It’s not like the news that President-elect Obama has named Fed President Geithner as his Treasury Secretary really does anything right now to change whatever is going on with the financials. While it does remove some uncertainty regarding who is going hold one of the most important jobs in the country right now, the fact of the matter is that the shorts were probably leaning heavily on the banks, and all it took was a catalyst to trigger the sort of reflexive rally that was bound to happen sooner or later. I'm highly skeptical of the choice of Geithner, but I'll wait to see how it plays out.
Of course, even though some of the financials were able to recover from some ugly action, there’s still uncertainty regarding any sort of news over the weekend. Several big banks were trading like the market was expecting some kind of forced sale or bailout, so it will be interesting to see not only if anything happens, but how the market reacts if it does.
In the meantime, all of this recent turmoil, 7% intraday swings, and meltdowns in firms that everyone thought were rock solid really messes with Thanksgiving. Way back when the market used to act normally, we’d find that the week of Thanksgiving offered up some pretty good trading. However, this market is far from normal. It’s being driven by a short-term mentality, and we suspect that big money buyers who might be interested in doing some accumulation want no part of this craziness right now.
An example is AOD, a dividend-capture strategy closed-end fund. Trades at a significant discount to NAV; yields 37% - yes, 37%!! - as of yesterday's close and was down another 7% or so today on no news. Invests in megacap dividend-payers like XOM, ABB, etc. Obviously someone is getting out at any price. I am happily adding to my stake in the 5s. Anyway, I suspect that something is up in the financial sector, and how that plays out will determine how things shake out as we move forward.