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Morning Musings From Art Cashin
From UBS Financial Services
Was Emily Litella A High Frequency Trader? - On Saturday Night Live the late, great, Gilda Radner created a hilarious character named Emily Litella. The character was an elderly woman with a bit of a hearing problem.
She would mis-hear something such as “violins on television”. She would then begin to rant and rant on why folks would be against “violins on television”. As the rant grew louder and more animated, the anchor would interrupt and explain that people were really against “violence” on television not violins. Litella would than turn to the camera and sheepishly say – “Never Mind!”
Monday was an Emily Litella trading session.
The session started slowly and indecisively. The New York Fed data was far weaker than expected and put the bulls in a defensive position. At mid-morning, the dollar began to strengthen and the Euro headed south.
Speculation that the Greek rescue package might unwind began to make the rounds. Some contended that the European parliaments (spelled “Germany”) would not certify the government offers of aid. Others said Greece will not be able to implement austerity and felt Thursday’s general strike could demonstrate that.
Shortly before noon, technical factors kicked in. The currency driven selling sent the S&P down through several technical mileposts in very rapid succession. First, they took out Friday’s low (1126). Almost simultaneously, the S&P broke below its 150 day moving average (1125) and the cocktail napkin support (1122/1125).
Those collective breaks turned the selling into freefall mode with the S&P hitting the day’s low (1114) in a matter of minutes. When the freefall episode didn’t turn into a mini-“flash crash”, the bulls tried to circle the wagons with the Dow at -184.
Stocks then churned somewhat sideways with a weak, ineffective rally attempt on the 1:00 release of the NAHB data. It was the best reading since 2007 but the bulls couldn’t turn that into a real rally.
Shortly before 2:00, the rally in the dollar began to fade and stocks turned better. With European markets closed, the dollar faded further and further. As stocks headed toward the close, the dollar became basically unchanged on the day.
So, after looking as though they might crash through mid-day and then grappling with data, technicals and rumors, they ended up about where they started. Kind of like commuting by roller-coaster. Or, as Emily Litella would say – “Never Mind!”
Marinating With Mauldin And The Mavens – John Mauldin popped into town on a speaking tour. Last night I joined him for dinks and dinner along with two hedge fund managers, a mortgage maven and a computer programming wiz.
As you would expect, the conversation was all over the lot. We discussed the probable fate of the Euro and Eurozone. Another topic was potentially latent inflationary pressure versus no velocity in the money supply (M3 dropping at fastest rate on record). And more and more. We hope to touch on some of these topics in coming days.
Cocktail Napkin Charting – The volatility over the last two weeks are giving the napkins a heavy workout. As noted above, the mid-day selloff took the S&P down through several key support levels. Broken support usually turns into resistance but the 1123/1127 area in the S&P stalled the rebound only briefly.
For today, the napkins suggest resistance around 1145/1150. Support may revert to 1120/1123 with back up at 1107/1111.
If Euro weakens, yesterday’s low (circa 122) could be critical.
Spots Turn Spotty Yet Again – Our ham radio pal managed to rustle up the latest sunspot data and, guess what, they’re gone again.
You may recall that in the previous series, we ended with multiple spots yielding a value number of 77. Sunspot numbers for May 6th through the 12th were: 45, 24, 23, 0, 0, 0, 0. So, we began with multiple spots, dipped to two spots each of the next two days and then went blank. Preliminary data suggests we remained spotless on the 13th too. We’ll monitor the impact on the climate in coming months.
Consensus – Volatility likely to continue with currencies as spur. Tough trading environment. Stay very nimble.
Trivia Corner
Today’s Question - From a simpler time - In order to get Little Bob to study math better, his dad offered to give him 8 cents for every problem he got right and take back 5 cents for every wrong answer. At the end of 26 problems, neither owed the other any money. How many problems did Bob get right?
AN ENCORE PRESENTATION
On this day in 1980, a nature photographer (actually a TV cameraman for a nature special) arose in the pre-dawn chill of the southwestern corner of the state of Washington. He noticed something very strange - the birds weren't singing. How quiet it is he thought...well not for long! About ten minutes later it wasn't so quiet.
First there was a level 5 earthquake. Then at 8:38 a.m. local time, nature showed a sense of humor by blowing off the top 20% of a local attraction called Mt. St. Helens. In the process it sent 1.5 cubic miles (that's cubic miles, folks) of pulverized rock 12 miles into the sky (that's 12 miles, folks). If you're a megaton freak, the force was 500 times more powerful than the A-Bomb that fell on Hiroshima (that's 500 simultaneous A-Bombs, folks).
The ash that followed the eruption made everything "midnight black" for a radius of 90 miles. (So if the explosion had occurred in Manhattan and you were in Philadelphia everything would be pitch black - but then you could have been in Manhattan.) The force of the blast alone blew trees into the Columbia River for a stretch of 20 miles. In over four states, highways were covered with ash sludge three inches thick.
Luckily, when the news leaked out, the Sierra Club obtained a restraining order on volcanoes and the Interior Department announced that any future eruptions would be seasonally adjusted.
The stocks market staged a nice comeback but you would hardly describe the bounce as an eruption.
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Art is a very funny man, wish there was more Arts
You can tell, Tyler is totally burned out and needs to lighten up a bit before he ends up like Barney Frank - speaking out of a puckered orifice.
As for hobnobbing with John Maudin, I wouldn't think that would do much for one's mental health.
Maudlin Mauldin is an interesting character. I consider his views the "average" opinion of all "informed" opinions and thus a good barometer. For this reason I listen closely, mostly for the change of the second derivative. How quickly he modifies his opinions and in what direction is more important to me than his actual opinions.
But like all team players, the man never speaks the obvious.
I agree, the man is gutless and he's paid to be gutless. Never expect a person to do one thing when he's paid to do another. He's paid to tell the greatest number of people exactly what they want to hear. But that still makes him a good barometer of the so-called aware investor, those who are at least making some kind of effort to understand.
Which is different from the deaf, dumb and blind investor, those people who blindly put money into their 401(k) using whatever allocation the person sitting next to them is using that day/week/month/quarter.
For example, at one point I worked in a small bank as an "investment advisor" aka an investment salesman. My co-workers would come to me for advice on their 401(k) allocation. But they wouldn't take it. What they did was when the quarterly statements came out, during their lunch breaks they would huddle together and see what each other was doing. Then they would change to the consensus opinion of the other clerks and secretaries. I kid you not. I've seen this happen in a variety of business, not just banks. That's the dumb money.
Deflation bitches!!!!!!!!!!!!!!!!!!!!!
Trivia question answer (at the risk of embarrassing myself).
10 problems correct, 16 problems wrong.
Correct.
Enjoyed Art as always. Is he still on CNBC? His insights were wasted there.
Market Update: Europe all fixed. Debt no problem. Back to risk on! Sell gold, buy everything else! Stocks, B@$#&s (I'm such a potty mouth!)
Doncha just love the way the market opened +74 on no volume? Again.
I have a lot of respect for Art Cashin. But Art suffers from a common disease called "after-the-factitis" where circular logic reinforces common beliefs and misconceptions.
This is how markets can be manipulated and the market participants can be oblivious to it. Or at least find ways to ignore it and explain it away. Art and thousands of others are always looking to explain after the fact why and how something happened. And considering the complexity of the markets and the herd mentality everyone exhibits, it's not hard to explain bizarre market behaviour.
Per Art Cashin......
"Shortly before 2:00, the rally in the dollar began to fade and stocks turned better. With European markets closed, the dollar faded further and further. As stocks headed toward the close, the dollar became basically unchanged on the day."
Yup, makes perfect sense to me. It's logical and precise and explains the rocket to the moon in terms that not only are understandable but also don't actually acknowledge the elephant in the room. I don't blame Art, he feeds off the carcass of the beast, he is the beast. You don't disown that which feeds you. We are all corruptible as long as it can be done in a comfortable manner. Just a spoon full of sugar makes the medicine go down.
Art's a good salesman, he keeps the story line entertaining and makes it sound believable. I mean, he is one of these guys you just want to naturally agree with what he is saying.
Setting aside the theatrics, Art's napkin numbers are pretty accurate most days.
I just read about (in no particular order)
1. Sunspots baby, with a nod to Bob Seger
2. Art's dinner date
3. Singing birds
Wow. Just wow.
Little Bobby needs to study harder. 10 out of 26 ain't too good.
10*8 = 80 cents (right answers)
16*5 = 80 cents (wrong answers)
How about this corrupt crap from our glorious bankers?
http://www.bloomberg.com/apps/news?pid=20601109&sid=axH24KWxjVDE&pos=10
What is this country coming to? It is getting so an honest scammer can't even make a gigabuck anymore.
From the article.
"The workings of the conspiracy -- which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits -- can be pieced together from the Justice Department’s indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials."
This must mean the Justice Department, all these states, Bloomberg and so on are all conspiracy theorists. Why isn't the mainstream media denouncing these foaming at the mouth nut cakes?
"Last night I joined him for dinks and dinner along with two hedge fund managers, a mortgage maven and a computer programming wiz."
Ha, I bet.
Double-income, no kids?
staying nimble.....
Richard Russel just went nasty on US markets...he says go total liquidity.
"
Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:
Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him."
Read more: http://www.businessinsider.com/dow-theorist-richard-russell-sell-everything-liquid-you-wont-recognize-america-by-the-end-of-the-year-2010-5#ixzz0oI3hVoK0Correct me if I'm wrong but didn't Russel recently flip from bear to bull like 6 months ago, give or take? Or am I thinking about someone else?
Nihilists flip their opinions to suit the strongest person or voice in the room.
Everyone will probably take a haircut - that's de-leveraging for you.
If the banks close more prop desks (and presumably liquidate their positions), that money has to go somewhere.
You'd never hear that out of John Mauldin, just buy baby, buy.
This is an unfair charactarization to the nth degree. You obviously have never heard John speak in person. I heard him 3 weeks ago and the title of his current talk is "The End Game", which basically says the GTFO because we are going to have a prolonged nasty period ahead of us, and that you should look to Emerging Markets for growth, and sector specific areas for bubbles to ride like biotechnology. He is hardly long only. I agree with CD's take on him being a barometer - he has a rolodex of some of the best and brightest and synthesizes a lot of their ideas. But saying that all he does is tow the party line is categorically unfair and smacks of sour grapes to me.
Art's the best...to the extent that ZH publishes his notes and even the weekly report from Goldman, its nice to balance the insanity of markets against some basic benchmarks.
thanks tyler
Art has considerably lower (job) risk tolerance than, say, Santelli. He likes his TV job.
It's a sad day in the education system when little Bob can achieve 32.5% in the test and not lose his pocket money.
Maybe he just wants to go into investment banking when he grows up. He won't need any mathematical skills there.
Art -I hope there is always room for you in the markets. I worry about your ulcer though, too many rich meals with your panoply of pals.
37.5% sorry, can't type.
Merchant banking for me, then.
or maybe merchant baking.
One soufflé or another...