suspected was for a bout of risk aversion with financials bearing the brunt (-13.8%) of the rout and the dollar, yen and bonds getting a bid.
• Perhaps the most striking news overnight was China’s trade balance. Exports came in softer than expected but it was the collapse in imports that caught the eye (down 43.1% YOY). Those almost unbelievably bad Japan machine tool orders we saw Monday (-84.4% YOY) now look all too believable and chilling.
• The chaps at the ECB seem to be warming us up for a rate cut at their March rendezvous. Council member Guy Quanden has just opined that he is “absolutely ready” to cut rates below 2% and that this level was “never taboo” for him. Note there is a raft of his colleagues giving us their wit and wisdom throughout today so watch for hints on the degree of the impending cut i.e. will it be a measly 0.25% or a bolder more Anglo Saxon move. Sweden’s Riksbank have just slashed rates by 1%, so the pressure is on.
• Career opportunities for former high flying CEOs who crashed to earth (though some had a golden parachute).
• And what’s the world coming to you may ask, as Johnson & Johnson (JNJ) win regulatory approval for a prescription pill to treat premature ejaculation.

Irish Life And Permanent Making Plenty Of News
US rating agency Standard and Poor’s moved Irish Life and Permanent’s (IL&P) A- ratings to negative outlook. They said the government support on hand is sufficient to allow IL&P to rework its business and funding profile and basically get itself on a firmer footing. Shape and liabilities are the most important things for the bank to work on seeing as loan-deposit ratio was 243% in October 08.

Meanwhile, an investigation has begun into IL&P on the placing of a €7 billion deposit with Anglo Irish before the end of the bank’s financial year. The stock is off 12% this morning on this news.

Also the courting between EBS and IL&P seems to be making progress with the main stumbling block said to be the former's €500m development property “portfolio”.

Equities

• Credit Suisse (CS), another Swiss bank gone pear shaped, have just posted a $5.2bn loss.
• Steelmaker ArcelorMittal (MT) have come in with a huge $2.6bn loss as the global depression has led to a collapse in sales.
• It seems we are still eating yogurt as dairy kings Danone (GDNNY.PK) posted some impressive numbers this morning with sales up 10%. Guidance was less healthy saying they’d miss “medium term goals”.
• Now we know why Peugeot (PEUGF.PK)/Citroen were looking for a dig out from Sarkozy. They have just reported a €343m loss and expect lots more red ink on the P&L in 2009. Note French industrial production was down 2.8% in December 2008 (far weaker than expected).
• China’s Chinalco is mulling a $20bn investment in mining giant Rio Tinto (RTP). This story has been rumbling for a while now.
• SmurfitKappa (SMFTF.PK) reported results that were in line with expectations. Cash flow generation to pay down debt remains the key focus and challenge. They have suspended their dividend for 2009, cut CAPEX and bought back some of their debt in the market, which is trading cheaply, nice idea.

And Finally… The First Cut Is No Longer The Deepest

Disclosures: None

Comments

[1worldcurrency:]

If he doesn't acknowledge by now that securitized lending is a giant Ponzi shell game he's either part of it or quite stupid.

Feb 11 05:16 AM

[Jim Hawthorne:]

Geithner Blows it?
Maybe not! If the strategy was to drastically lower expectations, make sure we were clear on the economic 'Red Alert', and cheer up the newly united Republican opposition, then it was an overwhelming success!
It did produce bipartisan disappointment!

Feb 11 06:53 AM

[Bill Jencks:]

Hey, c'mon, of course the dollars had it!!

Everyone's looking at the microeconomic view. What about the world
macroeconomic view? What's the ONE thing now that would kill the dollar dead?

Read my article called "China's Torpedo Play: Yuan Set to Replace the
Dollar in Asia" here:

slowsmile.hypocrisy.co.../

China isn't listening, and Geithner is bluffing for the markets. Stay away, well away from the dollar.

Feb 11 08:11 AM

[Crank Monkey:]

Plan A: Timmy rescues financial system.

Plan B: Lassie resues Timmy.

Feb 11 08:27 AM

[yank:]

Of course he's part of it. His fingerprints are all over the Lehman and Bear Stearns fiascos. And his overiding concern is to preserve and protect a corrupt, collapsing Ponzi scheme. American bankers have failed us miserably. They have lit the match on a powder keg that will result in another Great Depression. Thanks guys.


On Feb 11 05:16 AM 1 world currency wrote:

>
> If he doesn't acknowledge by now that securitized lending is a giant
> Ponzi shell game he's either part of it or quite stupid.

Feb 11 09:10 AM

[dare16:]

i think the market would response to the stimulus and plan in the next few days, it does't make sense for the market to close lower than b4 he announce the plan. Dont tell me his actions has negative impact on the economy and banks. If this is true how did the market know. It involves so much money, i think i has some positive impact on the economy according to economic theory.

Feb 11 09:18 AM

[sleepless_o...:]

I fear there is too much interest in saving individual banks and bankers and not enough focus on addressing reform of the system. It is obvious that at least some of the major banks need to be restructured. We need to develop a policy that:

(1) Forces reorganization of insolvent mega-banks each into several individual banks (none too big to fail).

(2) Separates investment banking and commercial banking (Glass/Steagall like).

(3) Does not allow banks to enter any financial arrangement unless it is (a) subject to regulatory audit, (b) publically traded on a regulated exchange or (c) with the Federal Reserve.

(4) Retricts mergers among banks to prevent any too big to fail institutions in the future.

Maybe some other readers will want to argue against this or to add to the list. These are some of the important issues that should be debated.

Feb 11 09:25 AM

[Jake Berzon:]

News like this on JNJ would normally propel its stock to instantaneous new highs. Yet, that doesn't appear to be in the cards in the current economic situation. Before one can ejaculate, he has to get it up and that's difficult to do when you are depressed at least without popping Pfizer's Viagra first. So, Why is Pfizer also making new lows?

Feb 11 09:25 AM

[T.Stamps:]

Good article. When I saw geithner talking I thought, He's a tax
cheat. How can this man be trusted. He only admitted too and payed
up his taxes when he wanted the job. Obama said he wouldn't be
business as usual. He hires lobbyists(said he wouldn't do) and tax
cheats. Since obama won, instead of hope and change we hear
be scared, have fear. This isn't a leader

Feb 11 11:10 AM