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Art Cashin On Black Monday, 'The Raven' Remixes And The Tepper Corollary
As always, some very entertaining and enlightening musings from Art Cashin, with an emphasis on Black Monday, modern-day Edgar Allan Poe remixes, and, last and certainly least, the Tepper Corollary.
"THE INSURER"
A NOW TRADITIONAL ENCORE PRESENTATION
On this day in 1987, the stock market suffered its worst crash of the 20th Century, worse even than 1929. The Dow lost 22% in a single day. Each year as the anniversary of the great ’87 crash approaches, I get requests from the steadily dwindling number of ’87 veterans to repeat my follow-up poem, “The Insurer”. For survivors of October ’87, the memories are seared into our psyches not unlike veterans of some great battle. For, as in a battle, not all who participated survived (financially). It was an amazing couple of weeks in which the wheels almost did come off the locomotive. Someday, maybe I’ll write a book about it.
Anyway, below we repeat the poem. It was written in the manner of Edgar Allen Poe’s, “The Raven”, though it lacks even a scintilla of his talent and clarity…..somewhat like a stick figure rendering of the Mona Lisa. But…..you do the best you can.
While all of the references will be familiar to veterans of ’87, I have learned some folks who read these “Comments” were in Pampers at that time. So we’ll give a quick one paragraph synopsis of the background to the ’87 crash.
A Brief 1987 Recap – Even if there had been no “October Surprise”, the year 1987 would have been a remarkable one for Wall Street. The Dow started the year below 2000 and ran to 2722 by early Fall. (A gain of nearly 38%.) The rally was breaking all the old rules. A group of guys in Chicago came up with a new rule called Portfolio Insurance ( or Dynamic Hedging) which might be synopsized as buy strength/sell weakness (we’ll explain another day). The U.S. dollar was weak and the subject of controversy. There was some conflict and confrontation in Iran (U.S. bombing Iranian oil platforms). The President’s wife and right hand had gone into the hospital for a rumored cancer operation. And there was a new SEC chairman who was misquoted in the midst of the free-fall suggesting that maybe markets should close. The misquote greased the skids.
Okay, that’s enough background. Now -
The Insurer
Once upon a Monday dreary
Traders waited worn and weary
As they gazed upon newstickers
warning of the day in store
Foreign markets were imploding
sending senses of foreboding
With positions overloading
sellers would be bringing more
To dump upon a bloody floor
October now had past its middle
as investors faced this riddle
With their Quotrons they would fiddle
looking for The Bull of yore
Greenback's value falling quickly
trade deficit behaving sickly
And with Iran, relations prickly
raised the specter of a war
Ahead a day that promised gore
So on the open there came selling
much faster than the tape was telling
While in Chicago they were yelling
"Dynamic hedging" is no more!
Specialists were inundated
as futures prices unrelated
Kept the selling unabated
stocks once eight now sell at four
Futures dipped below the cash now
and insurers made a dash now
Trying not to be the last now
rushing for the exit door
Then news reporters often shrewder
began misquoting Chairman Ruder
A trading halt?...a new intruder
caused yet more panic on the floor
Bethesda had a guest named Nancy
an operation somewhat chancy
Helped to make the markets antsy
adding to our selling lore
Throughout the day as prices melted
brokers, dealers all got pelted
And bank accounts not safety-belted
were blown away forever more
The bell, it rang to end the sorrow
while traders ran to banks to borrow
To have an ante for tomorrow
not knowing what it held in store
Twenty three years…now since that day
yet there was a scare last May
Reminding in a flashy way
of when fear and panic swept the floor
The Dow stands full six times higher
than when it closed that day so dire
Despite two wars and terror fire
the Bull arose to run some more
This anniversary, headlines all
dwell upon that fateful fall
And ask us veterans to recall
a time that left us scared & sore
New chills we get from déjà vu
as currencies now run askew
And trading partners threaten too
as in that sad October yore.
But keep your faith that it's a new day
though there are hints that skies may turn gray
We’ll hope such clouds won't bring a blue day
let's hope the Bull returns once more!!
And, yes, there is now a Tepper corrolary. Soon there will be a Tepper lemma: in a nutshell, it will occur when it is discovered that one is preaching on TV nothing more than a better exit point for one's positions.
Just Bad Enough To Be Good – Stocks moved smartly higher in moderate volume riding the rally in the financials and oil stocks.
The financials benefitted on two fronts. First, the Citigroup report was better than many had expected. A key feature was a large surge in deposits to a new record high. Another boost for the financials came from the announcement that several banks would resume the foreclosure process. That suggested that securitized mortgages might not be the un-certifiable toxic waste dump many had feared. Also helping stocks was some bad economic data. Industrial Production fell for the first time since 2009.
Using the Tepper corollary, stocks rose under the assumption that the weak economic data would force the Fed to move closer to QE2.
The rally appeared to stall during the middle of the day and into late afternoon. Then, shortly after 2:00, the bulls attacked again. Once they moved higher than the post-opening highs, the rally kicked into overdrive. That spike took the S&P right into the resistance band at 1183/1187. They stopped twice in the final hour at 1185.50. The stall produced no significant pullback sealing the bulls’ victory.
h/t London Dude Trader
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1987 = No plunge protection team and a functioning & organic marketplace
2010 = Massive choke-hold by plunge protection team, massive POMO events, a fed that refuses to be audited, $1350 per oz gold, a fiat currency war, bailed out banks with unlimited access to 0% cash to slam into equities.
I see zero connection to 1987.
How about mass delusion?
How about a national debt = GDP, a multi-trillion dollar deficit, no industrial core remaining, yada yada yada.
What gets pumped must get dumped, nothing ever changes and nothing new under the sun.
Boilermaker,
Did you ever get a lead as to why the inverse ETF jumped before yesterday's SPY flash crash?
Nope, I still don't understand it.
Look at them today, the market is way down and they are down also. Since they track 'daily' moves, how can that possibly be?
SPXU and UPRO are directly the opposite of the SPX today. I would say that violates the prospectus to the maximum.
remember that in these etfs you have to trade tomorrows open, today. the possibility that the information, order flow is being front run, is more than likely, its purely rhetorical. talk about a level playing field, the HFTs are trading on the nanosecond, and you're shorting Mondays open, Friday afternoon??
The UPRO and SPXU don't track SPY. They track SPX and their holdings have nothing to do with SPY.
Also, there were big blocks sold/bought on each ETF at 2 minutes prior to close cause the mega-shift.
They are meant to track daily movements. Seriously, I don't get it. First the SPY has nothing to with these ETFs. Secondly, the time is completely frigged even if they did. Also, they track daily movements with leverage.
Proshares hasn't returned my email.
This is no game for the retail investor.
Problem is, if you sit out in cash, the dollar is getting debased by the minute. Total Catch-22. Gold seems like one a the few alternatives for my meager capital, but as the GATA boys have uncovered, that market is manipulated as well. Seems there's nowhere to run, nowhere to hide.
then VP Bush walked to the floor of the NYSE on day (3) I believe, with a sack of money from Uncle. That was the moment when the Presidents Working Group on the Financial Markets was created. Greenspan backstopped the market, (they weren't able to erase the trades in the flash crash, but those who bought the bottom did nicely). As Cashin says the markets recovered nicely, (no wonder why now is there?) The PPT became a pimple on the ass of the Fed Treasury reflation machine. The Fascist Business Model, the MIC is now just a pimple on the ass of the FBM, gradually acceded to new heights. Dynamic Hedging was really heavy put selling on out of the money strikes.The system crashed so quickly there was no time to exit the positions. Individuals investors were pummelled because most sold at the bottom, Institutions used the government liquidity boost, and hence became the giants they are today.
Let's also try to remember the limits of the systems at that time. The computerized systems, such as they were (and they were pitiful, and utterly unable to handle the amount of orders that streamed in that day), pretty much collapsed, and traders and market makers (yes, they still existed then) went back to paper. That led to even more uncertainty, because resolution became difficult, took far longer than usual, and became far more opaque.
It was really at that point that many independent investors (I among them, and holding a rather strong net worth for the era) became utterly disgusted with the system as it was. We had to work with retail brokers, most of whom had just graduated from one of the Ivies with a lesser degree and GPA, back then, and it deteriorated much farther by the 1990's--I was constantly harassed on the phone by bucket shops (I would include in that category some shops considered specialists, and wholesome). The fact of the matter is that most of us became relatively wise to the the fact that our dear brokers were simply feeding us whatever came over the tannoy that morning. And we got fed up, accordingly.
Nota: I didn't sell that day; I thought it was an anomaly. But when I went to sell my positions at Merrill Lynch in 2000, I was awarded an entire group of Solons questioning my move, and attempting to delay it. I finally threatened them with the regulatory authorities if they refused to accept my order; they caved. That order should have been a given, without question. In retrospect, I imagine that they had to unwind a number of their own positions to fulfill it, which not only pissed them off, but cost them royally.
II now trade online, of course, but I expect the same issues to arise regarding trades this time around. Be very careful. Trading paper is going to become exponentially more worrisome, if not impossible.
It's pretty simple.
Dollar Down = Risk On
Dollar Up = Risk Off
Except for REITs, which are immune to this cycle, since this is a PigMen - sponsored and Fed-approved sector.
LOL.....
goddamnit robottrader. I'm going to lose my job if I get caught laughing out loud in a quiet office one more time.
I'm getting smarter just by reading this ZH post.
http://www.psychologytoday.com/blog/the-scientific-fundamentalist/201010...
"Better than expected" is the most overused and abused phrase in financial media over the last 3 years, second is "less worse"
Just buy em
The desperation to keep the banks green today and get back to business on the foreclosure front is straight from the PR handbook.
"The President’s wife and right hand had gone into the hospital for a rumored cancer operation."
I wondered why Reagan wasn't photographed waving to crowds for a few days...
LOL
(Reuters) - A top Federal Reserve official said on Tuesday further monetary easing by the central bank must be hefty enough to spur recovery and securities purchases of $100 billion a month could be in order to achieve the necessary impact.
http://www.reuters.com/article/idUSTRE69D6H020101019
Cashin - one man I'd love to tip a dram or two with...but wouldn't try to outdrink him for certain.
On that day in 1987 i was coming thru Grand Central Station late in the day to get to Wall Street. Back then the GC station had a giant streaming stock ticker in it and a Merrill Lynch booth in the middle of the floor. The sticker was streaming that the volume was at 600 million shares ( the daily record at that time was 200 million shares ) and that the mkt was down 500 pts.
Outside of the NYSE you would have thought the Mad Bomber had struck again.
Today marks an important turing point for global markets and the USD strength I warned about has arrived.
http://stockmarket618.wordpress.com
http://www.youtube.com/watch?v=_gekaEzqj5g
I was there that day too! ... OJ to the max
Those were the days. I remember when we would smuggle pizza pies on the floor past Jackson the guard.
On that day I was trading fixed income for a Primary Dealer on the West Coast. Gnarly crazy day and week. Would get lifted and then slammed, hundreds of millions at a time, and had to make tight spreads b/c of PD status. Everyone was hooting and hollering for real - squawk boxes going nuts! Management kept coming around and asking where we stood profit/loss wise and most of the time we had very little idea. Just trying to not be over limits. Ended up making a boatload but didn't really know until end of day.
Heart stopping moments there !
From Steve Grammatico at BigJournalism.com
The Raving by Robert Gibbs
Lay, O Lord, a curse on press men, rude and churlish, sad, obsessed men
Who persist to query me on matters that they know I must ignore.
As I parry, neatly jinking, Tapper stares at me, unblinking;
No doubt he is thinking, thinking Robert Gibbs is short one oar.
“Jake the Malcontent,” I mumble, “never one to seek rapport.”
Of them all, him I abhor.
Yes, the fire’s now an ember from that long-ago November
When every media staff member bowed and scraped outside my door.
Confident, I held my pressers (Helen! Old as earth, God bless her),
Brushing off reporters–lessers, lessers who were such a bore,
Including Jake the Tapper, whom the gods named my bete noire.
From the start, we’ve been at war.
There! He rises, smarmy, sassy; I feel dizzy, bloated, gassy,
Sickened—stricken with the urge to swat this gadfly to the floor.
As I tamp down nauseation, purge my thoughts of his castration,
Jake the Tapper–this . . . crustacean–floats a challenge like a spore.
Yes, Jake Tapper the crustacean floats a challenge like a spore,
And it roots inside my core.
Shaken now, I face him squarely, caustic tongue in check, just barely:
“Scribe,” I bark, “or journo, hotly your aspersion I deplore.
Blurted out while I was wrapping–in the middle of recapping–
Just to get your mates to clapping, clapping because you’re plainly sore.
Well, be careful, sir,” I warn him; “you are swimming far from shore.”
Says he louder: “Lie no more.”
The rabble stand, and now they’re cheering; I hold my ground, erect and sneering,
Mulling whether it is possible for order to restore.
Eventually, the room grows still; then Knoller shouts out, sounding shrill:
“Robert Gibbs has stained his office and has much to answer for.”
Now his colleagues all repeat it: “Gibbs has much to answer for.”
Back comes Jake with, “Lie no more.”
“Leave,” I snarl, my stomach churning; “briefing’s done, we are adjourning.”
No one moves; I hear Jake humming with a backup group of four.
“Really,” I say, “really, you can’t . . . hang out here to do a . . . coup chant.”
But Jake just laughs to underscore they will dish me out what-for;
And so they sing a rap refrain where they dish me out what-for
From their slammin’ gangsta score:
Jake the Rapper, never droning, keeps intoning, keeps intoning
In the press room I abandoned, oh, a few months heretofore.
And that shattering refrain, I will hear it in my brain–
Evermore!
...ah, 1987, what a year....a globe circling crash....fortunately the short only fund I worked for then had its best year ever and was ranked No.1....but then no one needed short hedges....
Rumor of Regan vs today if Obamashithead went to surgery we'd be up 1,000 pts and all the unemployed would be dancing in the streets. beware was room temp we'd be up 2,000 pts. IMO
I was trading NYFE futures in the pit on 11/19-20/87 and the floor did close down for about a half hour or so on the 20th. The NYSE claims they never halted trading that day - but they did. I can still see the last sale made before the trading halt. At 106!!!!!!!!! The MX ( a DJIA mimic) stayed open and somebody bought the *^&% out of it. When we resumed trading at the NYSE the futures were like 134 Bid - from At 106 a half hour earlier.
The next day there was a sign by the door. It said DO NOT HONOR THESE BADGES. There were 44 names on the list.
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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