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Art Cashin: "The Spinout May Begin", And Why Equities Just Got Punk'd By Bonds Once Again
The FoF Chairman speaks.
The Spinout May Begin - Overnight Events
Asian stocks followed the New York lead and traded higher. European stocks looked to do the same with Paris and Frankfurt trading up over 1% at 3:30 EST. Italian bonds, however, were having none of it.
The yield on the Italian 10 year pushed well above 7%. More importantly the spread between it and a basket of other
bonds widened enough to prompt some regulators to raise the level of collateral needed for the Italian bonds.
Worse yet, the whole Italian bond yield inverted. The yield on the 2 year and 5 year actually traded higher than the yield on the 10 year.
That spooked markets and Milan was down over 600 points by 6:00 EST.
Things have calmed somewhat since but we need to get some adult supervision soon.
The problem is now clear. Italy is both too big to fail and too big to save. Tomorrow we’ll go through some of the numbers.
And here Art explains why with everyone chasing beta to make up for the October underperformance in which hedge funds only achieved about10-20% of the broader market's gains, how everyone just got burned. Badly:
Most money market managers have been underperforming the market. There are several ways you can try to make up the difference.
In the old days, you might find the hot new stock in the hot new industry. But given the very heavy correlation among asset classes (everything moves together), that’s not productive.
So now, some managers are trading the swings. You wait for the selling to dry up and as the market begins to turn up; you rush in to buy the high beta stocks (they give you the most bang for the buck). So, by buying the dips in this manner, you add another point or two to your performance.
That strategy may be the cause of another phenomenon noted by Jason Goepfert. It is the apparent crowding into these positive stocks causing some distortion in the arms index.
Here’s a bit of what Jason said:
"This is more directly related to breadth than sentiment, but the Arms Index (better known as the TRIN) is showing that over the past week, traders have poured into positive stocks. There has been roughly 25% more volume flowing into advancing stocks than declining stocks."
Jason further notes that the prior two times this happened this year, it was at or near a short-term market top. In any case, this morning’s outlook suggests that the bond market is the better interpreter of events Italian.
As always.
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Just a little reality folks. Italian debt and credit costs a problem with or without Berlesconi - that's just more distracting noise.
Market is now TBTF and therefore TBTSave. Take care peeps!
Bond markets lead. Curve inversion and risk. Italy 3rd biggest debt market. Assuming Japan and US @ 2 and 1. And they have incredibly medicated manipulated rates. When do they go pop to reflect reality?
Gold is TSTS - too shiny to sell
Adult supervision resumes in 6 minutes
Scary!
My bet is the ECB will step in and monetize, sooner rather than later. Germans are grandstanding for now but they aren't going to let the house of cards collapse so swiftly and dramatically. But I'd be surprised if the euro was still around in 10 years time.
You may be correct. But somehow I don't think they want to hear, "close your eyes and think of Europe" just now..
Merkel is a tool of TPTB like her counterparts and therefore will be sent to the guillotine before Germany abandons the euro. I expect her party to take a tumbling, only to be replaced by a more left-wing, more pro-euro party who will campaign against banking and evil capitalism.
History repeats itself.
I'd tend to agree, but I think it will have to drop significantly first... We gotta lot of bullshit gains to plough through from hopium October...
Just like the last thing that goes through a bugs mind when it hits the windshield is usually it's ass.
I'm going to guess that the current ECB situation is going to require more than grandstanding now, the ECB as an entity is no longer relevant. Only thing listening to them on the market right now are the HFT/Algo's.
We need the MHFT to help us understand this market impasse.
just a precision on Italy: biggest European sovereign debt market, by a long mile. Bigger than Germany, bigger than France and bigger than all the problem childs combined
Noticed how the shit clings to the air today?
You know what that means.
http://www.youtube.com/watch?v=Pvm-n6gwPCY
I think it means if you don't have a super powerful nuclear fan, then you're not gonna be able to not get hit with s--t. All the gold won't shield you. We're all gonna have to wade through some s--t. But gold and PMs mean you'll be able to eat next year.
No, brass and lead mean you will be able eat next year. PMs mean you will have a nest egg when we get around to trying this "economy" thing again.
It's already started.
The shit blizzard.
lulz
Thats right KlausK, shit hawks are circling...big, dirty, shit hawks.
The winds of shit Ran, winds of shit...
with everyone chasing beta to make up for the October underperformance
Recipe for disaster. Needing to "make up ground" is the death-knell equivalent of "he's still away" in golf. VIX gotta rise if this sentiment prevails...
The need to make up ground for underperformance in Oct., and to make their year, sounds a lot like the traders in Reminisences of a Stock Operator who busted themselves trying to win a beaver coat. The market eats people alive who are trading for a goal rather than just trading what the market offers.
Time to ring the cash register. Love a rising VIX. This is where we sell them the stock and the Calls - everything equity (except the ultrashort ETFs).
http://finance.yahoo.com/news/Advisors-Grow-More-Bullish-ETFTrends-686580067.html?x=0
"Adult supervision". That made me grin.
In 1929-1931 they called it "organized support," and it was always just around the corner.
maybe they can performance chase by shorting the hell out of this overbought hopium induced market!
they are too busy polishing turds
It's that 'deer in the headlights' thing. Unless you are one of the chosen few with "connections" at the FED, trading has become a treacherous job.
On the one hand, you believe the market is going higher, if for no other reason than you think Bernake bucks may be just over the horizon to keep things propped up. On the other hand, there is a big danger that the market will be allowed to drop several hundred points again to make a point about the joys of QE....and maybe to allow some of the chosen to make another little fortune shorting the drop.
And then, there is the 3rd hand....the one that really scares you. A flash crash could happen again and all those carefully constructed hedges might not work...oh my!
So, maybe it is more comforting to just sit and polish those turds, hoping your shiny turds will be worth more than the other guy's ugly turds.
Guess we won't be seeing Art on CNBS today.
finally some sanity. But but the FED still has full of assholes. what to do?
It looks like that asteroid hit the high altitude bullish satellite and brought it down to earth.
Very bullish for the bears.
The risk reward in all bonds is insane.
Very soon, there will be a stampede to move portions of bond portfolios into gold to hedge exposure.
The game is musical chairs and the chairs are made out of gold.
At least, the chairs that aren't made of gold are rapidly decaying and falling apart.
I stopped trading this market a long time ago and this is exactly why. Never know day to day what loony tune will be playing. Just remember this is all just coming attractions for the "feature presentation".
At least Las Vegas has lights and pretty girls for the free drinks if you want to gamble. Just do not go more than six blocks from city center. The rest of the city like most of Nevada is in a depression. We are basically insolvent, the govt. just does not want that to be common knowledge, for now.
I can recommend the Sri Lankan casinos right now. They're so desperate to attract custom that they're offering very player-favourable rules on the blackjack tables. The girls aren't much to look at, but the drinks are free. Making a reasonable living isn't that difficult as long as you stay sober.
Just avoid the occassional Tamil Tiger with a satchel charge and you'll be fine!
Who is not the "buyer" of these bonds....Central Banks....the gorilla in the room...if these are on your books now they are toxic...and if you to go to your boss and say I am going to play in this market you would be fired...sure some hedge funds will...but for a public investor no way...so now its either mark to market ...or the Central Banks buy it all....at least 50% until the markets stabilize....that saves today...but they still need trillions more to fund thier deficits...and what is the rate that a consumer will pay for a bond in a country that is in "default"...but that name will never be used...UNLESS the Central Banks keep the rates low by buying it all...man I am so confused....I want to puke...Super Committiee are you watching this....that my friends will be the big bang I think...then end...the Super Committee failure to do anything.....
It's not complicated but until now it seems so. Europe is a trading bloc whic requires MASSIVE amounts of credit to sustain. This type of money is only available in New York. New York blew up in 2008 BUT was bailed out. Now the trading bloc which told our Treasury Secretary Geithner to get lost is now desperate for trillions. That money will not appear...the trading bloc will be decimated...and Europe will come right back to New York and DC looking for "various parts of the hundreds of billions" ...which New York can do...for a price.
get a grip, get gold.
Robo will say that he was never in stocks, and that they are for punks.
Bah! It'll be green by the close.
His Victoria's Secret bra is cinched up too tight and it's cutting off blood flow to his brain.
momma only lets him play with practice accounts!
Where did the "shit blizzard" come from? Can the bears please explain?
TY
It's not Bulls and Bears. It's Hypesters and Realists.
Did you get burned??
And I did not Junk You.
Well see, it all starts with a butterfly flapping its wings in the rectum of a skittle shitting unicorn...oh wait we need a BEAR to explain this. Where is Uhrlacher when we need him?
Go long duct tape, is all they have left.
Welll, not that Italy doesn't have problems, but the private sector isn't in debt like other countries.
As long as the public sector still exists, it is always the private sector that is liable for its debt. Just because it's in the name of an abstraction means little. What matters is the ability of the public sector to rule through the threat of violence (in both directions).
All in all, it comes down to the teachings of Mises. Ultimately, it is ideas that rule, as no amount of violence can maintain an idea whose time has come and gone. Today the idea that the public sector has any legitimacy is starting to weaken.
Tomorrow? Who knows?
This orderly rearrangement of the finances of each european country is BS. There must be an organized effort to start with the smaller sovereigns, i.e. Iceland, Ireland, Greece, etc. before the larger economies are addressed. Are the bond vigilantes in control of this situation, skimming gains off of the reduction in value of sovereign debt or is there a NWO behind this movement? It just seems incredible that we are going through this time in slow motion.
the centralizers are like mexican drug pushers
or AMA members
That shit is killing you, dude, have some more of it.
http://www.cnbc.com/id/45219555
The spotlight is on Italy, and all the other PIIGS are now in the shadows. Don't forget that there's a general election in Spain on 20th November (called early by Zapatero who isn't standing for election this time). The new Government will be able to blame everything on the previous administration when they lift the lid off the Pandora's box of Spanish banks. And, as in the Greek myth (and its modern day real tragedy equivalent), Hope will be left in the box.
I hear General Franco is doing well in polls.
I thought he was still dead.
Which is why he is the best qualified.
"Number One, bring me my brown pants"
After changing ....
"ENGAGE!"
Don't forget your Brown Shirts as well.
Turd tsunami today?
QE3. I always get the largest ship names mixed up, first it was QE2, then Victoria. Wasn't the largest passenger ship the Titanic?
Man the lifeboats at the Fed. What you say: There are not enough lifeboats? Print faster I say. We will all float on paper boats and save Italy.
Greece must be fixed. Haven't read a damn thing about it today. Now that MUST be bullish.
How to fix Italy? Why, just move on to France. Or the US....
Germany is damned either way - if they stay in the EMU, they will have to bailout the rest either directly or indirectly. If they leave, it, there will be significant economic dislocation, but also a lot of benies (their external debt becomes much cheaper). They had their mercantilist cake and got to eat it as well for a while under the Euro - however, that has come to an end. We may be quickly approaching a point where there is more for them to gain (or less pain to endure) through an exit from the EMU, especially if France is starting to kick the idea around. He who exits first exits best.
If internationalism is destroyed, you can bet it's just a play to bring back militant nationalism, just in time for WWIII. Then, after we (the survivors, that is) grow weary of all the destruction, "we" (the herd) will be lead to the inevitability of true global government.
Marx and Hegel will be their gods.
It seems that finally this October 30th DJIA prediction chart has sprung into action-and about the time it should have.
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
Happy ride down the slope...
Art always add value. Bet he drinks rare burgundys. Reds...not whites.
bring in the adults and get this bankruptcy overwith,
the sooner the better
DOW chart reveals very overextended price action and another Wile E Coyote scenario...
http://stockmarket618.files.wordpress.com/2011/11/2011-11-09_dow_4_zb.png