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Art Cashin Compares This Week's Action To The Days Before Black Friday
Yesterday's ominous selloff (today's very temporary EURUSD, and 100% cross-asset correlation, bounce notwithstanding: after all the data just got even worse courtesy of the Philly Fed, meaning much more pain for the S&P before QE 3 comes) got you a little jittery, with Flash Crashy overtones? You are not alone. Market veteran Art Cashin recounts that yesterday's market action was not so much reminiscent of 2010, or even the 2008 uber-volatile market, but really 1987.
Some Echoes of 2008 (And One, Faint, Slightly Scarier Echo) – (For those of you who listen to me throughout the day on the UBS squawkbox this may be a little “old news” – but hang in there.)
The stock market got hammered by a one-two punch yesterday. Actually, it was more like a one-two-three punch.
Early on, stock futures were in the hole as the Euro sagged on the breakup of the emergency Greek rescue meeting late Tuesday and signs of new unrest in the Athens streets.
Then, into that weakened and nervous environment, strode a series of lousy economic stats in the U.S. At 8:30, the CPI was a notch high which might be a hindrance to further Fed easing. Worse, and far more shocking, the NY (Empire) Fed Index imploded to -7.8% from +12. It had been expected to come in at +12. The plunge sent the already weak equity futures reeling.
At 9:15, Industrial Production came in weaker than estimates and Capacity Utilization actually fell, reinforcing the suggestion that the economy was stalling.
The Dow opened down about 100 points and the bulls immediately began to circle the wagons. They trimmed the losses slightly but were unable to mount a credible rally. Then, around 11:30, things began to unravel with a vengeance. There were confusing (and occasionally conflicting) headlines about the actions and intentions of the Greek PM, Mr. Papandreou. Had he been asked to resign? Did he say he would? Did he say he wouldn’t? Would there be a “unity government?” As a backdrop to all this, TV screens filled up with the likes of smoke canisters, riot batons and rock throwing mobs in Athens.
What really broke the back of the Euro and the markets (we think) were reports of a “leaked” EU email about the breakup of Tuesday’s rescue mission. It was said to have a very pessimistic tone and cast doubt on an effective ultimate rescue. As stocks and oil and grains got pounded, some folks heard echoes of 2008. Some TV pundits saw similarities to Lehman in September. Most traders, however, saw things more analogous to March and Bear Stearns. The rumormongers had begun to shift the discussion from European banks to the unknown counterparties on European Credit Default Swaps.
That universe is potentially enormous, populated as Captain Renault might say – by the usual suspects. That clearly runs the risk of some 2008 potential.
By the closing bell, the ugliness had not lifted. The breadth was negative and outright atrocious. It was a “90% down day” and, we think, the third or fourth in this selloff. It not only erased all of the gains of the prior two days, it took us to new lows for this down leg.
At the post close seminar of the Friends of Fermentation, the chatter about the echoes of 2008 grew a bit louder and more animated. A few of the geriatric veterans were a bit more somber and reflective.
They recalled another volatile expiration week that followed a growingly aggressive selloff from a high only weeks before. That was not 2008. It was 1987. But that’s so unlikely, right? Pass the peanuts, please!
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From Art's mouth to God's ear.
Only one ear?
ah yes Black Friday and the crash of 87 and everyone's favorite pundit of the day Louis Rukeyser with his pals Marty Zweig and Allen Sinai
Black Friday edition of Wall Street Week in its entirety
http://www.youtube.com/watch?v=2MyToTwag34
http://www.youtube.com/watch?v=h9iE-bn0xBU
http://www.youtube.com/watch?v=o7_l5ijG0bg
WOW! His face was really green on my TV that night, don't adjust that set! Oh yeah, get that Kojak Lollypop ready, because who loves you, baby! Nice post, thanx for the mammories[sp] but wasn't Black Friday on a Monday that year?.
Marty and Sinai were pretty prescient that night follow the links for Black Monday and beyond and you'll get to see your buddy Cavuto and even a cameo by a youthful Kudlow
http://www.youtube.com/user/crashof1987#p/u/5/4pjSlIkNxXg
and in this report a week later what in hindsight is perhaps the birth of the current generation of banksters as the push for deregulation goes full speed ahead (including a cameo by the Late Bill Seidman)
http://www.youtube.com/watch?v=cnAz3lCQ04k
Awesome! Thanks for posting...
Rukeyser: “These computers are used by large institutional investors, whose money managers are paid huge sums of money, to make no-brain decisions that are made for them by computers. Aren’t these guys overpaid?”
Cant happen, circuit breakers.
Yep
The chaos will be everywhere else tho, gonna be fucking funny when stawks dont trade for a week then open down 30%.
Yep, I'm guessing what we'll see next wont be some smooth comfortable patch job, but a sudden chaos event.
Jim Sinclair seems to be echoing the same thoughts...
http://goldandsilverlinings.com/?p=1244
They didn't think it could happen in 1987 either. Remember portfolio insurance? Everybody had it. There is always something that can trash the system. Flash crash, a robot blows up, who knows. They said the Titanic was unsinkable. We all know what happened there.
Even with circuit breakers a 30% one day drop is possible.
http://www.nyse.com/press/circuit_breakers.html
You'd think they'll be able to switch all algos to buy in the half hour breaks no?
and the "plunge protection" team
but who knows what game theory can do to the robots. untested waters now.
2k shaving in one week, then QE3
except it won't be called QE3.
It will be called "Cupcakes" according to Jim Rogers
Great, plunge the markets down (I dont believe they can) and then 'QE3'....go for it Ben I really want to see my gold at $2,000 overnite.
I was only 3 months in 'da bidness' when the '87 crash happened. What a rookie hazing that was. What doesn't kill ya........
Ha ha, my boss walks out of the men's room with his necktie thrown up around his shoulder, his eyes were all red and watery. I went inside there was vomit everywhere, what a day! Bobby P. got all my guys out, what can I say. Here check the reprints from this book, great pics of Boesky & Guiliani too: https://picasaweb.google.com/larryokarski/TheMissilesOfOctober
PPT was born 10/20/1987 XMI Futures on CBOT saved the world! C2XMZ if I remember correctly... and Oh yeah, Larry Wachtel said on the speakerbox, "Things must be getting bad, I just PUKED!" Smithtown did too, ha ha. (This was a Monday, not a Friday).
I was 7 months into Goldman when the '87 crash hit...surreal market action...feels nothing like it. Rates are half, PE's are lower, this is a different issue. Worldwide debt exposure is off the charts compared to '87, and that, this time, is the catalyst.
A 2,500+ drop in the Dow? There wasn't a PPT back in 1987, but certainly possible over the course of a week, in the absence of the Fed.
Actually I had a drink with Art at Ben and Bensons that Friday before the crash..actually 4 drinks...I think he has a point....ha ha I was the AXE in Genetech symbol GENE and the stock was in a crossed market on Monday for 5 hours....it was the wild west baby.....sweet
Was it the practice to flee Wall Street for mid-town steakhouse on Friday? Did you all take the subway, bus, taxi, or ? to 52nd street?
P.S. I hope someday I can have a drink with Art.
http://www.benbensons.com/index2.htm
1987 was the start of the bull market, glad to see you are so optimistic tyler. but i think you are rushing it just a bit.
By "Bull Market", are you reffering to the millions of manufacturing jobs we lost to China during that period of time?
talking strictly stock index numbers, not trying to get philosophical
stock index numbers meaningless in real terms.
Greenspan slit the curreny's throat during this time.
well if they are meaningless on the way up, surely they would be meaningless on the way down. and if that were the case, why such attention to it?
Funny man, you make me wanna roll my IRA over to you at Edward Jones so you can fix my asset allocation for me.
try again dum dum. bull started in early 80s.
didn't really get going until we were able to fashion GDP out of debt. Can't do that anymore and that's the difference.
if you spelled "dumb dumb" correctly you might have some credibility
No he's right and you're wrong, go buy some Dum Dum suckers and see for yourself.
oh the pops, staple food of all white trash households
A fool and their money are soon parted....say goodbye to your paper wealth Shill Boy.
T.E.I.N. everyone.
You may not like it but paper wealth is going to be around for quite a while.
It's what "Kazoo" used to call Fred Flintstone... But since Fred isn't around...
Back then we were just starting to lever up as a country. That is no longer an option. We are in debt destruction mode now. The Dow will go to 4000
The bull market to which you are referring is generally considered to have begun in 1982, not 1987.
A Lesson from 1987: Who did the traders screw? They screwed each other! It wasn't the little guy holding the bag, it was the brokerage firms- EFHutton? Drexel-Burnham? Kidder-Peabody? A large swift move lower shakes out the little guys' stops, have we learnt nuthin' from history? There will never be a TARP II, so Jamie & Lloyd better be careful this time.
On the other hand, God Bless Art and his trader's gut, there aren't too many like him around anymore- I'm thinking of Larry Wachtel as another example.
so Jamie & Lloyd "better be careful this time."
They got their loot already...did you see their compensation for last year??? they know what is coming...but, hey thanks for the warning...
BULLSHIT, markets only crash when bailout legislation doesn't go through, and then like TARP it's voted on again the next day.
THE STOCK MARKET IS TOTAL FUCKING GARBAGE.
Agreed. The markets are now just pure garbage, completely irrelevant to anything real world and stinking.
where is hammy when you need him???
any bulls out there?
they need volunteers to hold the bag...
Bernank might call it a 'perception tool'.
When it comes to Bernanke, it's a perception stool.
Market breadth yesterday was the worst since 2008. Advice from a guy with pointy ears: You do not want to be long equities right now. I am 100% short.
Likewise. Could be a major change in trend occurring: from Bull (fully rigged) to Bear (need justification for further rigging). If so, a strategic change from BTFD to STFB is in order. Care to compute the probability - based on your cold calculus - that such a trend change has indeed occurred, Mr. Spock?
Precisely. A shift in market momentum does indeed seem to be occurring now. One indicator that gives us evidence is the slow stochastics of the S&P 500. Every time this oscillator came down to 20, it was a BTFD moment. But on this swoon, slow stochastics has dropped below 20, which hasn't happened in over 2 years. Further, it has been languishing under 20 since June 3--about 2 weeks, which hasn't occurred since 2008. This is the start of the decline the bears have been looking for.
Well, it feels that way to me as well, but better to leave feelings out of it, right? You express a 100% probability ... astounding! And encouraging, as I've actually been Selling The F'n Bounces since about March, even turned my nose up at some modest profits & am looking forward to getting some $ back at this point. At this point, I'm at least 100% certain this dip is of a higher degree than the last few. Thanks for the slo stoch numbers that confirm that feeling.
BTW, I used to do the Mr. Spock schtick back in the dot.com days on another board, in another galaxy far, far away. Can't believe how time flies, and how many suckers ... I mean "investors" can fall for the same crap time and again. Fear, Greed::Rinse, Repeat
Someone needs to write a program that would give the definitions of all the acronymns on the left or right margins of text.
Ya, sorry there Armando. I don't know if it's even been used before, but since the one most used here is Buy The F'n Dip (BTFD), I thought the context might be enough for its opposite: Sell The F'n Bounce (STFB).
See the post a couple down: TEIN has had me going for a while, but I think I may have just got it: The End Is Nigh (or Near).
Can I get a witness (CIGAW)?
Someone needs to write a program that would give the definitions of all the acronymns on the left or right margins of text.
Art talks like we have a real market. LOL
Very true....very sad!
T.E.I.N. everyone!
I compared market action of late to just prior to 'black friday' in an earlier article this morning.
system is broken beyond repair. Am growing own food and getting house toward a zero energy. self sufficiency is important in the years ahead.
Its funny to watch isnt it? The system is totaly broken and corrupt beyond repair, and everyone is just placing guesses on how and when more duct tape and bubblegum will be applied for another 'fix'.
Yep. Typical socialists ... "just one more rule change", "just one more regulatory committee" and all will be fixed! Fucking morons are always looking for mommy to come and kiss it better.
(insert appropriate cartoon here)
Is it possible that the market is feeling a bit out of shape and not as able to "Twist and Shout" as in previous decades.
http://tradewithdave.com/?p=6968
Dave Harrison
www.tradewithdave.com
So, under 1240 by close?
Agree with the garbage thought.
I guess I too am getting old. I remember well the 87 crash and have been positioned for a safe fall over the cliff with a few shorts and lots of confetti until miners return to the forefront. What a crock of shit this market is.
0 longs except inverse ETF or two.
Who woulda thought a Weiner resignation would so threaten the pig Market?
aha...that was the reason...i couldnt figure it out what was going on...
Baloney sandwithes! If the markets drop, it is only because the rigged casino decided to fleece the 401k sheeple.
I don't listen to funny papers, funny gooned owned news networks (including fake alternative media), or fake polls from the funny networks who attempt to tell me what reality is. This is getting quite ridiculous at this point. Every blogger is just pounding these goons into the sand with their garbage stories. There is censorship on blogs like yahoo and they still can't stop it. Simply amazing. Welcome to the 21st century goons.
The 401K sheeple ARE the main next target for fleecing...hell over the last month theyve already raided federal employee pensions for $100 billion, it will be even quicker for the public pension and 401K heist coming next.
What do people think, Bernank did all this so geezers can retire like a millionaire at The Villages?
Dream on.
not so fast, let's see more momos sucked into the long trade, before we collapse
Clarification please...MOMOS??...momentum traders?
I hope he is right!!!
question for you market historian-types...
Why the heck does the government release economic data piecemeal throughout the month? Is that the way it has always been, or did the big trading houses lobby to get it that way so the market could be yanked up and down willy-nilly and generate more trading profits?
Wouldn't be more efficent, if not more volatile to release a months data all at once and "get 'er done"?
So that theres always something coming with hours to keep people waiting for with baited breath.
Still awaiting the Weiner.......
going curmudgeonly OT (sorry, art).
libya: still bombs awaaayyy! but i see where some congo-lese, led by the dastardly Ku-Ku-Kucinich, a group of House farts, is suing prez0:
the suit will contest the Obama administration's "circumvention of Congress and its use of international organizations such as the United Nations and the North Atlantic Treaty Organization to authorise the use of military force abroad." (End Paste)
john boehner even sent a note TO: The Executive FROM: The Speaker Of The House about what the hell is going on, here?
yesterday, in NY, near the UN, louis farrakhan: expressed support for Libyan leader Muammar Al Qathafi and condemned the NATO-led bombing of Libya, UN-sanctioned military strikes and operations against the North African nation.
Former U.S. Attorney General Ramsey Clark also addressed the press and called for an end to the strikes and the war on Libya. (End Paste/pastes from The Tripoli Post)
yes, we have ku-ku-, j-bone, theMin, & ram-C/xA.G., presented as voices of peace and reason, by slewie the pi-rat, on zeroHedge, and inviting enquiring minds everywhere to ask: what the hell is going on, here?
That Idiot faked fucking killing Osama, that's what we call dirt. When you have dirt on someone that means you have power over them. The puppet got a shit load more strings on May the 2nd 2011.
Oh, they had ple-e-e-e-e-nty of dirt on the Big O (and his mum) long before May 2nd. He's on the inside and well protected (until he's not).
Obama is solidifying the use of Executive powers to pursue military objectives under NATO guidance; and yes - what the hell is going on here?
PPT better get on MON; they are a big dummo contributor.
"...the actions and intentions of the Greek PM, Mr. Papandreou. Had he been asked to resign? Did he say he would? Did he say he wouldn’t?"
Such a dilemma deserves an appropriate tune;
http://www.youtube.com/watch?v=GqH21LEmfbQ
Could be Mr. Pap' asking Christine Lagarde the question "Should I Stay or Should I Go ?"
AAPL through the 200-day for the first time in 2 years.
Where is the Weiner?
In a ditch with 2 self-inflicted lead overdoses in the back of the head?
TWWW....
Is it possible that the HFT algo's start driving the market down instead of up?
Possible yes, even easy ... but why would The Bernank order such a thing? In the run up to elections?
There might be a reason, mind you. I'm not sure I'm devious enough to imagine it however.
Every "pro" on the planet is now short. I have not liked stocks for a long time. But this is too obvious. And going into OPEX, I would have to expect a sneak attack market pump.
Along these same lines is this:
Found here:
http://www.lope.ca/markets/1987crash/
Crowd psychology fail? Why not. And remember, whoever can trade the decline can make money, too.
Act surprised when it happens, guys. I mean the crash.
JC! FUK US PIIGS!
(I love the new acronym so much that I can't quit saying it!)
VIX lives! Who would have thunk it.
please don't jump on my ignorance too quick.but IF a crash is constructed and IF a lot of people lose money and IF TPTB force you to take your money out of your401k,IRA etc.and pay zillions of tax dollars OR(to prove how much they love you) convert your retirement to US bonds,,,,,???how far down the road could that kick the slop jar?
To Election Day:
Who said that TPTB are Monolithic? Get some Republicrat ("One of "Our People" this time) to overthrow Obama and we can still salvage Bidness as usual. Cull the weak, impress upon the New People in Town that the best way to survive is to get along (Ummm...Could get a little messy...) and move on to the next item of business.
CW
TPTB are making a killing already.
A lot of retired folks are being forced to liquidate assets they have held for a long time.
After the 2008 crash they had to take out what had the lowest capital gains.
Now, with continued 0% interest rates, no Social Security Cost Of Living Adjustment in 3 years, and increasing inflation they are getting hit with huge capital gains taxes for selling their longer term "more successful" investments.
Imagine that; save, invest in the the markets, and get punished for it.
What a country.
Nice to see there are a few traders left on ZH.
....markets are setting the last bear trap in place. Wall streets gonna make a brutal last pop to Dow 14000 before december expiry to roast and eat for dinner all the baby bear cubs.
I remember that '87 crash, LOTS of regular folks lost their job over that one.
I think that Michelle Caruso Cabrera (the other sweater girl) from Greece may have had it right. The british anchor on CNBC kept trying to knock down what she said and from her expression she knew that he was putting out talking points about how Europe takes it time, how it is looking out to the next 1,000 years (seriously he said this) etc. etc.. She said that the ECB is playing this out in order to telegraph to the banks that do whatever you have to do to unwinde from all the debt and swaps associated with the Greek govt. and private companies. She even said that if it takes them trying to sell this debt off to vulture funds then do it, but essentially they are saying we can't do anything and before we announce it GET OUT AS MUCH AS YOU CAN!