Art Cashin Early Thoughts

Tyler Durden's picture

From the ever insightful Art Cashin via UBS Financial Services:

Greece Graced Vaguely Causing Buck to Buckle And Stocks To Soar – An announcement from European leaders of a commitment to assist Greece boosted the Euro and dinged the dollar. That in today’s Pavlovian world sent gold, oil and stocks higher. It was entertaining to watch pundits on TV trying to invent a stimulus or two for the rally. A couple even tried to attribute the rally in stocks to movement on financial reform.

Duh! What would make the Dow rise 100 points, gold jump $20 and oil to move up nearly a dollar? The answer fairly jumps off the page. It was the pullback in the dollar – er…..more directly, the dollar basket (DXY).

The relationship between the dollar and other assets is clearly evident by looking at the minute by minute charts. We presume the pundits look for other causation simply to fill up air time.

At any rate, the dollar driven levitation in stocks took the S&P up through the first resistance band at 1074/1078. The rally made it to 1080 before it got winded. The rally may be showing some signs of exhaustion, however. Next week could be interesting.

Greek “Rescue Package” Lacks Details And, Maybe, Commitment – A Bloomberg story this morning points up how tenuous the presumed rescue package is. Here’s how the article began:

Feb. 12 (Bloomberg) -- German Chancellor Angela Merkel rallied European leaders to help Greece deal with its debt crisis. She still hasn’t sold her political allies at home on the idea.

Lawmakers from Merkel’s coalition partner, the Free Democratic Party, are threatening to prevent her from turning the moral support offered by European Union leaders yesterday into financial aid. They’re backed by polls showing public opposition to such a move.

“Our citizens can’t be expected to pay for the consciously flawed fiscal and budgetary polices of other euro-zone countries,” Carl-Ludwig Thiele, the FDP’s financial-policy spokesman in parliament, said in a phone interview yesterday.

The dispute risks deepening the erosion in support for Merkel’s four-month-old coalition, which has slid in polls amid bickering over bank levies, solar-energy aid and nuclear power. Combined support for three coalition parties fell to the lowest since 2001 in a Feb. 10 Forsa poll.

Merkel’s clout will be tested if she seeks to go beyond the statement of support for Greece by EU leaders. They pledged help for the Athens government in exchange for adherence to a budget-cutting regime, stopping short of agreeing to concrete help.

If a Greek rescue package does evolve, could it bring down the German government? That could send Euroland into chaos as other governments might freeze up in response.

The reaction in the streets of Athens is another wild card. Will the Greek government be toppled by public opposition to the kind of austerity that the rescuers would try to impose?

This story is far from resolved. So to is the fate of the Euro. We may be at a rather historic moment.

China Hits The Brakes, Yet Again – China shocked the markets this morning by raising reserve requirements for the second time in a month. The timing of the announcement may have been based on the extended closing of markets for the Lunar New Year. There is a risk that the rapid multiple moves to tighten may convey the impression that China hasfallen behind the curve. That could cause problems for markets.

Us, Them And The Other Guy – For nearly a year, we have cautioned that Washington has poisoned civil discourse by positing much of the discussion of the financial crisis as an “us versus them” issue. It does not serve the common good and, as I cautioned Carl Quintanilla in December, it could spill into the streets in the second quarter. In an op-ed piece in the Washington Post this morning, Steve Schwarzman of Blackstone, addresses the topic as it applies to the banks. Interestingly, the op-ed piece appears to be whipping up a bit of backlash. Here’s a key part to Schwarzman’s theme:

This country, of course, needs fundamental reform of our financial regulatory system, as I, and many other financial institution executives, have publicly advocated for a considerable period. But we are debating thishugely important issue in an inflammatory political atmosphere in which key participants seem determined to single out the banks for special retribution in reaction to the financial crisis.

Schwarzman then goes on to list a broad variety of sectors and participants who contributed to creating the crisis. The central thesis, however, is that acrimonious finger pointing is at least counterproductive and may be destructive to both the economy and society.

Cocktail Napkin Charting – As noted above, the rescue rally 2.0 took the S&P through the first level of resistance. The next series of resistance levels are a good deal more formidable. The first band is 1083/1088 and then 1093/1096. Support is way down around 1058/1063.

Next week could be critical as the napkins hint that selling could resume, perhaps with a vengeance.

Consensus – China move sends futures lower this morning. Let’s see if more details show up on the Greece plan. It remains all about the dollar. Stay very nimble.

Trivia Corner Answer - The kitchen related six letter word with the two "soft G's" would be "ginger." Isn't that peachy? Today’s Question - There are 26 letters in the alphabet. There are 50 states in the U.S. A list of the 50 states does not use every letter in the alphabet. What's left over??

And our personal favorite - the History section:

On this day (+2…..which would be Valentine’s Day of course) in 1929, a group of executives gathered for a mid-morning get-together. Records do not indicate that coffee or buns were served. Nor do they appear to indicate that the seven mengathered around the water cooler (maybe because there was no water cooler).

Anyway, seven top guys in "Moran Enterprises" were gathered in a non-descript Chicago garage. Suddenly the regulators appeared. In this case the regulators were dressed in the uniforms of the Chicago Police. So to comply with this surprise audit, these seven men, men who worked for George Moran Enterprises faced the wall and raised their hands (a standard audit procedure at that time).

This time, however, the regulators were not police. Rather they were Al Capone's hit men dressed as cops. Instantly, they began firing Thompson sub machine guns (not standard audit equipment even at that time) at the backs of the seven gunsels from "Bugs" Moran's gang. After the initial burst, they checked the victims and put away any of those still moving. Then they drove off.

From drive-up to drive-off the whole thing took less than eight minutes. The bloodshed was so bad that one hardboiled reporter, from the Chicago City news, walked into the garage, and remarked "I got more brains on my feet than I got in my head". And, he had a big head.

Thus, the event entered American popular mythology as the "St. Valentines Day Massacre".

To celebrate attend a Conference on Market Neutral Strategies. But, if some guys claiming to be from the SEC show up carrying violin cases, try to crawl out the restroom window.

There was clearly no massacre on Wall Street yesterday – at least not for the bulls.

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phaesed's picture

It was entertaining to watch pundits on TV trying to invent a stimulus or two for the rally. A couple even tried to attribute the rally in stocks to movement on financial reform.Duh!

1. Thank you for Cashin's comments.... the man truly is amazing.

2. This makes me think of all the times he got cut off for saying that there might be a correction and wonder at exactly what went through his mind to all the idiots on Squawk Box....

Anonymous's picture

Trivia: q?

Anonymous's picture

Whats probably more amazing is the frequency that CNBC solicits comments from this moron

arnoldsimage's picture

 For wicked men are found among my people;
they lurk like fowlers lying in wait. [1]
They set a trap;
they catch men.
27 Like a cage full of birds,
their houses are full of deceit;
therefore they have become great and rich;
28 they have grown fat and sleek.
They know no bounds in deeds of evil;
they judge not with justice
the cause of the fatherless, to make it prosper,
and they do not defend the rights of the needy.
29 Shall I not punish them for these things?
declares the Lord,
and shall I not avenge myself
on a nation such as this?”

Dr Horace Manure's picture

TD reported about this back in September.

It looks like the idea to drain $1T from the system through reverse repos with money market mutaul funds is now upon us.

MMMFs are no longer covered by FDIC, and they can suspend redemptions under the new SEC rule.  Now they will be sold garbage from the FED's balance sheet?

Will all of the brain power assembled here at ZH please explain this so a simpleton like me can understand it?

My instincts tell me that MMMFs are now going to be a very dangerous place to put what we used to call "money".

Anonymous's picture

You dont think Blankfein, Jaime Diamond, and Goldman shouldnt get bonuses? You guys sound like germans.

Stevm30's picture

The question is: Is the European Council bluffing?

and if so...

Will the "speculators" call their bluff?

It's poker at this point - and the pot is huge.

greased up deaf guy's picture

nope.  as monty burns would say... "you mean, there's a new mexico?"

Cognitive Dissonance's picture

"We presume the pundits look for other causation simply to fill up air time."

I'm not picking on Art in particular but rather the consensus view in general when I highlight this statement. This is a major Achilles Heel for humanity and it's a trained response. The standard default assumption is that people are simply misguided or dumb or mistaken or any of a hundred other various afflictions that might explain why they're spouting nonsense or doing this or not doing that etc. 

This extends to the general public. How many times have I tried to explain to some poor sap the blantant manipulation and theft occuring right in front of their eyes and the automatic default response is "I'm sure there's some other explanation" which is then followed by a convoluted and poorly thought out reason for the manipulation.

I believe there are multiple reasons for this but after years of bumping into this emotionally defensive default position, I've concluded that it's simply an extension of the overall denial we operate within on a daily basis. To actually examine what's going on all around us at all times would require that we accept responsibility for it and then do something about it.

By not pointing a finger at someone else, we are indirectly avoiding pointing the finger at ourselves, as in "What are you going to do about this now that you've accepted it really is bad actors and not just stupidity?"

We will go to extreme lengths, regardless of the absurdity, to avoid examining ourselves, including avoiding examining others. Knowledge means responsibility. If I don't know, there ain't nothing to fix and I don't need to do anything. Hear no evil, see no evil, speak no evil, thus I don't have to do anything about the evil.  

suteibu's picture

Interesting thoughts.

First, people want to be positive and trusting.  It is easy for them when there are no major problems in their lives.  You see what happens to people when they have to deal with personal tragedy.  It is very difficult for most of them.  But this is a situation that is not personal, at least for those who have not lost their job or house.  So they remain positive until they have to deal with it.  And they don't want anyone spoiling that mindset for them.

Second, it is up to everyone to look after their own affairs.  Some think that means getting others to see life the same way because the individual feels he has no power.  The reality is that we want to be a part of some community and fear making choices that will force us to leave that community.  So people fret and worry and do nothing.

dan22's picture

Greek Union Madness:

The Euro Crisis and the Greek bailout- all you wanted to know about the Greek public sector and unions.

The rate of worker participation in trade union organizations has been calculated at about 28%. More specifically, the level of trade union membership is substantially different between the private and public sectors.

2. In the private sector, union the density is not higher than 18% and stands at around 472,304 workers, as of 2007 data. The number of union members among public sector employees is calculated at 311,000 persons and represents about 60% of employment in the public sector. The latter number does not include unionized employees of the security forces who are not represented by the public sector trade union, nor does it include non-unionized military personnel. In certain areas of the public sector such as banks and enterprises under state control union density verges on 90%. 3. The Greek trade unions are represented at the highest level by two confederations the Greek General Confederation of Labor, founded in 1918, which includes all trade unions covering employees under private law labor relations in the private and broader public sector – that is, 70 union federations and 83 labor centers with a total of 472,304 voting members and the Confederation of Public Servants, established in 1947, which includes the trade unions of public administration, where public law labor relations apply. ADEDY is a three-level organization, encompassing 1,260 first-level trade unions organized in 46 federations and representing a total of 311,000 voting members. 4. The organizational structure of the trade union movement has the form of a pyramid, with three levels of representation: primary or first level (company, regional or craft unions), secondary (local labor centers, sector federations) and tertiary (national confederations such as GSEE and ADEDY). 5. Membership in employer organizations entails an obligation to take part in collective agreements with the unions.             
the grateful unemployed's picture

there's government intervention in the markets, and then there are the agents the government employs to intervene in the markets, and those agents front run the operation.

AnonymousMonetarist's picture

Let me get this straight...

The country of Greece, where a third of the economy is underground, where over the last 175 years the country has been in default about half the time, will now be monitored by the EU to insure that all future government statistics are accurate, will give the EU the power to audit its' books, and will have to follow the austerity measures laid out by the EU?

Are you kidding me?

There is no chance in Hellenic that Germany will support anything other than a Potemkin bailout.

Oh and might you suppose that the EU, once follow up reports from Greece show that there are -harumph- still ongoing 'discrepancies', will fine Greece for its' transgressions?

Other EU members probably won't be too terribly willing to gnaw at the horsehair holding the Damocles sword dangling above them also.

The canaries are chirping this morning as Dubai CDS, measured by bps, explode by over 17%.

And the dominoes are being set up as witnessed by the Spanish consortium scurrying to London to meet with its' 'bondholders'.

As mentioned on this blog in December of 2008 :

'A bank holiday where the Federales liquidate insolvent banks' capital structures (with the burden of proving solvency emphasized) per a crazy concept called price discovery is in the national security interest of the United States.

Fiscal initiatives that mandate and hold steadfast to the goal of increasing incomes on a generational basis are the greatest challenge in front of us.

Although it grieves me to say it, both given the implications for human suffering and the rapscallions throughout history that have parroted such a view but ... sometimes to solve a problem you have to make it a bigger problem.

If we can accomplish the Houidini-esque stunt of funding this debt at manageable levels it will only be by literally defining AAA as anything American (i.e. if America becomes AA then literally AA is the new AAA, with the assumption that the reasons for our 'downgrade' would serve as deleterious to all others, except maybe Mr. Gold.)'

I believe this vision is playing out. We are the last canary, and the biggest domino. But given the magic of our reserve currency, our 'downgrade' will only occur within the context of the world being downgraded first.

I've always held firm to the thesis that deflation is the midwife to hyperinflation. A real deflation, not just disinflation, requires liquidity evaporation due to multiple sovereign crises, where the backstop is called into question.

Deflation is the dollar bid, hyper-inflation is the downgrade of American's citizenry commensurate with a currency devaluation .

Would suggest that the quantity of liquidity evaporation will very much define the quality of any hyper-inflation.

We have a free skate while there are troubles in Euroland (should stretch over months not weeks) and then we'll find out just how thin our ice really is.

Beware the Trojan Hoax.

Hephasteus's picture

Speaking of places with 1/3rd of the economy underground. Has anyone really looked at how corporations work. Or been to mexico or looked at a globe.

Anonymous's picture

Al Capone was a helluva businessman. The guy knew how to get results. I think he's Obama's hero, but Obama has been neutered. That's why he needs that muthafuckkin pitbull, Rahm.

BlackBeard's picture

Agree.  Rahm's just a big bitch.

Master Bates's picture

We double topped at resistance, making new lower lows.  Then today, the market fell.

Did anybody think that the bullshit rally would continue?

Anonymous's picture

Art Cashin? This is what he said:
"Next week could be interesting."
And thats exactly what he was saying since last March, every week, literally. Useless... And his napkin charting? It is just that - napkin charting.

greased up deaf guy's picture

nobody's forcing you to read his thoughts... since last march.  when watching television, do you flip through the channels looking to watch shows you can't stand too?

"And his napkin charting? It is just that - napkin charting."

this is about as insightful as "it is what it is."  thank you for that.

bankofamerika's picture
bankofamerika (not verified) Feb 12, 2010 11:34 AM

Did quants cause the crisis? More pain to come:

Anonymous's picture

Trivia Question: Only Q (New Jersey)

Orly's picture

Everyone has this bass-ackwards.

It is not the stock market following the inverse of the dollar, it is the inverse of the dollar following the rampant liquidity in the markets.  As long as there is mucho money floating around, the market will rise and the dollar will fall...until it doesn't.

I know it is a small point, but it is one that needs to be clarified.

Grand Supercycle's picture

Choppy sideways action and chronic mixed signals continued this week, but the buying support I have previously mentioned returned on Friday 12 Feb.

It seems the DOW / SP500 / EURO / COPPER counter trend rally may start this coming week.

Daily charts remain bearish of course.

Tom123456's picture

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