Market Commentary

The markets are still reeling from the Administration plans
January 25, 2010

The markets are still reeling from the Administration plans to aggressively pursue an unabashed populist agenda towards the largest money center banks.  After the stunning loss in Massachusetts Senate race and loss of the critical 40-60 split in the Senate, the President did not wait long to change tactics and go on the offensive.  In my view Thursday’s bank plan announcement is a stunning turn in the political discussion essentially abandoning his previous progressive agenda because of plummeting popularity.

In my view if any of these curbs are passed, the President potentially wins a significant and populist victory given the country’s perceived anger towards the banking system.

However what will be the impact?  The President’s own Treasury Secretary stated via anonymous source as reported by Reuters “Geithner is concerned that the proposed limits on big banks’ trading and size could impact US firms’ global competiveness.”  The source also stated Geithner has concerns that the limits do not necessarily get at the root of the problems and excesses that fueled the recent financial meltdown.

In my view the markets are dealing with massive uncertainty, confused about the potential impact from Washington.  Is the President grasping at straws, frantically looking for a victory to salvage his tattered agenda?  Are  companies delaying hiring and purchasing decisions until the direction of Washington is known?

These comments are not meant to be political.  I will save that rhetoric for talking heads.  I am only again stating Washington is perhaps emerging as the greatest issue facing business as the outcome of the Administration’s change policy is still unquantifed.

Last night the foreign markets were down. London was down 0.27%, Paris down 0.40%, and Frankfurt down 0.66%. Japan was down 0.74% and Hang Sang down 0.62%.

The Dow should open moderately higher as today’s prevailing thought is that last week’s drop was overdone.  Moreover most are concluding the negative discussion regarding the reappointment of Bernanke as only hype and meaningless political posturing. The 10-year is off 7/32 to yield 3.63%.