2/11/09 (Geithner Blows It, RIMM! Best Buy, really?)

Traders,

Well it seemed that Geithner didn’t complete his homework. The “Big Bang” of a plan we were promised was a dud. He avoided or ducked pointed questions and the answer it seemed – we’ll just toss MORE money at it! Previously when confronted with the fact we are heading done the same road that Japan did in their “Lost Decade” – Geithner’s simple answer – they didn’t spend enough money on it. The irony was that this nation criticized Japan for supporting failed banks and propping them up. We told them (in fact scorned them) that what they were doing will fail and create years if not a decade long recession. This nation was right – but now we are doing exactly what we criticized other nations for.

The problem with Geithner is that all he really did was tell us (generally) what the problem is – guess what – we already KNOW that. Then it was a very broad and general idea of what they were going to do, toss money at it - we already KNOW that and have seen them do that. There was no details, no answer, no thought. It was as very disappointing after all the HYPE that we were going to hear about the BIG PLAN that was going to save us. No policies – nothing. So far Geithner is no different than Paulson and if I was Obama, after making the big “Ta-Da” he did, I would seriously give Geithner that beat down. This was Geithner’s time to shine and lay out the policies of how we ARE going to move forward.

However, what was REALLY scary with Geithner’s plan (if you want to call it that) – was his “counting” on investors to provide the build of the financing for his program to lift the toxic assets off the banks’ balance sheets. That is concerning for two reasons – A. He knows (we know, everyone knows) the government is out of (financeable) money – (note: they can and will print more – but that will NOT be financed). His statement alludes to that – since he is counting on investors to carry the bulk of the load. B. What investors is he “counting” on?

This Public-Private Investment fund that he is talking about to purchase securities may sound interesting and even plausible on paper – but I think there is serious details that need to be hashed out.

But if Geithner was looking to sell the FAITH, bring confidence, and give the world a feeling that he has GRASPED the idea, has a plan, and it is ready (if not already) executed – he totally blew it when he said, “We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it.”

The market heard THAT loud and clear – you mean you DON”T have a plan! And everyone ran to the exit doors as the market tumbled.

Jim Roger's response:

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/v1yQTu2Ffw3w.asf&vCat=/av&RND=660394975&A
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RIMM – profits shrinking

RIMM is getting the beat down this morning as it signaled that profit for the 4th quarter will come in at the low end of the target. While RIMM released a couple of new phones to give Apple’s I-Phone a run for its money (RIMM’s Bold and Storm) – prior to the holiday – it didn’t make enough traction to off-set the slowdown. Some have criticized RIMM for going after the I-Phone and away from the business market which made their CrackBerry the main gadget of every businessman and woman. Even politicians, including our new President uses one. RIMM was a leader that other’s followed, now it is trying to follow Apple. Good or bad – only time will tell. For now the slowdown is starting to hurt their revenue growth as people may have to make do with last year’s model.

Stock is down $7 in the pre-market and looking lower.

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Best Buy, the best of the rest?

Goldman came out with a STRONG BUY recommendation on Best Buy – why you ask in these consumer slowdown times. Goldman’s feeling is that the competition is either dead or on their way out. Circuit City (their largest competitor) has filed bankruptcy and other mixed retailers are trimming down the selection to reduce over-head. With competition falling to the way side on the strong survive. No doubt that Best Buy will see some slow down from the consumer side – but if they can off-set that buy picking up Circuit City’s customers it may help keep them in the black.

Keep your eyes on it this morning. It might be a lighter weight recession stock (like Wal-mart or Target) – however it still is a fairly narrow one trick pony (since it is only electronics – the first thing consumers stop spending on.)

Stock is up small in the pre-market. Interesting to see how Goldman’s recommendation plays out.

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Futures Pre-Market

The futures are flat to slightly down – RIMM news didn’t help the tech sector in the pre-market and we are also seeing a loss of confidence in the foreign markets. Expect a mix to slightly week open if the futures remain at sub fair value levels.

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Support / Resistance

INDU 8000 ???? (We blew through that support yesterday – the question is do we get back above it today? I hate to say it but a visit to 7500 is not unreasonable.)

NDX 1200 (We are above this area for now. Do we test it – it is certainly reasonable.)

SPX 800 (850) 900 (We are down below the pivot point – but well above the support of 800. Looking better than the INDU)

RUT 400 (450) 500 (If there was any saving grace yesterday – it was the RUT staying close to the 450 area. 425 is really short-term support. How do we move from here?)

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GOLD 850 / 900+ (Gold moved up yesterday in the 910+ range. It certainly didn’t pull off after Geithner’s hint at spending MORE money.)

SILVER 10 / 14+ (It has now moved up above 13 an ounce.)

OIL 35-40 / 50+ (Oil is still sitting in this range – building good support – for now.)

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Conclusion

All I can say is that Geithner seriously blew it. It is a little alarming that he is still trying to figure it out, even if he IS he should have been SELLING THE FAITH – not HOPING to count on investors. I mean you are running the ship (aren’t you)? The market sure didn’t feel confident and I was surprised that there was not MORE of a plan or really any plan with any detail. Obama painted the broad strokes already, we didn’t need Geithner repeating it.

We are at a pivotal time and we are following in the Japanese footsteps, putting the dollar at risk, and doing many things that we have criticized China, Japan, Hugo Chavez, and others for. I’m not the only one that sees that – several have made the same observations (Jimmy Rogers went OFF on Bloomberg last night). Let’s just hope those that count (in aiding this country from abroad) are not the observant and are buying the faith.

This was found on Steven Leavitt's blog (Author of Freakonomics)

Gary Becker and Kevin Murphy write today in The Wall Street Journal about their concerns regarding the stimulus package.

There are no two economists in the world who I respect more than Becker and Murphy. Whatever your political bent, when these two write something, you should think hard about their arguments.

http://online.wsj.com/article/SB123423402552366409.html