Geithner Trying to Get Bankers to Take on Risk

[Excerpted from Bill Cara's Daily Report]

On Tuesday the US equity market started off sharply lower, recovered, and then encountered stiff selling in the last 90 minutes. Treasury Secretary Tim Geithner is on Wall Street Tuesday trying to get bankers to take on risk, which is something that is foreign to their nature.

In New York at the close Tuesday, the DJIA (-115.89 -1.49% to 7659.97), S&P 500 (-16.67 -2.03% to 806.25), and NASDAQ (-39.25 -2.52% to 1516.52) showed the nervousness of traders before another media scrum with the President last evening.

The Toronto Composite (-109.12 -1.22% to 8849.39) followed NY, whereas the Venture Board (+0.26 +0.03%to 924.29) remained flat.

In the US equity market, the big loser on the session was the Financial sector (XLF -4.8%), while Basic Materials (XLB -0.4%) was down but not by much as papers and chemicals showed some strength. But within the Financials, the REITs ($DJR -8.4%), Banks ($BKX -7.4%) and Insurance ($INSR -5.7%) showed the most weakness. Wall Street is looking forward to their meetings today with Mr. Geithner to see if and how the toxic assets will be moved off their balance sheets.

Among the Cara 100 stocks that lifted yesterday, SanDisk (SNDK +5.7%) and Teck Corp (TCK +2.8%) were leaders. The losers were led by Teekay LNG (TGP -9.9%), MICC Communications (MICC -9.8%), Perdigao (PDA -8.6%), which is restructuring, announced soaring sales, but also took a big Q4 loss, and Russia’s Vimpel-Communications (VIP -8.1%).

US Treasury bonds added +0.40% to 129.12.

The $USD added +1.08% to 84.20, while the Euro dropped -1.24% to 134.65, the Yen dropped -0.82% to 102.27, and the Cdn Loonie dropped -0.56% to 81.27. The Australian Dollar also pulled back -1.50%. The Pound gained +0.73% to 146.82.

Oil prices ($WTIC +$0.18/bbl to 53.98) gained a tad, while $GOLD stayed flat for most of the day after dropping hard in the early hours, closing down -$13.70/oz at 925.80, which is similar to the first half of last week.

Precious metal spot prices at 9:36am ET today for gold, palladium, platinum and silver were at: 922.60, 204, 1114, and 13.18. Silver has been pushed down the most. But the group seems to be hanging in, and may be a laggard following the broad equity market higher today.

Earlier in the day Tuesday, Asia-Pacific equity markets were mixed: Tokyo (-0.10% to 8480.0), Hong Kong (-2.07% to 13622.1), Shanghai (-2.00% to 2291.6), Australia (+0.82% to 3546.2), and India (+2.08% to 9667.9).

In Europe at 9:30am ET, the French CAC (+0.21%), German DAX (+0.04%) and UK FTSE (-0.69%) have been gaining modest strength after the February US Durable Goods Report was fairly strong.

DJIA equity futures rallied, and the DJIA was up +90 shortly after the open. Prices look like they are headed higher for a continuation of the rally that started Monday.

At the end of the day, the meetings in NY between Treasury Secretary Geithner and Wall Street will decide the outcome. A deal must be worked out regarding the toxic asset plan before Geithner heads to London for the April 2 G-20 meetings.

Comments

[Karen Consumer:]

Please help me understand the bad bank idea I keep hearing about. Private companies won't buy bad securities because they don't want to lose any more money. The government's solution: ask private companies to buy bad securities using taxpayer money as insurance? Or is it: ask private companies to loan the government money so the g'mt can buy bad securites with mostly taxpayer money but not all (my taxes pay 90% of purchase price, private companies pay the other 10%)?

I know I'm just a high school grad, but it seems to me that if these "toxic" assets were worth hanging on to or having, they wouldn't be toxic and they wouldn't need my money to buy them. Did I miss the last round of kool-aid?

Mar 25 04:47 PM

[Repsonsible...:]

Well it mostly a diversion all theses plans Because 75% of these Toxic assets have NO Value , theres nothing there they were insurance polices with NOTHING To Pay out if they had to. Its like You sell me a life insurance policy for $100K. I give You $1,000 for it .You Spend the money and Have nothing left I die my wife trys to collect You say sorry
I can't Pay I spent the money, thats basically what went on . Thats why 75% of these toxic assets are worth NOTHING Just Worthless Insurance polices on Bonds investors bought . Now they dont tell You but there Over a 100 Trillion $$ of these "Polices" out there still today called "Toxic assets" ! Now the other 25% of bad polices have homes backing them so theres some value there maybe 40 cents on the dollar . The banks will Hold on to these hoping for a housing recovery where maybe they can get back 80 cents on the dollar. Of Course if the Gov gets them off there books at 80 cents on the dollar im sure they'll take it , The Tax payer will have to Pay 95 % of that it will add apx in the area of $25 Trillion to the FDICs Debt s. WHICH OF COURE THERE is no way they have . The numbers have become ridiculous Its only a matter of a year or so before the whole thing crashes down on the public. My self Ive invested All My money in foreign accounts in Gold as that will be the only way to preserve your wealth , barring that You could Buy Gold coins , The Canadian Maple gold leaf is probably a good bet . Im NOT a Professional money manager these are Just my personal opinions. I spent my life as a Engineer and am now retired.

Mar 26 10:48 AM

[Repsonsible...:]

Well Today Obama Meets with Big Bankers to BEG for there forgiveness for that bill Congess passsed trying to STOP those crooks from ripping off MORE of Your Tax money . He'll assure them the Bills dead and his boy Timmy will make sure that they can UNLOAD ALL of there Toxic Loans on the American Tax Payer for WAY more then there worth and then they'll really be able to give out HUGE Bonuses next year !
He'll also promise NOT to Do Or say anything that they might take offense at !
Is this the Change He promised , when he said he was going after the bad actors on WS ?? No this just another slick politcian , once again lying to The People to get elected then doing what evers going to make him Richer when He leaves office ! So there it is all the other stuff is just the usual smoke and mirrows , this guy is out for Himself period . He could care less about the American People ,, Kinda like when Clinton said "I feel Your Pain" while he was really feeling someting else ;) So Its Washington and WS ,, Vs You who do You think will be better off 4 years from now ???

Mar 27 09:43 AM