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Art Cashin Vomits All Over The FOMC Minutes, Offers Bernanke A Deal On Some Prime East River Real Estate

Tyler Durden's picture




 

Art Cashin, who lately looks like he is coping with the market's lunacy in a very liquid fashion, pulled a Rosie and basically went medieval on Ben Bernanke and the chairman's now infamous explanation that interest rates are up because they are really down courtesy of Richard Feynman and quantum chromodynamics, in some parallel universe in which QE2 is actually working. In a nutshell, the most famous face on the NYSE has offered to sell the Princetonian a piece of very valuable East River real estate in exchange for agreeing with the BS that the FOMC's committee is dishing out now on an almost daily basis.

Declare Victory And Get Out” – That was the advice given to Lyndon Johnson in 1966 by Senator George Aiken of Vermont, as a means for the U.S. to extricate itself from the morass in South Vietnam.

Looking at the recent Fed minutes, the FOMC may be considering heeding Senator Aiken’s advice.

For weeks we, along with others, have noted the apparent anomaly of rates rising in the face of the Fed’s purchasing of billions and billions of treasuries through QE2.

It seems the Fed may have heard some of the concerns and criticisms on the topic and felt they had to discuss it at the FOMC meeting. Here’s a bit from the minutes:

"The decision to expand its holdings of longer-term securities by $600 billion by the end of the second quarter of 2011 was also roughly in line with market expectations, although market participants appeared to expect the purchase program would be increased over time. In the weeks following the November meeting, yields on nominal Treasury securities increased significantly, as investors reportedly revised down their estimates of the ultimate size of the FOMC’s new asset-purchase program. Incoming economic data that were viewed, on balance, as favorable to the outlook and news of a tentative agreement between the Administration and some members of the Congress regarding a package of fiscal measures also reportedly contributed to the backup in yields. Market participants pointed to abrupt changes in investor positions, the effects of the approaching year- end on market liquidity, and hedging flows associated with investors’ holdings of MBS as factors that may have amplified the rise in yields. Futures quotes suggested that the path for the federal funds rate expected by market participants rose over the intermeeting period."

Wow! Senator Aiken would have been proud. They throw a series of possible reasons on the table. Year-end position squaring. Mortgage hedging. The tax cut extension. Even the possibility that QE2 might be less than expected.

The primary reason they cite, however, is basically that the plan is working. The markets apparently seized upon the idea that QE2 was working and in the face of a re-charged recovery were demanding higher yields.

There’s a bridge on the East River that may be for sale. Rates began rising instantly as QE2 was launched. That could not allow time or samples to evaluate.

And, if QE2 was already so effective, why aren’t there discussions of winding down a program that was so quickly achieving its stated goals.

There are several pieces to this puzzle that still don’t fit.

 

h/t London Dude Trader

 

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Thu, 01/06/2011 - 18:29 | 854124 kato
kato's picture

severe groupthink. treason charge for the bernanke. he like to read 'Under Dog' comics as a kid.

Fri, 01/07/2011 - 06:04 | 855405 4xaddict
4xaddict's picture

Cashin is great. Amusing article.

Thu, 01/06/2011 - 18:29 | 854127 T Rex
T Rex's picture

And, if QE2 was already so effective, why aren’t there discussions of winding down a program that was so quickly achieving its stated goals.

Thu, 01/06/2011 - 19:09 | 854245 MarketTruth
MarketTruth's picture

Well... it is like Ben Shalom Bukkake boarding the USS Fed with a big MISSION ACCOMPLISHED banner. Same difference really.

Thu, 01/06/2011 - 21:59 | 854768 EvlTheCat
EvlTheCat's picture

Nice use of imagery! :)

Thu, 01/06/2011 - 18:30 | 854128 icesickle
icesickle's picture

Off topic... but ive been searching all morning for the article on US banks backed by the federal reserve stealing/holding hundreds of billions of dollars that was routed through a US bank meant for Bejing I believe? Last I read it was tied up in one of the high courts.

Anyone remember the specifics or can link me the article?

Thu, 01/06/2011 - 18:30 | 854131 Flakmeister
Flakmeister's picture

Actaully Feynman had very little to do with quantum chromodynamics... But that's another story...

I feel sort of sorry for the old guard....  Naw, on second thought, they are all pigmen, albeit, polite jovial pigmen

Thu, 01/06/2011 - 18:35 | 854138 Tyler Durden
Tyler Durden's picture

Nobody talks shit about Feynman on Zero Hedge.

Thu, 01/06/2011 - 18:40 | 854158 Red Neck Repugnicant
Red Neck Repugnicant's picture

Only particle physicist in the history of the world who can diagram a quark/anti-quark pair and get in a woman's pants with equal precision.

I'm sure this will make you vomit, but he's one of my personal heros.  

Thu, 01/06/2011 - 19:13 | 854261 Cognitive Dissonance
Cognitive Dissonance's picture

Clean up on aisle 6.

Thu, 01/06/2011 - 19:59 | 854402 Astute Investor
Astute Investor's picture

Start in the boy's department and worry about understanding the basic puts and takes that drive gross profit margin before you move up to the men's floor and quantum physics.

Thu, 01/06/2011 - 22:25 | 854822 Red Neck Repugnicant
Red Neck Repugnicant's picture

Look, you moron.  I read your response and I didn't respond because it was so stupid it just wasn't worth my time, and the thread was already burnt to a crisp.  But here you are, still going at it...

Your post had something to do with aggregate volume, as if I thought gross profit margin only applied to a single item in the entire fucking store. Of course it applies to the aggregate!  I was simply trying to break it down to a single item, so it'd be easier to comprehend.  In truth, while the gross profit margin of one item may be compressed, it is often offset by a higher gross profit margin on another - in the end, all I care about is the net affect of gross margins as a whole. Not net profit, net effect. If WalMart is compressed on peanut butter, but can offset it on crackers with no repercussions, then it doesn't matter in the context of our discussion.

Speaking in the aggregate, though, can get confusing, so I broke it down to a visualization of just one item, hoping it would be easier to conceptualize - obviously it wasn't. Whether I speak about the aggregate or individually, gross profit margins at WalMart and McDonald's are increasing - and that still means exactly what I said last night:  prices paid by the consumer are rising faster than prices paid by WalMart or McDonald's for the same item. They're jacking you for more profit, and using inflation as an excuse. 

Now you can keep trying to wrap your brain around it, and write some stupid post trying to say that I didn't take into account aggregate volume, meanwhile the entire point of gross profit margins still eludes you and seemingly everyone else.

Out of respect to Feynman, I will not carry this discussion any further with you. At the same time, though, I simply can't let you think that you won your point on something as stupid as aggregate volume of all products.  

 

Thu, 01/06/2011 - 23:34 | 854943 Astute Investor
Astute Investor's picture

Whether I speak about the aggregate or individually, gross profit margins at WalMart and McDonald's are increasing - and that still means exactly what I said last night:  prices paid by the consumer are rising faster than prices paid by WalMart or McDonald's for the same item. They're jacking you for more profit, and using inflation as an excuse.

I'm guessing you didn't respond because you couldn't respond without admitting your premise is incorrect.  My post was primarily focused on the motives for WMT shrinking it's package size for a certain brand of coffee (i.e. most likely due to commodity inflation).  You believe that there is "no inflation" and WMT's actions with respect to coffee is simply about gouging the consumer. 

The whole gross margin issue is really secondary.  I believe you were the one talking about gross profit in the aggregate (looking at historical gross profit margins at WMT) again while the article simply focused on coffee.  It's all there in black and white so there can't be any revisionist history.

In addition, you continue to fail to recognize that gross profit margins (for an individual item or in the aggregate) are driven by price AND VOLUME!!!  If selling prices are flat but volumes increase (due to lower selling prices) and COGS grow at a slower rate then gross margin INCREASES.  Your point that higher gross margins can only be due to sales prices increasing more than prices paid to suppliers is incorrect (per my example of products from Intel, Dell, etc. where lower selling prices are offset by increased volume).

I won my point going away and without really trying.  You clearly have not spent much time analyzing financial statements given your comments.

 

 

 

Thu, 01/06/2011 - 23:44 | 854995 Red Neck Repugnicant
Red Neck Repugnicant's picture

Here is your error:

If selling prices are flat but volumes increase (due to lower prices)...

Prices AREN'T decreasing.  You're trying to defend your positions with not only fictitious assumptions, but assumptions that fly in the face of the entire preface of the debate: prices are RISING.  Where in the hell is anyone talking about prices declining? Your argument began on quick sand, and now it's gone. 

However, I will concede one thing.  Obviously you were speaking specifically about coffee, while I was looking at the aggregate gross margins of the world's largest retailer and food chain.  But even that's no excuse for you because you just said that you prefaced your argument on prices declining - coffee is clearly rising.  

Take 10mg of Ritalin and try again.  



Fri, 01/07/2011 - 00:06 | 855026 Astute Investor
Astute Investor's picture

My argument remains entirely intact.  My comments about WMT's action on coffee and my critique of your gross profit margin analysis are separate and distinct.

(1) WMT did not increase the product selling price for coffee to create the illusion that prices are unchanged.  However, by shrinking the product size, they effectively implemented a stealth price increase (higher selling price per unit purchased).  The customer paid the same price for the can of coffee, but simply bought a much smaller can.  With global coffee bean prices up 72% in 2010, I would assume that the action taken by WMT was taken to at best maintain gross profit margins for coffee.

(2)  For many technology products and consumer electronics, selling prices to consumers do decline even in the current environment (computers, HDTV, etc.).  Lower selling prices are offset by higher unit volumes which is often sufficient to offset any cost increase resulting in higher gross profit margins.  Your statement that the only way to achieve higher gross profit margins is by raising prices more than costs increase is incorrect because it ignores the potential benefit of higher unit sales volume.

Fri, 01/07/2011 - 02:00 | 855207 Red Neck Repugnicant
Red Neck Repugnicant's picture

The only person talking about deflation in consumer electronics is you. 

My thesis was very clear, and I used charts/proofs from two of the largest companies in America who touch the wallets of those who can afford price increases the least.  

The fact that I would get junked over 100 times for trying to bring that argument (are price increases about profits?) into the conversation speaks to the unwillingness everyone has to listen to anything other than their regularly scheduled programming. 

I'm done with this topic. 

Fri, 01/07/2011 - 09:31 | 855592 Astute Investor
Astute Investor's picture

The only person talking about deflation in consumer electronics is you.

http://www.dailyfinance.com/story/consumer-electronics-show-are-price-cu...


I guess that's not really true and I'm not even attending CES this year.  My consumer electronics example was used to simply show how your statements about what influences gross profit margins is still incorrect.

 

The fact that I would get junked over 100 times for trying to bring that argument (are price increases about profits?) into the conversation speaks to the unwillingness everyone has to listen to anything other than their regularly scheduled programming.

 

I'm guessing there are very few WMT apologists on ZH.  Ever think you got junked because people thought your analysis was shoddy resulting in faulty conclusions?

Thu, 01/06/2011 - 23:17 | 854849 Red Neck Repugnicant
Red Neck Repugnicant's picture

How can I get junked 7 fucking times for that?

Anyone who truly knows Feynman and his womanizing reputation that was second-to-none would find my comment hilarious, especially considering the truly nerdy reputation of that field.  Imagine having Ed Witten as your wing man on a Saturday night in Vegas. 

 


 

Thu, 01/06/2011 - 18:45 | 854162 cougar_w
cougar_w's picture

Word. Lay down the smackage Tee Diddy. Feynman is a right homey at Zee Row Edge. No be mess'n.

Thu, 01/06/2011 - 18:46 | 854170 velobabe
velobabe's picture

fight club, glad you still got your pen mojo on, tyler

V O M I T, bitchez

Thu, 01/06/2011 - 18:58 | 854205 tallystick
tallystick's picture

Also a hell of a bongo player, and locksmith.

Thu, 01/06/2011 - 20:36 | 854516 DocLogo
DocLogo's picture

agreed. Could listen to him for hours...this is just beautiful - http://www.youtube.com/watch?v=ITpDrdtGAmo

Thu, 01/06/2011 - 22:29 | 854836 lewy14
lewy14's picture
Nobody talks shit about Feynman on Zero Hedge.
LMAO. You are clearly in a superposition of the joking state and the not joking state.

 

Fri, 01/07/2011 - 01:48 | 855188 Oracle of Kypseli
Oracle of Kypseli's picture

The only non-gick scientist, whith great sense of humor, playing the bongo drums in Brazil and geting layed on the beach with a variety of morenitas and criollas, should be an idol to most.

Thu, 01/06/2011 - 23:33 | 854983 bankonzhongguo
bankonzhongguo's picture

Dirac and Feynman slash notions. 

That's when I knew I had to go back to eighth grade math and be a banker.

Fri, 01/07/2011 - 00:19 | 855048 Flakmeister
Flakmeister's picture

  Ain't talkin' trash.... I guess contribution to Parton theory was important, but that wasn't QCD. BTW, I've had lunch with Witten.

Fri, 01/07/2011 - 01:57 | 855198 Oracle of Kypseli
Oracle of Kypseli's picture

Wasn't he the one that told the joke about a blonde who was caught speeding and was told by the state trooper that she was driving at 80 MPH? to which she replied that this was impossible as she has just left the house five minutes ago?

Well, in one of his lectures that he repeated this joke a feminist complained to him, to which he replied that the state trooper was also woman.

Fri, 01/07/2011 - 02:37 | 855260 Problem Is
Problem Is's picture

"Nobody talks shit about Feynman on Zero Hedge."

Classic Feynman QED
In one of Feynman's books, he tells the story of proving to his frat bros at MIT that the human bladder does not operate by the force of gravity...

By standing on his head and urinating...

Thu, 01/06/2011 - 18:38 | 854152 Spalding_Smailes
Spalding_Smailes's picture

Flak,

 

When does the blowtorching in Silver Wheaton stop ?

Fri, 01/07/2011 - 00:16 | 855047 Flakmeister
Flakmeister's picture

Re-read my posts...

I don't know. A 20% pull back?

I said weakness and to hedge by selling the Jan 12 45 calls against. If you did it when it was 40, you would have gotten 6 bucks.... Patience.

Thu, 01/06/2011 - 18:46 | 854140 cougar_w
cougar_w's picture

It all seems ludicrous until you notice that everyone in the room is looking at Ben and reading the FOMC minutes and nodding and saying "that's right, good going, keep it up."

Because the alternative is to go ape shit, scream in terror, run around in circles tearing your hair out, and gibbering incoherently.

Which as you know frightens the children.

If it bothers anyone just don't look. See the White Knight is talking backwards, isn't that clever, now where did my croquette ball run off to? What's that you say all this is insane? Well why wouldn't it be insane dearie, the world is at an end you know nothing sane can come of that. Now help me find my hedgehog or we'll never finish this game and the Red Queen will be on about our heads being off. Again.

Thu, 01/06/2011 - 18:49 | 854183 Misean
Misean's picture

:)

Thu, 01/06/2011 - 22:10 | 854802 EvlTheCat
EvlTheCat's picture

Because the alternative is to go ape shit, scream in terror, run around in circles tearing your hair out, and gibbering incoherently.

 

Which as you know frightens the children.

1) I would like to see this honesty, but only if they concluded by pushing The Chairman out of the top window in the Fed.

2) I don't know about others, but I already use The Ben Bernank as a substitute for the traditional boogie man when telling my kids ghost stories around the campfire.  It's amazing what children comprehend when put into the proper context.

Thu, 01/06/2011 - 18:38 | 854155 AUD
AUD's picture

Yeah, so what? Gold down, oil down.......

These blusterings on the stupidity of the Fed by Wall Street blowhards is having no impact on the market.

Thu, 01/06/2011 - 18:49 | 854173 spinone
spinone's picture

They are truly too big to fail now.  They will never go away.

The fed and the wall street banks won.

If they fail, we fail, because they are the system and they will take everything down with them.

 

Thu, 01/06/2011 - 18:54 | 854182 cougar_w
cougar_w's picture

Someone was saying the same thing as they erected all those statues on the shores of Easter Island.

"This is real. This is the power. This will survive the ages and bewilder mankind for all eternity. We totally rock."

They were right, whoever the Hell they were.

Thu, 01/06/2011 - 19:12 | 854254 AUD
AUD's picture

Today is where the action is and the action is saying that the market thinks the Fed are Gods. The fact that they aren't is having no impression...today.

Thu, 01/06/2011 - 19:18 | 854274 cougar_w
cougar_w's picture

The Market is the Fed and their buddies on Wall St.

They lose only when we stop thinking about the Market as being anything important or useful.

When that happens I really don't know what they will do. Unleash the armed forces to whip our collective asses, I suppose. Something dastardly like that.

Thu, 01/06/2011 - 19:29 | 854293 AUD
AUD's picture

The Fed is a market maker but is not the market. The market is saying that the UST is still 'money good' & then some. Gold still displays a healthy contango on the COMEX, despite the recent fall in $ price.

Personally I think the 'end' will be a sudden 'how could have we anticipated this?' event, kind of like a bubble bursting.

Thu, 01/06/2011 - 20:51 | 854560 Art Vandelay
Art Vandelay's picture

I met a traveller from an antique land Who said: "Two vast and trunkless legs of stone Stand in the desert. Near them on the sand, Half sunk, a shattered visage lies, whose frown And wrinkled lip and sneer of cold command Tell that its sculptor well those passions read Which yet survive, stamped on these lifeless things, The hand that mocked them and the heart that fed. And on the pedestal these words appear: `My name is Ozymandias, King of Kings: Look on my works, ye mighty, and despair!' Nothing beside remains. Round the decay Of that colossal wreck, boundless and bare, The lone and level sands stretch far away".

Thu, 01/06/2011 - 18:59 | 854208 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It will be sad if all IMF conditions are enacted onto the 1st world.  It would be stunning really.  But now that the maul of the Gauls is in full effect with Spain following Portugal's suit, all that is left are Japan, Britain, NorthWest Europe, and America.  This people may just buy what the banks are selling, we will see, the pieces are falling into place for great changes.

Thu, 01/06/2011 - 18:49 | 854174 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Buy AUD before or after real estate bubble pops down under?  Invest in whose paper?

Thu, 01/06/2011 - 18:45 | 854168 spinone
spinone's picture

It won't matter until it does.

All fiat currencies fail.

All empires crumble.

The questions is not so much what, as when.

Thu, 01/06/2011 - 18:44 | 854169 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Yes Art has it.  Write about the BS.  Tell your friends.  Bernanke is BS.

Fri, 01/07/2011 - 00:30 | 855060 RockyRacoon
RockyRacoon's picture

Art Cashion is nobody's fool and has been around long enough that he doesn't need approval from any of the fools on the floor.  It's about time he played the straight man.  If he could get over the old man humming to himself he'd play well on the TV gig.

Thu, 01/06/2011 - 18:50 | 854181 Misean
Misean's picture

Just a confirmation they need to add a few more epicycles to the fundemetally sound model they use. 

Thu, 01/06/2011 - 18:55 | 854197 flacon
flacon's picture

All I have to say is one big fat LOL!

Thu, 01/06/2011 - 19:00 | 854201 Don Birnam
Don Birnam's picture

<< Art Cashin, who lately looks like he is coping with the market's lunacy in a very liquid fashion...>> I had noticed the very same; Art's broken capillaries seem to increase with the margin debt level on the NYSE.

Make mine Macallan. Neat. In an 8-ounce tumbler.

Thu, 01/06/2011 - 20:33 | 854510 StychoKiller
StychoKiller's picture

Art Cashin also is exhibiting signs of Parkinson's Disease :>(

Thu, 01/06/2011 - 18:58 | 854206 spongeBOB
spongeBOB's picture

And of course the dip(shit) buyers showed around 3:30 to scoop up those cheap shares in anticipation of tomorrow's NFP blow-out numbers.

Thu, 01/06/2011 - 19:01 | 854210 buzzsaw99
buzzsaw99's picture

"The decision to expand its holdings of longer-term securities by $600 billion by the end of the second quarter of 2011 was also roughly in line with market expectations, although market participants appeared to expect the purchase program would be increased over time.

replace "appeared to expect" with "knowed it!"

there is zero chance the bernank won't be back buying more stuff after QE2 is over. zero chance. he'll be back like a chip sniping floozy at the vegas tables.

Thu, 01/06/2011 - 19:10 | 854241 Buttcathead
Buttcathead's picture

Market participants  can kiss my ass !!!

Thu, 01/06/2011 - 22:01 | 854770 Kali
Kali's picture

can i watch?  That would be nice SEC porn

Thu, 01/06/2011 - 19:16 | 854267 max2205
max2205's picture

Again, Ben did QE 2 just to give TBTF banks more bailout money. He will say anything but. But that's why he is doing it period.

He should be fired for appropriating money without congressional approval

Thu, 01/06/2011 - 19:35 | 854322 johngaltfla
johngaltfla's picture

Thank God for Art Cashin preaching some sanity....

Fri, 01/07/2011 - 00:34 | 855062 RockyRacoon
RockyRacoon's picture

He ain't got nothin' to lose.  The worse things get the more vocal he will become.   I've heard him say that this most recent market fiasco outdoes all past events in U. S. history.

Thu, 01/06/2011 - 19:48 | 854367 ewmayer
ewmayer's picture

Krugman was jumping through similar "liar, liar, pants on fire" hoops as Bernanke in an effort to "explain" why all of sudden rising rates - the exact opposite of what Bernanke said QE2 was meant to accomplish in his WaPo op-ed justifying the program - were actually a good thing.

BTW, Feynman was quantum ELECTROdynamics (QED), he won the Nobel together with Tomonaga and Schwinger for that. But QCD uses much the same approach pioneered by those luminaries, it's just much, much harder because the coupling coefficients used in the perturbation expansions are not small, so computation becomes unbelievably hard. QED you can do to ungodly levels of precision - at least if you're Feynman - using pencil, paper and a slide rule or hand calculator; QCD needs supercomputers to compute most things to any level of accuracy. Or so I'm told. ;)

Thu, 01/06/2011 - 19:51 | 854380 Missiondweller
Missiondweller's picture

Good going Art Cashin. As an alumni of PW he makes me proud.

Thu, 01/06/2011 - 19:59 | 854409 NERVEAGENTVX
NERVEAGENTVX's picture

I guess the chinese can dump U.S. treasuries faster than the FED can buy them.

Thu, 01/06/2011 - 21:12 | 854619 Wolf in the Wilds
Wolf in the Wilds's picture

Its because the Fed cannot admit they have to monetise US Debt to prevent rates from rising:

 

http://viewfromthewilds.blogspot.com/2011/01/to-qe-or-not-to-qe-that-is-question.html

Thu, 01/06/2011 - 21:40 | 854720 SwingForce
SwingForce's picture

QE2 is nothing more than another round of free money for The Banks. Its the only explanation where all the puzzle parts fit, as presented by Art Cashin.

 

Thu, 01/06/2011 - 23:01 | 854872 Contra_Man
Contra_Man's picture

No more sun spot worries either after that punch bowl call - apparently all is not rotten with spiked Purple Poisoned Kool-Aid, remember that great "marinating ice cube" call, with Dow then proceeding to immediately revert to cross through 7,8,9,10, and 11,000... and U say another BS wave of QE substance abuse is coming... may I please have another?

DJIA Closes At Fresh 2-Year High In Thin Trading; S&P 500 Slips WSJ - Dec 20, 2010
Fri, 01/07/2011 - 00:21 | 855049 Coldfire
Coldfire's picture

Art's pints are well taken.

Fri, 01/07/2011 - 00:51 | 855087 rapier
rapier's picture

With QEI the rate rise started in 10 mintues. At least with II it took a couple of days.  Let's be real.  Ben doesn't give a shit if rates go up some.  I suppose at some point it would be a problem but he wanted risk on to inflate stocks and every other asset imaginable. That is the only way the system works. Unless very short term very large profits can be made through finance the system stops working.

Fri, 01/07/2011 - 03:35 | 855318 gwar5
gwar5's picture

While the FED is doing voodoo, we should be getting the gold away from the FRBNY

Fri, 01/07/2011 - 03:52 | 855340 dcb
dcb's picture

there is no penalty for telling lies in our system by the elites. none of the reasons for qe2 were the actualy eal reasons, so they will keep doing it

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