Here at "A Dash" we have argued that resolving the problem of troubled assets, called "toxic" by most and "legacy assets" by Geithner, was Job One for the Obama Administration. We understand that a new President has many jobs, including in this case, the stimulus package, dealing with auto companies, a housing program, proposing a budget, and presenting to a joint session of Congress. This agenda is dictated for a new President--dictated by circumstances, tradition, and the budget process. It is not really a matter of choice. The market does not distinguish between the broad agenda, which may or may not happen, and immediate plans -- those completely under the control of the Obama Administration. Market participants are woefully ignorant about the norms of politics. As a result they misinterpret many routine actions.
Unfortunately, a normal transition does not fit the current times. Compared against other transitions, this one has been fast. Given the crisis circumstances, it is still too slow. It will be a great dissertation topic for doctoral students in public policy and political science.
Our take is that Geithner came in with an idea about troubled assets, got involved in his own confirmation issues, could not staff up quickly enough, and is still working on the details of a plan. We like what we have seen so far, but the market will be very skeptical given the mis-steps and the delay. We still await the details.
The failure to deliver on the most important issue has opened the door to criticism. As the stock market declines, it is viewed as a referendum on the economy. The average person interprets the stock decline as strong evidence about the economy. It is a negative feedback loop.
While we are not regular viewers of Jon Stewart's The Daily Show, perhaps we should be. (Thanks to a helpful reader for alerting us!) It would be nice to have a great audience and a staff that could dish up some exciting video clips. We also lack the wit and skill of Stewart. Let us compare his take and ours.
The Santelli Tea Party
In our pondering professorial style, we suggested that Rick Santelli was playing to an atypical audience.
Jon Stewart, who invited Santelli to the show, made the same points. We especially like the cheers from his audience, in contrast to the cheers for Santelli from our friends at the Merc. Some of the comparisons and clips are unfair and out of context, but the concept captures the idea.
The Stock Market as a Tracking Poll
We characterized the market as a demanding, self-centered girlfriend. Jon Stewart shows the ticker in the background in every Obama appearance, and even suggests that it be super-imposed upon his forehead!
We have suggested that it is past time to deal with troubled assets once -- and move on. Jon Stewart, interviewing Joe Nocera of the New York TImes, does a funnier and better job using the AIG example.
We hope readers will watch the segments cited, or watch the entire show. We enjoyed it, and so will you.
So what is the investment take? This is Part 2 of our projected four-part series on why we cannot find a stock market bottom. Each segment provides a clue about what might change, and how we might find a catalyst. (Valuation and Technical Analysis on the agenda.)
For now, the failure of the Obama team to deal with troubled assets at banks has opened the door for criticism from all sides. This failure has extended the attack on financial stocks and the overall market. This allows critics to suggest all sorts of alternative causal models that do not really fit.
Like all investment managers, we continue to watch for more details on the Geithner plan. When we get it, and when it is understood, it will be a winning trade and investment.