Obama to Wall Street: xoxo

March 24, 2009

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Some odds and ends from Stock Jockey — thoughts on the administration, market, selling into strength. – Ilene

Obama to Wall Street: xoxo

Courtesy of StockJockey at 1440 Wall Street

Was the rally all Geithner related? Of course not. The scary days of a few weeks ago, when sellers whacked health care equities left and right and panicked over everything else on their sheets, have been replaced by a new marketing/PR campaign, just in time to launch a thousand ships.

Well, you get the idea. Its all good now….

The Obama administration, after months of criticizing Wall Street, has been scrambling to woo top bankers and financiers to back its latest bailout plan.

In recent days, in spite of public furor over huge bonuses paid at American International Group Inc., the administration has concluded that it needs the private sector to play a central role in fixing the economy. So over the weekend, the White House worked to tone down its Wall Street bashing and to win support from top bankers for the bailout plan announced Monday, which will rely on public-private investments to soak up toxic assets.

But weeks of searing criticism by politicians and the public had left bankers leery of working with the government. After brainstorming about what to do about that problem, the White House resolved to try to take control of the debate, according to several administration officials. In weekend television appearances, President Barack Obama and other administration officials tempered their criticisms of the financial sector. WSJ

Meanwhile every idiot with a browser is looking for a resurgence of inflation, something I find unlikely given the trends in employment, or lack thereof. And with some strategists suggesting the Quantitative Easing measures by Bernanke are, give or take, roughly equivalent to a 100 basis point Fed Funds cut, we are far from out of the woods, sportsfans.

But if you are looking for longs based on the recent policy actions (despite the fact we are up maybe 18% from the lows) check this out:

Impact on stock market: overall, policy makers are likely to get ahead of the curve with an ever increasing set of policy announcements (QE by UK, US, Japan, Switzerland and we believe soon to be followed by Sweden and Canada), buying poorer quality assets (e.g. TALF) and more direct action to help banks. And this, at a time when lead indicators are tentatively turning up (9 out 12 on our indicators) and equities are still attractive valued (an ERP of 6.1% on trend reported earnings against a target of 5.6%).

We continue to prefer to play the policy announcement of QE, bank bail-out etc via the credit related plays in the equity market:

(1) Non-life insurance and (for the brave) life insurance;

(2) autos (the most correlated sector to credit outside of financials);

(3) companies with high financial leverage but safe operationally;

(4) US housing related areas. Credit Suisse

The ducks are quacking, and I am a seller into strength. May the force be with you.

Mike Santoli has some thoughts on “Geithner Plan” below. I am sure of one thing – Larry Summers is thrilled it is not named after him. Brilliant, he is.
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