Art Cashin On (Warren Buffet's) "Handcuff Volunteer-ism"

Tyler Durden's picture

We already posted Howard Marks' most recent letter in its entirety previously, but it bears reposting a section from Art Cashin's daily letter which focuses on one segment of Marks' thoughts, which is especially relevant in light of today's most recent comment from one Warren Buffett - a person who very directly benefited from the government/Fed's bailout of the banking sector in 2008 - who said that "Bank Risk No Longer Threatens U.S. Economy." The same banks, incidentally, who are TBerTFer than ever. An objective assessment or merely yet another example of the "handcuff volunteerism" (not to mention crony hubris) Marks touches on? Readers can decide on their own.

From Art Cashin:

Wisdom From A Sage – Howard Marks of Oaktree has another in his long and consistent series of wonderful client letters. This one has to do with things like risk, risk control and herd mentality.

Here is a key piece of his essay:

Arguably the eight pages of this memo leading up to this point are there for the sole purpose of establishing that when investors are sanguine risk is high, and when investors are afraid risk is low. Today there's no question about it: investors are highly aware of the uncertainties attaching to the sluggish recovery, fiscal imbalance and political dysfunction in the U.S.; the same or worse in Europe; lack of growth in Japan; slowdown in China; resulting problems in the emerging markets; and geopolitical tensions. If the global crisis was largely the product of obliviousness to risk – as I'm sure it was – it's reassuring that there is little risk obliviousness today.


Sober attitudes on the part of investors should be a source of comfort, since in normal times we would expect them to bring down asset prices to the point where they're attractive. The problem, however, is that while few people are thinking bullish today, many are acting bullish. Their pro-risk behavior is having its normal dangerous impact on the markets, even in the absence of pro-risk thinking. I've become increasingly conscious of this inconsistency in recent months, and I think it is the most important issue that today's investors have to confront.


What's the reason for this seeming inconsistency between thoughts and actions? The answer is simple. These people aren't buying because they want to, but because the feel they have to. In the past I've referred to them as "handcuff volunteers."


The normal response of investors to uncertain times is to say, "Because of the risks that are present, I'm going to shy away from risky investments and stick with a very safe portfolio." Such views would tend to depress prices of risky assets. But, thanks to the actions of the world's central banks to keep rates near zero, that very safe portfolio – especially in the credit markets – will produce little if any return today.


Many investors have sought the safety of money market and T-bill funds yielding zero, Treasury notes at +/- 1%, and high grade bonds at 3%. But some can't or won't. The retiree living on his savings may not be able to abide the 90% reduction in short Treasury note returns. I imagine him picking up the phone, calling the 800 number and telling his mutual fund company "get me out of that fund yielding zero and get me into one yielding 6%. I have to replace the income I used to get from intermediate Treasurys." And thus he becomes a high yield bond investor…whether consciously or not.


A similar process can affect a pension fund or endowment that needs a return of 7-8% and doesn't want to bet its future on the ultra-low yields on high grade bonds and Treasurys, or the 6% that the institutional consensus expects stocks to return (especially given how badly stocks performed in 2000-02 and 2008 and their overall lack of gains since 1999).

This is the new universe that the Fed and, in fact, central banks around the world have brought us to.

Anyway, try to read the whole piece. As usual, it is structured on logic and filled with wisdom. No wonder that Warrant [sic] Buffett once said he reads anything written by Howard Marks.

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jbvtme's picture

i'm long waterboards

Looney's picture

I love Waterboarding, but it’s gotten a bad rap lately.

I also like Snowboarding, but I’m not sure how exactly it works…  ;-)


billsykes's picture

Snowboarding is the Canadian equivalent only with snow and maple syrup. Just as deadly.

AccreditedEYE's picture

More tales of doom... This doesn't end materially lower like 2008/09.... like EVERYONE expects. It ends much, much higher. Look at the DJIA.. barely a DIP and it's moving higher already. BTFD

GetZeeGold's picture



Amazing what you can do with a little hot QE cash.....huh Amigo?

AccreditedEYE's picture

I don't get to control "how" it goes higher, or if it is "right" or "wrong", or if government is crushing normal people, if corporations are keeping wages lower than dirt, or if stocks are going to go higher on REAL growth of Ben's toilet paper. Every day, the ONLY thing I control is if I buy and at least try to keep up with costs of life or fall behind. Taking a moral stand has become way too expensive for me.

francis_sawyer's picture

RobotTrader has made his triumphant return cleverly disguised as the Eye of Sauron...

AccreditedEYE's picture

I've been on this board for over 3 yrs. If you're bearish, you GET KILLED. I didn't say not to buy gold or silver. Why is it bad to buy? You really wanna screw the system? Buy stocks to DOW 25,000 and make world equity markets the laughing stock of the world. (yes, more than they already's possible) Think about it.

billsykes's picture

Sell Bitchez.

(sarcasticly -1 you, but if it works for you- buy)(long FEMA railroad cars)

Dr. Engali's picture

No robo never responds. Sauron has been on the Hedge for a long time. 

francis_sawyer's picture

true dat... My bad because I was basing solely on the "momo" analysis...

GetZeeGold's picture



Not cosidering the risk of the next flash crash......has become way too expensive for me.


That's why I just buy safe crap. I sleep much better at night.....and I've saved a fortune in Zoloft.

Dr. Engali's picture

The S&P will hit 1000 before it hits 1500. The only way we break out to new inflation adjusted highs is if we hyperinflate. I wouldn't buy and hole here. You're better off to buy the dips and sell the rips...God I hate that phrase.

AccreditedEYE's picture

agree sir. You do have to trade it, but that also involves buyin' it at times.

francis_sawyer's picture

Only thing francis_sawyer is buying here is a sturdier boat...

Hayabusa's picture

When government corruption is rampant, markets are manipulated and fiat is being furiously debased... while interest rates do not keep up with inflation people are going to figure "what the hell"... given the choices I may as well go for broke and throw the long ball with my eyes closed and hope it finds it's mark.

847328_3527's picture

CPI is only 1.6% according to the BLS....what inflation?

asteroids's picture

If that's the case uncle Warren then we should (1) go back to mark to market (2) let interest rates rise to a historical normal and (3) stop the FED from buying $40B/mo in bank held mortgages. Then let's see what happens eh?

tooriskytoinvest's picture

When Reality Sets In, Hope Turns To Fear! Moody’s Threatens To Downgrade U.S. AAA Rating, More Sovereign Wealth Funds Unwilling To Buy More U.S. Debt, WH Seeking More Taxes, And Deep Cuts Raise Questions About Morgan Stanley As Earnings Season Just Started…

muppet_master's picture


yes WS got "drunk" again...and QEorganizer is spiking the bowl...leading the sheeple to a bigger and bigger cliff

currently spx stuck at 1468....can't tell you if THIS IS THE TOP (double TOP) or not...or if flash crash will happen @ spx 1525-1550....but it will happen...

strategy:  just wait in cash after the crash....should be able to buy

OR slowly, start building shorts with SPY or QQQ...slowly....then after crash to spx 1200 or below cover shorts and go long b4 major dead cat bounce !!

busted by the bailout's picture

If stock investors are long because they feel they have to be, but at the same time are fearful about the economy, that seems like a good setup for a crash. 

At the first sign of trouble, they may all try to exit at the same time!

Ness.'s picture

Yuppp!!  Algos will go bidless and fist fuck themselves trying to cover longs.  Retail is not going to be there to stop the bleeding.  


Better to be 2 years too early than 2 minutes too late.

muppet_master's picture

buffet "GUARANTEES" you the future!! LOL !!

for ther record when the banks and QEorganizer bankrupt the US please reference this link below...i saw it on bloomberg this morning, did a search on yahoo (No i do not own yhoo piece of crap site)...anyways, couldn't find bloomberg link, but found one below from businessinsider..which by the way i don't read their site...the point is that:

buffet "GUARANTEES THANK BANKS WILL NOT GET US IN TROUBLE"....= fool me once, shame on you (2008) fool me 2X, shame on me........sheeple shame  on you ????? not me !!!


Winston Churchill's picture

In that case Uncle Warren, time to go back to GAAP and the old FASB balance sheet

reporting.Until then ,Gold, and thanks so much for keeping the price down.

muppet_master's picture


at $67 near day's high...will continue to short up til $70 (hopefully) the Pump-a-trators will do some "story telling" to the sheeple.

still holding my EUR 1.3295 shorts from sell on the news fiscal cliff deal....the spx was @ 1450 at the time and haven't yet sold off....they will.

QQQ @ $25 in 2009, but NOW you can get a "deal" its "cheap" at $67 !! = about 300 % increase !! go buy sheeple, you don't want QEorganizer to "fail" do you??

its better to have a crash from a bigger cliff than a medium cliff....says the kenyan-kenysian rapist idiot !! come on QEorganizer keep raping the 99% and giving it to the casino have a "nobel prize" you idiot !! yeah your croonies under YOUR ORDERS, ordered the committe to hand you a "prize"...we ain't buying your bs !!

virgilcaine's picture

 shorted lumber @ 394 has been a volitile grind lower but holding and profitable for now.  Was at multi Yr highs and rolling over with Commercial selling. Going to be alot of lumber lying around if we go into Recession.

AynRandFan's picture

Very cool dynamic chart of the yield curve.  See it flatten!

Wipewithpaper's picture

Warren will get back what he put into Bank of America and by holding hands with the admin is going to do just fine.

Value investor, BS he is just manipulating the system a lot quieter than most.

Take a peek at Warrens latest gift.

AynRandFan's picture

Over the last couple years, I've lost on FAZ probably 75% of the time.  So, you'd think I wouldn't go for it again.  Wrong!  Just bought in again.  Timing is everything, and in my experience, good timing is 99% good luck.

virgilcaine's picture

I wondered at the time in 09 what his angle was for Buying BNSF a rather cyclical business . Guess the shale oil was it!

muppet_master's picture

spx NOW @ 1462

spx today @ 1468 = was the DOUBLE TOP !!! SELL NOW !!! short like crazy !!!!

linrom's picture

Window dressing behavior.

muppet_master's picture

QQQ at $66.66

kinda reminds me when spx @ 666 on 3-2009....except NOW its annoucing the ULTIMATE TOP !!