Good news, good news, bad news

The Dow is up 6.5 percent.  And Tim Geithner will be Treasury Secretary.  That’s the two pieces of good news.  The bad news is that the market is up because of a political appointment.  That’s really very bad news, especially since the other logical candidates for the post were extremely competent.

Comments

maybe the market is up on news/noise like this because the uncertainty of the interregnum era is being resolved. this is akin to realizing volatility. (ie maybe at this point we have seriously positive theta.)

My co-worker has a theory: The market is up not because Geither is better than Summers. Either of the two would have been good. Instead, the market is up because the appointment of one of them means that the country has someone who can start making the important decisions in economic matters. Previously, says the co-worker, the market had been spooked because it seemed like there was no one in charge; Paulson couldn't speak for Obama, and Obama didn't seem to be able to make big decisions without his team in place.

How do we know it's up for this exact reason? It's not like this isn't a very volatile time.

a lot of people have been getting into the markets recently given recent reports that the market is "groping for a bottom"

I am pretty outraged that you would say the political appointment is the reason for the market surge. You really think you know why the market moves? Why did the market fall 500 points at the end of the day yesterday? How about the day before that?

Today was the first time I have bought a stock since Obama was elected. I could care less about Tim Geithner, beyond that Obama might have made a worse pick. Summers was a better candidate but the PC police would never let him serve.

So why did I buy stocks. I saw 4 good companies with stock prices that had dropped so much they looked like a bargain.

probably the markets saying bye to paulson

Correlation is not causation.

blabla,

Nice point. Additionally, it happens to be someone that will require absolutely zero time to be up to speed on any of the issues, tiny details of the issues, current proposals, past and current plans, the extent and severity of the crisis, abilities and duties of the secretary of the treasury, and most likely knows exactly who is in the most trouble and why there are in that trouble. This knowledge base is irreplaceable at this juncture in history. He is probably working right now.

Note that he can behave as treasury secretary during the time between now and the inauguration. This pick over Larry Summers shows the pragmatism of Obama and is a testament to his competence.

That the market has rallied on the news is good news, not bad. Markets should and do respond to the political environment because they one method of determining valuation. Valuation is and must be influenced by future values, which in part will be determined by the competence and behavior of government officials.

I would have thought that Tyler would know better than to place great meaning on the day to day movements of the stock market. While I'm not a big believer in EMH, I don't think given the huge swings we have seen day to day that we can say anything about what happens in the next day or why other than the long term trend has been down.

The news may have triggered the timing the late day ascent, but it is not the cause of the ascent or it's degree. The market was badly oversold and was due for a rally, and once one gets going on decent volume, shorts begin covering their positions, many of which were closed in the money due to the market's decline over the course of the week.

I can't speak as to whether the appointment had anything to do with the surge in the market; I think in general it's a mistake to even ask, "Why did 'the market' do such-and-such?" It's sort of like saying, "Why did high school students behave like that last Thursday from 1 to 2 pm?"

But supposing the connection is real, I totally agree with Tyler that it's a bad thing if the stock market is whipsawing because of political appointments. His point (I take it) was that we are now in a position where the government is exercising incredible day-to-day influence over the economy, as opposed to providing a general framework.

Of course, this is partly why I opposed the bailout in particular, and just about everything Bernanke and Paulson have done since the crisis began. So I agree with Tyler's observation in today's post, but I wonder why he seems surprised that things have come to this. Of course if the government starts handing out a trillion dollars, people will ignore their customers and look to DC.

I'm assuming it would have gone up for any of the logical competent choices. I tentatively rate this 3 good newses.

While I agree with Bob, sometimes it's just fun to speculate about teenage behavior. Maybe it didn't like the idea of Re-Volcker.

The market was heavily oversold, groping around new lows, and it was option expiration Friday.

There is a very well known pattern where markets very often reverse at 3:00 PM on mixed trading days. I bought shares right at 3 in anticipation of this bounce, fully expecting a big one due to the heavily, heavily oversold condition and optionexp. The Obama appointment at the same time was coincidence.

How many traders/investors can cite a single difference policy-wise between what Geithner would do as SecTreas vs what a Summers agenda would be?

Timothy Franz Geithner is the president of the Federal Reserve Bank of New York.

October 31th, the Federal Reserve Bank of New York has hired Michael Alix, Bear Stearns’ chief risk manager, as a senior advisor in the Bank Supervision Group overseeing the regulation of banks.

Change you can't believe in...

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