The Geithner Bottom?

The appointment of New York Fed President Timothy Geithner - "not Wall Street guy" - as Treasury secretary in the incoming Obama administration is this week's most compelling market mood match.  The announcement, by many accounts, helped send the stock market soaring late in trading on Friday after two days of selling drove stocks to their most oversold levels since their last big one-day bounce a week ago.  One Bloomberg reporter said there was cheering on the trading floor as the Geithner announcement dropped.

No disrepect to Geithner, but bottoms aren't typically made on good news.  It is a truism that markets bottom when bad news happens and the markets don't blink, when those who were moaning "I can't take it any more" start saying "I'm mad as hell and NOT going to take it any more."

I suspect Geithner's efforts in 2009 will have more effect on stocks then than the Geithner announcement on Friday had on stocks this past Friday.  

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We are pretty much at the point where we can feel the national mood becoming more in sync with the fortunes of a President Obama as opposed to a President Bush.  Positive mood will be reflected in continued hope and goodwill toward the incoming president.  Negative mood will be reflected not only by feelings of anxiety and even anger toward Obama, but even emotions like a nostalgia for aspect of the Bush administration.

We see that as stocks make new lows and we hear criticism, particularly emphatic on Chris Matthews' Hardline cable program, that Obama is not taking enough responsbility for the economy.  There is a leadership vacuum, goes this increasingly anxious line of criticism, and this "one president at a time" stuff just won't do. 

It could be argued that the Obama cabinet is filling out at a perfectly appropriate pace.  But that's really neither here nor there.  The point is that the fear we are seeing in the new lows has started to open up Obama for criticism, the first since winning the election in November.  If the mood does not recover in the short-term, we are likely to hear more on the need for Obama to "do more."

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Stocks staged an end of month rally in October, and there are some statistics behind end of month rallies that suggest that it would not be impossible for November to close out on an up note, as well. 

Beyond that, I have a hard time not seeing stocks rallying into the Inauguration, if not sooner.  I say that from both a technical as well as a mood perspective. 

Looking at long term charts of the market, it is truly impressive to see how swiftly the mood deteriorated over the past year.  And I can see as much as anybody the possibility, if not likelihood, of stocks bouncing as sharply as they fell.

That said, I was looking at a long term chart of the Japanese Nikkei 225, a stock market that has been in a bear market for 18 years.  Imagine a young person born in Japan in 1990 who has become of age this year!  How likely is that person to want to pursue a career in banking, as a stock broker? 

We hear relatively little about Japan nowadays, certainly compared to China or even India, Russia or Brazil (the BRIC countries), and when compared to the true mania in the United States over Japan back in the 1980s, when such mania - reflecting the spiking Nikkei 225 - was truly appropriate.

I hope to spend the holidays learning a lot more about what life in Japan has been like for really a generation of Japanese living under deflation and stagnant if not outright declining social mood.  It could be "Turning Japanese" time once again.