I've been talking a lot lately about my concerns re Obama's (Geithner's) handling of the banks. Well, I don't know if there is any news today, but I came across a couple of things yesterday that made me wonder if things are better than I feared.
First, there was Citicorp's reporting that it has operated profitably over the past two month. I don't know how big a deal that news actually is --how much promise it gives that there's some sort of bottom to the economic nosedive-- but it was impressive that the news sparked a rally on Wall Street of some seven per cent or so.
Second, there was an account of an interview Geithner did with Charlie Rose, in which one of the passages quoted had Geithner saying that one of the reasons the markets have been unhappy with what's been coming out of Treasury is that there had been some "unrealistic hopes" in the market that there'd be money forthcoming beyond what would be fair to the taxpayers. Which led me to think that perhaps the Obama-ites have been less feeding of the financial culprits than I'd thought might be the case with these various bailouts.
I don't know how much weight I should give to what Geithner said there.
UPDATE: I came across an article by the contrarian market analyst, Mark Hulbert, whom I always read (on marketwatch.com). He argues today that yesterday's rally is not likely the beginning of any great bull market. His argument is based entirely on the historical study of other market bottoms, and they don't look like this. They don't generally turn around in this dramatic fashion and head upward in a rally.
He could be right --as I said, I value this guys views-- but I suspect that what we have here is someone a bit trapped in his piece of the map, i.e. technical analysis.
Technical analysis says that the market moves according to patterns, and contrarian technical analysis says that it's when everyone has become hopeless that it's time for the contrarian to buy and that when everyone's irrationally exhuberant it's time for the contrarian to sell. (Hulbert follows specifically a population of market-timing newsletters: he's waiting to call a bottom when that group has become overwhelmingly pessimistic.)
But there are reasons why the pattern MIGHT be different now than in earlier market cycles, if yesterday did mark a market bottom. Today's circumstances are probably pretty rare in relevant ways.
How often has it been the case that the economy has been hanging on the edge of something like this? How often have we been in a situation where everyone's wondering whether the financial system is going to collapse or not because of big "zombie" banks to hearing that one of the major potential zombies operated profitably for the first two months of the year?
The real question to be asked is whether that news from Citi should be given any non-trivial weight as news about whether or economy is starting to find some ground under its feet.</strong>