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Morning Thoughts From Art Cashin

Tyler Durden's picture




 

Always educational and fascinating insights from Art Cashin, via UBS fin services.

Influence Of Dollar/Euro Mutates Somewhat. Is It Real Or Temporary? – Stocks rose in light volume regaining nearly all of Tuesday’s losses. Crude oil also regained its losses from the prior day. Gold, however, opted out of the traditional troika. Some of the stock gain was attributed to assurances in the Bernanke testimony that rates would remain low for a very long time. Certainly, the timing of the morning rally lent credibility to the Bernanke influence. Stock rose almost vertically around 10:20 as his testimony began.

The dollar’s movements showed some muted influence on both stocks and oil. Shortly after stock trading had begun, the dollar weakened from pre-dawn levels.

There was an Alice in Wonderland type thesis around the mid-morning softening of the dollar. It occurred as TV screens showed the demonstrations in Greece turning rather ugly. The thinking was that European partners might be more motivated to help, lest the violence worsen and spread to other challenged sovereigns. As the images left the screens,  the dollar began to tick back up.

The dollar rebound failed to return to the day’s highs and stayed well below the highs that followed the Discount Rate move. That muted move did not appear to influence either stocks or oil. The failure of gold to correlate with stocks and oil (as it has for weeks and weeks) was not readily explained. Traders will watch over the next few sessions to see if they reconnect.

Traders were a little disappointed with the internal technicals of Wednesday’s rebound. In Tuesday’s selloff, the breadth was negative on a 10 to 1 basis. Yesterday’s bounce saw breadth turn positive but by less than 3 to 1. Also, volume dropped on the up move.

What’s Next – A Crossword Puzzle? – Stratfor examines a story about hidden bomb strategies that was published in an al Qaeda on-line magazine (wow!). Here’s the opening:

The 12th edition of al Qaeda in the Arabian Peninsula (AQAP)’s online magazine, Sada al-Malahim (Arabic for “Echo of Battle”) released Feb. 15 contained an interesting article discussing the group’s innovative, imaginative designs for improvised explosive devices (IEDs). The article, titled “The Secrets of the Innovative Bomb,” discussed the methods used to hide the IEDs employed in the group’s failed attacks against Prince Mohammed bin Nayef, the Saudi deputy interior minister, and Northwest Airlines Flight 253 on Christmas Day 2009.

The article, bylined “The Military Committee,” noted that there are secrets to AQAP’s ability to smuggle IEDs past security. The first secret listed is the divine nature of the attacks. The author notes the attackers completely believe in God and act for God, and claims their inspiration and faith allow them to maintain a high degree of self-control in the face of scrutiny by security personnel.

The second secret is that the AQAP operational planners carefully study security measures and then plan the type of IED to employ in an attack based upon those measures. This is a process STRATFOR has previously discussed many times when describing the adaptive and imaginative nature of jihadist planners like those with AQAP. The article notes that AQAP pays attention to X-ray machines, metal detectors and detection equipment intended to pick up explosive residue and odors — like sniffer machines and dogs — and then seeks vulnerabilities in the system.

The final secret listed is that AQAP planners carefully study how security and intelligence services operate and seek ways to avoid them. They study how to travel without raising suspicion and note that the success of Umar Farouk Abdulmutallab in passing through multiple countries and airports in his effort to bomb Flight 253 despite his father’s warnings to authorities resulted from these efforts.

The author claims that the device used in the Prince Mohammed bin Nayef attack was different from the underwear device used by Abdulmutallab, and seeks to refute media reports that the devices were the same. First, the author claims there is no way that Abdullah Hassan Taleh al-Asiri, who attacked Prince Mohammed Nayef, could have carried a syringe anywhere near the prince. Second, the author maintains that al-Asiri was strip-searched, and that Saudi security even inspected his underwear. Because of this, the author asserts that the device was remotely detonated and that the detonator had been implanted in al-Asiri’s abdomen.

The idea that bombs may be implanted internally will likely raise more calls for intense scanning. All from an al Qaeda online magazine. The world grows more bizarre each day.

Cocktail Napkin Charting – In Wednesday’s Comments, we wrote that the napkins saw resistance at 1102/1106 in the S&P. Yesterday’s high was 1106. For today the napkins suggest resistance at 1104/1108 and then 1113/1118. Support
looks like 1088/1092 with critical backup at 1080/1083.

A Busy Day – There’s a ton of “stuff” today. Initial Claims will be very important. We’ll also see Durable Goods and some home price data. Bernanke returns to the Hill and there are a couple of other Fed speakers.

Consensus – The dollar is pressuring the troika this morning. Some sharp language out of Athens may be behind the move. Stay very nimble.

Trivia Corner

Answer - The nine U.S. Presidents who never attended college were: Washington; Jackson, Van Buren; Taylor; Fillmore;
Lincoln; Johnson; Cleveland; and Truman.

Today’s Question - Dr. Jekyll and Mr. Hyde - Not every hidden personality is evil. For example, there is a seven letter man's name in which the middle five letters can be read backward to form another man's name. Do you know it?

And our daily favorite - the history lesson

On this day in 1836, the government of the United States granted a patent on a device that would become the prototypical American weapon. And, by accident, its development would become a prototypical story of American invention.

The patent, of course, was awarded to Samuel Colt for his "single barrel pistol with a six chamber revolving breech." You and I (as well as Hoppy, Roy and Gene) knew it as a "six shooter."

Colt's idea was not entirely unique. Several patents for revolvers had been granted earlier (one of the earliest was for a "12 shooter" but it, like the others, didn't work well). But Colt, who was 22 when he got the patent, showed his gun was practical (and at the time....it was the only way a man on horseback could get several shots off successfully). Therefore, it seemed like a good idea and Colt found backers who helped him open "The Patent Arms Company" in Paterson, N.J. But despite rave notices for the weapon, sales were slow and the factory closed in 1842. Colt slipped closer to bankruptcy.

Then in 1846, fate took another weird turn. The U.S. was going to war with Mexico. And the Texans they were fighting for, suggested to the American Secretary of War that many of them were very happy with Mr. Colt's six shooter. So the Secretary of War ordered lots of them.

That left Mr. Colt with several problems. 1) He had no factory. 2) He didn't have a six-shooter left to his name.

He attacked the second one first. He advertised for samples of his own gun. Gun owners thought the ads meant the revolver was now a collector's item…..so they refused to sell. Colt was reduced to hiring a gunsmith to work from Colt's own original diagrams (with suggestions from the famous Texas Ranger - Sam Walker).

Finally.....when they had developed a prototype…..Colt needed to hurry things up. So he hired…..who else.....the son of Eli Whitney to implement the concepts of mass production and interchangeable parts. Within a decade the Colt .44 was the gun that was winning the West.

To celebrate go to some place with a swinging door and order six shots of red eye. And tell the surly looking guy with a facial tic and a mustache (down at the end of the bar), the immortal words of Hopalong Cassidy. "No matter how loud or how fierce the guy behind a rock sounds, if you count the bullets, when he's out of ammunition he's out of luck." Thanks Hoppy!

Traders tried to figure out whether the bears had run out of ammunition Wednesday, or were they just pausing to reload.

 

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Thu, 02/25/2010 - 13:19 | 245068 Hondo
Hondo's picture

Who cares if rates remain low if it's due to the same reason as Japan rates are low.  An there is absolutely NO one that can say with any certain probability that that is not where we are headed.

Thu, 02/25/2010 - 13:31 | 245089 SDRII
Thu, 02/25/2010 - 13:31 | 245091 10044
10044's picture

Just shows you don't need a college degree to fight central banks (Jackson)

Thu, 02/25/2010 - 13:46 | 245114 berlinjames02
berlinjames02's picture

Trivia answer:

Jonathan / Nathan

Thu, 02/25/2010 - 14:00 | 245143 Anonymous
Anonymous's picture

Nope

Gregory / Roger

Thu, 02/25/2010 - 14:16 | 245186 Anonymous
Anonymous's picture

Gregory / Roger is to correct answer.

Jonathan has 8 letters in it for God's sake...

Thu, 02/25/2010 - 14:21 | 245198 mule65
mule65's picture

Wrong -- middle 5 letters.

Thu, 02/25/2010 - 14:22 | 245201 Anonymous
Anonymous's picture

fail

Thu, 02/25/2010 - 15:10 | 245299 Cyan Lite
Cyan Lite's picture

Epic fail...

Thu, 02/25/2010 - 13:49 | 245119 Anonymous
Anonymous's picture

I work in investment banking. I believe we are lock-step following the japanese. The vast, overwhelming (7 to 1 and more like 9-1 when i get higher up the food chain) majority in my company and peer group disagree with me. Not one of them has put up a robust defense of why they are correct and i am wrong. Most of them cant even put up any defense - the mantra is "american consumers are different to japanese". Wow. Thats it. Its not even correct. Consumers are consumers. We all know what the savings rates have done in both countries and are now doing , right?

Suffice to say i have 100% conviction i shall be right.

Thu, 02/25/2010 - 14:12 | 245174 Anonymous
Anonymous's picture

100% Agree. The proof is we allowed banks to change the accounting for losses, (the accountants should be ashamed of themselves. The Japanese did the same thing. They also worked "very closely" with business and we have implemented this model as well...i.e. General Motors. We now have Zombie Banks, no one can say we don't, consistent with Japan. We have fully implemented the Japan Way yet we are in a much worse condition than they were when the entered their great deflation. I expect our outcome to be much worse than Japans, thats damn ugly but true.

Thu, 02/25/2010 - 17:24 | 245637 Anonymous
Anonymous's picture

'the accountants should be ashamed of themselves'

No. Those who elected those who forced FASB to change the rules should be ashamed of themselves.

Thu, 02/25/2010 - 15:07 | 245289 No More Bubbles
No More Bubbles's picture

Yes, you are right.

Consumerism is DEAD!  It's going to be a slower process than some (myself included) would like, but people are going to be getting more real about what they need to survive.  What people "want" in a collapsing economy changes dramatically........

Thu, 02/25/2010 - 20:44 | 245985 Anonymous
Anonymous's picture

We are different , we are up to our eyeballs in debt.
American consumers have also figured out that they can
stop paying the mortgage, remain in the house for 2
or 3 years for free(I know one person who hasn't
made a mort payment in almost 3 years)and the mort
money goes to consumerism.
Not paying the mortgage won't last forever, no doubt about that.No such thing as a free lunch But its going strong for now. If it works for the banks, it can work for consumers....

Thu, 02/25/2010 - 13:59 | 245141 mouser98
mouser98's picture

Tyler, what was the answer to last Friday's trivia question?

Thu, 02/25/2010 - 14:01 | 245146 Anonymous
Anonymous's picture

http://intelfin.blogspot.com/

has all of cashin's full reports daily.

Thu, 02/25/2010 - 15:45 | 245392 mouser98
mouser98's picture

found it finally:  8 marks at 1, 3, 6, 13, 20, 27, 31, 35

Fri, 04/16/2010 - 11:15 | 304061 Tom123456
Tom123456's picture

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