Blog Claim "Markets Flat Before Geithner's speech", Really?

[mannfm11]

I am not a news moves market guy. What I do believe moves markets is the preconceived plans of traders. There are a lot of people that think that Obama and Geithner can make the markets go up, just like they believe that the Fed can make them go up. That is true when the trend is pushing upward, which is the case when the economy is providing actual asset inflation cash. But, when assets are consuming cash like they are now, nothing makes the market go up. So, people have been buying for the past couple of months in anticipation that good things are just around the corner and you don't want to miss it. Also, people are holding on for the same reason. This is a long trend bubble and people have been trained to stay the course. Robert Prechter said people would buy this one until it broke all of them, that the bottom in this grand supercycle bear would be maybe as low as sub 100 on the Dow.

I have waited to watch this one for a long time. I thought 2000-2002 would be this one, but they interrupted it with 9/11 and FNMA. What I have seen is repeated fixes being put in. You might recall that they came into 2007 with the idea the Fed would have to cut and we would have a soft landing, so pile into stocks and catch the strong move, like happened in 1997. We got the cut, they bounced a little in October 2007, then it ran out of steam. We had a mild panic in January 2008 and some kind of fix happened and the market rallied. Of course, they came up with this, we must retest the bottom then things will be okay, so Bear went on the blink and the rescue came in mid March. There were about 3 or 4 hot days that got the market back to a little over Dow 13,000, a 5/8th retrace from the top on the first of May and it melted again, this time to about 10,700. This time they bailed out FNMA. Remember the CNBC nonsense rumors about the monoline insurers and the NY insurance commissioner moving the market 500 points in an hour or 2? Another fix in, another bottom, no carrythrough. Same as FNMA. We were up close to 1000 points in a week or so and another selling opportunity.

Then what came? The first leg of wave 3 of wave 3. This is where we are, the first leg of the first leg of wave 3. Breakdown into mid September and a collapse of Lehman, Fannie, Freddie and AIG in a week. That is about $12 trillion of capital management or banking in a few days, about 25% of the debt management in the US in 1 big bomb. Then the complaint becomes, too many short sellers shorting the price down so these very wealthy and solvent institutions can't raise any capital, so lets ban shorting and get Congress to approve $700 billion to buy all the bad crap so we can get back to a bull market. Remember the first vote, where the raging bulls had bought up all the stock they could hold and the vote failed. The kids threw their green peas against the wall and bailed. Then the Senate got involved, packed some bacon sandwiches in the bill and got it passed. So, the bulls piled in again, waiting to get rich when the bill passed. Do you remember what happened? That was a Friday. I want to say it was October 3. The market was around 10,800 from what I recall and it went down 600 points or so when the bill passed. The market was 9500 by Monday morning and it rallied to close around 10,000. By that next Friday it had touched 7700 and rallied to close on some kind of nonsense to 8400 or so and made a 1000 point move that day before it collapsed something around 300 points the last 30 minutes. I couldn't believe what I was watching.

So, what is next. Obama gets elected we are saved. They rally the market to 9600 or so for election eve and it collapses the next 16 days to around 7500. The Obama election was a bigger disaster than the 9/11 disaster, which only made 8100 from the same level. Then we bounced as Paulson did some TARP work. What was next? a bottom and we will be okay in 60 days because the new guy is going to fix it. We get to 9000 twice and the market falls apart at the first of the year. People have been buying for the event of this stimulous package and the bank bailouts. Wait and see what happens when they pass the stimulous bill. Today the news got a 60 point move and it went flat. The Geithner appearance at Congress was anticlimatic. It wouldn''t have mattered what he said.

Anyone who can't figure out that modern economics is so much voodoo and illogical that it cannot work is an idiot. These guys are throwing kitchen sinks at the banking system because they know that their success is predicated on getting the banks past their administration to the next administration and that without massive debt creation, their time in the barrel is a tragedy. It is amazing that the only way to economic success is selling yourself, your kids and their kids into some kind of permanent bondage and when the bondage holders lose their grip, we are supposed to sing up for more bondage so they don't go broke and those of us that were smart enough to stay out of this wringer or get out of it don't gain ownership of their scam. The problem is that we go from bankrupt to in debt to where an even greater bankruptcy is the only path. The problem is too much debt and the only solution is not only more, but more to bail out billionaires and fat cats. Fat cats put these guys in.

I will add one more thing. Timothy Geithner is beyond shame. The guy is basically the Secretary mentioned in the IRS code, yet he couldn't follow the rules. He was the head of the NY Fed and the chief regulator of many of the main culprits in this crisis, yet he attempts to present this as a problem created by the last administration. Geithner is clearly a Clinton guy, a Rubin guy, so he is most likely Fed Chairman of NY due to a Clinton appointment, as these terms go 14 years. The guy was the most powerful regulatory banker in the US, presiding over the worst banking decisions in history. Yet he attempts to put this and all the failures so far on the Bush administration. The Federal Reserve has been running this show for a long time. Bush clearly brought Paulson in because someone could see this mess coming and thought Paulson might be able to tie it back together. No one can tie together a busted banking bubble when the aim is that there aren't any losers. It is clear that the US system was operating with the fat cats having no skin in the game. Does anyone understand that? Do they understand that these big players were taking on this stuff with no money up? It all rolled back on the banking system and the taxpayer when it failed. That is what all these guys are waiting for now, 100% financing and 100% guarantees to buy this crap with nothing down at 25 cents on the dollar with no recourse loans.

[tobyguy]

I am not a news moves market guy. What I do believe moves markets is the preconceived plans of traders.

......The Geithner appearance at Congress was anticlimatic. It wouldn''t have mattered what he said.

I would agree that there are likely all kinds preconceived plans of traders. However, I'm not sure they would really set market direction or be a strong enough factor to really move entire markets. I'm not much of a conspiracy person, but I don't doubt that there are people out there who try and do so.

In regards to your second point, I would have to agree. It didn't matter what he said, the market was going to do what the market was going to do. Unfortunately many people, including yesterday's blog tried to paint a picture that it was Geithner's incompetency and response details (or lack of) that moved the market - which is a load of garbage. Is he incompentent, probably. DId it lack details? Yes. Will he make a difference? Probably make things worse. EIther way, if the markets had gone up by 380 or down by 380, I wouldn't give him the credit either way!

Overall, the notion that the news moves/leads the market is simply silly. How many times I've seen some kind of major announcement in the morning, then the market rally, then the media (eg. CNBC), says, yup, the market liked what was said in the AM and that's why it's up! Only to tank in the afternoon in the other direction! Or how many times the media ignores bad news when the markets rally (eg. last weeks major jobs lost report). Trying to attribute market direction on news is missing the point to what's actually going on in the market.

I also find it amusing that many out there fail to understand the difference between correlation and causation (and I don't mean you, mannfm11).

Tobyguy

[MisterB]

"... the market was going to do what the market was going to do."

Tobyguy: Are you a technician who believes that fundamentals and events do not move the markets? That seems to be the gist of your position.

[John]

> Overall, the notion that the news moves/leads the market is simply
> silly. How many times I've seen some kind of major announcement in
> the morning, then the market rally, then the media (eg. CNBC),
> says, yup, the market liked what was said in the AM and that's why
> it's up! Only to tank in the afternoon in the other direction! Or
> how many times the media ignores bad news when the markets rally
> (eg. last weeks major jobs lost report). Trying to attribute
> market direction on news is missing the point to what's actually
> going on in the market.

> I also find it amusing that many out there fail to understand the
> difference between correlation and causation (and I don't mean
> you, mannfm11).

You seem to be a pretty hopeless case, but I'll take one more shot at
responding to you.

The up and down movements of the markets are chaotic events, and
there's generally no way to correlate those movements to news
stories, which are also chaotic events.

But that's not to say that it's NEVER possible. For example, if
there's a terrorist attack on the oil fields in Nigeria, and the
price of oil spikes right after the news, then it's reasonable to
assume that the two events are correlated.

Even if you argue that the news event didn't CAUSE the price spike,
since the price of oil was going to go up anyway, it's still possible
to conclude reasonably that the terrorist attack TRIGGERED the spike
in price.

On the other hand, if you were to ask me whether the next terrorist
attack in Nigeria will cause a spike in the price of oil, I would say
that I have no idea. Using news events to predict markets is almost
always a losing battle.

And so, we have three completely different but related concepts about
correlations between news events and markets: (forward-looking)
predictions, and (backward-looking) explanations via causation or
triggering.

When you say that you "find it amusing that many out there fail to
understand the difference between correlation and causation," what's
really amusing about your remark is that YOU don't understand this
difference.

You write, "Unfortunately many people, including yesterday's blog
tried to paint a picture that it was Geithner's incompetency and
response details (or lack of) that moved the market - which is a load
of garbage." What you're arguing is that there's NEITHER correlation
nor causation, so once again your sloppy reasoning exhibits itself.

In the particular case under discussion, the market fell sharply
during Geithner's speech. I watched Geithner's speech live, and I
thought it was completely vacuous. Geithner's speech was a major
worldwide event. Even if traders don't sit around reading press
releases, they DO read headlines crossing their Bloomberg terminals,
and they DO react to advisories from their own research departments.

In my opinion, looking backward, the news event is correlated to the
market event. In my opinion, investors reacted to the vacuity of
Geithner's speech, since they were looking for specifics that would
tell them where to invest.

That's a perfectly reasonable conclusion, and even if you disagree
with it, that wouldn't excuse the fatuously vituperative behavior that
you exhibited.

And that brings us to what is probably the most important point of
this posting. You don't come charging into someone's home with the
purpose of excoriating the host. When you visit someone's home, then
you show respect to the host and to the other guests. If you want to
excoriate the host, then do it somewhere else.

There are some of the most intelligent people on the internet
contributing to this forum. And amazingly enough, they all seem to
be able to find ways to disagree with me and each other, either
directly or indirectly, without exhibiting anything remotely like the
inappropriate behavior that you exhibited.

You keep writing as if you're God's gift to the Internet, but looking
back over you're postings in this thread, there's little that even
makes any sense.

You seem to think that you're the first person it's occurred to that
news events don't always move markets, and yet every single person on
this forum has thought about it, and is way ahead of you.

Your statement about "the difference between correlation and
causation" is simply sloppy work. You rant without thinking.

And I'll mention the broken links again, because it's all of a piece.
The sin is not that you posted the link wrong; the sin is that you
didn't bother to check your work -- TWICE -- in the context of
criticizing me for not checking my work. And then you had the
audacity to "blame the computer," as if PhpBB is at fault because you
can't be bothered to check your links.

Do you see where I'm going with this? Even if your core argument
were valid, it wouldn't matter because your own work is sloppy and
your own behavior is so inappropriate, and because you really are not
in the same league as the other contributors to the forum.

You're welcome to continue posting to the forum, but I would ask that
you take the time to try to emulate the other contributors -- learn
from them and emulate their behavior.

Sincerely,

John

[Higgenbotham]

Overall, the notion that the news moves/leads the market is simply silly. How many times I've seen some kind of major announcement in the morning, then the market rally, then the media (eg. CNBC), says, yup, the market liked what was said in the AM and that's why it's up! Only to tank in the afternoon in the other direction! Or how many times the media ignores bad news when the markets rally (eg. last weeks major jobs lost report). Trying to attribute market direction on news is missing the point to what's actually going on in the market.

I also find it amusing that many out there fail to understand the difference between correlation and causation (and I don't mean you, mannfm11).

Tobyguy

Going back to July 2007, the derivatives mess was piling up and the potential existed for it to spring a leak. At that time, few people in the world understood what a CDO was or what the loss of value in these derivatives would mean. But there were people who did and they were waiting. On July 17, 2007 the stock market was very near all time highs. That evening, news broke that 2 Bear Stearns hedge funds that were invested in CDOs had lost billions. S&P futures immediately went down. There was discussion on Internet forums as to why the futures were falling. It was attributed to a couple tech companies posting lower than expected earnings. You can still look at that breaking news story on Bear Stearns today; it is still posted on cbsmarketwatch.com and there was not one comment on that story. Usually, a marketwatch story draws dozens of comments. This story is an example of leading news. Granted, by the time the news announced that Bear Stearns was bankrupt 9 months later, that news was a lagging indicator and it was plastered on the front pages of newspapers worldwide, and there were probably hundreds of comments on the marketwatch story that appeared that day.

Back to the Geithner thing. First, I said that excerpts of Geithner's speech were released at 10:08 a.m. Eastern by Dow Jones newswires. The content of the whole speech was not known at that time. The content of the whole speech was released at 11 a.m. The market had been moving sideways for over a day prior to 10:08 a.m. Eastern. It then started moving lower. The move lower accelerated at 11 a.m. Eastern when the entire speech was released. Going back to the title of this thread, "Blog Claim "Markets Flat Before Geithner's speech", Really?", OK, the markets were flat before the first excerpts of the speech were released. That's good enough for me.

People can draw their own interpretations as to why the markets fell after the contents of the speech dribbled out. For example, the news media can talk to traders and ask why they sold and the traders may say that they didn't like something specific that Geithner had to say. The media reports this. That in my opinion is a layer of truth. Another layer may be that traders were generally nervous and were looking for an excuse to sell, and would have found one no matter what, but they were unable to verbalize that and passed it off as something else. Another layer may be that Geithner's speech was a manifestation of larger events that resulted in Geithner needing to give that speech and the events were/are due to play out no matter what. Really, nobody knows how all these layers interact with each other. Right now, the market is trying to sort that out and is pushing back into the area that it was in right as Geithner's speech ended. This is typical market behavior. Meanwhile, Boomers and Xers waste time pissing on each others heads over trivia like this while the country goes to hell in a handbag, and Millies shake their heads.

[StilesBC]

Meanwhile, Boomers and Xers waste time pissing on each others heads over trivia like this while the country goes to hell in a handbag, and Millies shake their heads.

Nail. Meet Head.

[tobyguy]

Even if you argue that the news event didn't CAUSE the price spike,
since the price of oil was going to go up anyway, it's still possible
to conclude reasonably that the terrorist attack TRIGGERED the spike
in price.

On the other hand, if you were to ask me whether the next terrorist
attack in Nigeria will cause a spike in the price of oil, I would say
that I have no idea. Using news events to predict markets is almost
always a losing battle.

What I am saying is that what many consider to be reasonable is often wrong. I can come up with just as many examples were conflicts, natural disasters, etc. never lead to an increase in oil prices (Katrina, Houston hurricanes, invasion of Georgia by Russia are but a few). I do NOT believe that any of these CAUSED the market to move in any particular direction. Why? Because conventional media would have suggested oil should have moved higher, when it actually went lower.

I'm not trying to make distinctions here between triggering or cause and effect. That's all really irrelevant as far as I'm concerned (in this discussion anyhow).

When you say that you "find it amusing that many out there fail to
understand the difference between correlation and causation," what's
really amusing about your remark is that YOU don't understand this
difference.

Yes, you are correct, I am saying there is neither a correlation nor a causation. By correlation I meant that the market moved in one way or another during the time he was speaking, not that there was actually any connection between the two. Could I have worded it better? Or come up with a better manner to say what I was trying to say? Certainly. None of this takes anything away from the point I led with in this thread. Please stick to the point at hand. Going off on tangents is a clear sign of weakeness in one's argument.

You tried to say one caused the other (or triggered it). I questioned that. Technically speaking, your blog was incorrect and unsound since it was based on factually incorrect statements. You were trying to say one thing caused (or triggered) the other. I understand there is a difference between the two (triggered/caused), but it's really not that relevant, because his speech neither triggred nor caused it.

In the particular case under discussion, the market fell sharply
during Geithner's speech. I watched Geithner's speech live, and I
thought it was completely vacuous. Geithner's speech was a major
worldwide event. Even if traders don't sit around reading press
releases, they DO read headlines crossing their Bloomberg terminals,
and they DO react to advisories from their own research departments.

I'm sure there are traders out there that behave as you describe. But, in my opinion, they don't move markets in the way you are trying to describe. If they did, (for example) we wouldn't have days like late last week when the market when up 200+ points on a horible job's release announcement.

In my opinion, looking backward, the news event is correlated to the
market event. In my opinion, investors reacted to the vacuity of
Geithner's speech, since they were looking for specifics that would
tell them where to invest.

That's your opinion. And I've questioned the basis for that line of thought. Since this was his first speech in his new role, there's hardly any correlation data available now to make any type connection.

That's a perfectly reasonable conclusion, and even if you disagree
with it, that wouldn't excuse the fatuously vituperative behavior that
you exhibited.

If questioning your assumptions or pointing out your faulty logic is "fatuously vituperative", then so be it.

I did not get personal nor call you names, like you did me.

And that brings us to what is probably the most important point of
this posting. You don't come charging into someone's home with the
purpose of excoriating the host. When you visit someone's home, then
you show respect to the host and to the other guests. If you want to
excoriate the host, then do it somewhere else.


And I'll mention the broken links again, because it's all of a piece.
The sin is not that you posted the link wrong; the sin is that you
didn't bother to check your work -- TWICE -- in the context of
criticizing me for not checking my work. And then you had the
audacity to "blame the computer," as if PhpBB is at fault because you
can't be bothered to check your links.

I did not question your punctuation, spelling or grammer or anything like that. I questioned your logic. Your argument was not sound based on non-factual statements. That is much different then what I'm guilty of (not verifying that the web site took my complete link and substituted it with periods).

Do you see where I'm going with this? Even if your core argument
were valid, it wouldn't matter because your own work is sloppy and
your own behavior is so inappropriate, and because you really are not
in the same league as the other contributors to the forum.

The difference between [many of] them and I is that I question some of your assumptions.
In doing so, you've turned this into a discussion with personal attacks (not me). That is obviously the way you respond to others that question your arguments. There is a lot to be said about people who resort to that kind of approach.

You're welcome to continue posting to the forum, but I would ask that
you take the time to try to emulate the other contributors -- learn
from them and emulate their behavior.


Sincerely,

John

I'll continue reading your blogs as I often find components of them interesting. But have been very disappointed in this forum. Far too many personal attacks and name calling. If someone questions my facts, logic, line of thought, I'm ok with that (even if they do so harshly).

However, there is no excuse for the name calling and the kind of personal insults thrown around in this forum.

In my opinion, it's clear evidence of the lack of exchange of ideas.

Tobyguy

[freddyv]

I really don't understand what arguing matters like this accomplishes except to give certain people attention?

John, I am watching my 3 year old nephew for a few days and when he insists he's not tired even though it is obvious he is, I realize it is not worth my time to convince him because at his age he simply is not capable of being convinced. I simply have him lay down and remain quite and within a few minutes the snoring begins.

There are certain things we all accept are true because they are so obvious it would be a waste of time to argue them. "The sky is blue" is an example. Yet there are some people who will argue this and if you are intellectually honest you have to agree that "blue" is a relative term or that it is only blue from our perspective or...but why waste your time?

Geithner's speech did move the markets just as the sky is blue. Well, it's actually grey here in Medford this morning but my point is, John, why waste your time arguing such things? Personally I would prefer you spend your time writing more web logs as they are the most interesting part of the site.

But that's just my opinion.

--Fred

[MisterB]

Fred: I agree. I also agree with John that the TONE and attitude of Tobyguy is all wrong. This is John's site and I for one greatly appreciate his postings and since I have found his site I check it daily. Tobyguy should respect the fact of whose site this is. Also, in general, respect and civility go along way in furthering constructive discussion

[John]

Thanks guys, for your support in this matter. I appreciate it.

There are two reasons that I responded to tobyguy, even though he
went way across the line in tone and behavior.

First, I wanted to respond to the actual issue. Developing that
material on the three different kinds of correlation between news
events and market moves was kind of interesting.

Second, being a forum moderator for an open forum like this one is a
matter of personal interest to me. If I can "save" someone like
tobyguy, rather than having him just go off in a big huff, then it's
worth a little trouble. He can now make the choice whether or not he
wants to be constructive or become marginalized. The ball is in his
court.

Sincerely,

John