Casin Comments

FAIR VALUE = -240
BUY PROG = -140
SELL PROG = -340
CASHIN'S COMMENTS
FRIDAY, APRIL 24, 2009
[AN ENCORE PRESENTATION]
On this day (+1) in the year 1507 A.D., an enterprising author published a hit book. While he was not the John Grisham of his day, he did hope to benefit from two recent events of interest to move his book. First was the discovery of moveable type, which had occurred some 60 years before. (That meant he could print his tome in volume...so to speak.) Then, of course, there was that other curiosity (not about past clandestine lunches or curious shifting of funds) rather it was a public curiosity about a variety of sea voyages in the previous two decades.
The author, a German named Martin Waldseemuller, decided to publish makeshift maps of the new lands reached by these explorers. He dutifully researched all the reports and drew the assumed designs and locations of the new areas. Of course, he had to name them, so in his massive "Cosmographics Introductione" he applied a name to a large landmass in the Southern Hemisphere. He used the name of one of the men who had claimed to have visited it. No, it was not Christopher Columbus (he was busy renegotiating with the Spanish Court). Rather the budding cartographer used the name on a certain self-promotional pamphlet by a certain Italian Merchant named Amerigo Vespucci. The author called the potential continent - Amerigo. Unfortunately for Columbus, Waldseemuller's book was an instant hit.
And so the continent became known as America (later, South America when another continent further North was also discovered). And the other guy, Columbus, well he remained in litigation over Spanish rights to the treasures of this New World until he wound up in jail.
Traders had a tough time figuring out where they were this week and yesterday was especially perplexing.
Final Hour Follies Continue, Capping A Rather Random Day – The market had another sharp move in the final minutes of trading, adding fuel to the debate about the so-called ETF effect which we alluded to yesterday. There was no visible news to spark the spike. Further, the random waffling that prevailed through most of the day was thought to be the result of wariness in front of today's release of the stress test criteria. That thesis seemed to evaporate in the face of the surprise rally.
The bulk of the action yesterday seemed impervious to the news rather than directed by it. There was a lot of buzz and concern about comments arising out of testimony on the Bank of America/Merrill merger. New York Attorney General Cuomo appeared to suggest that Treasury Secretary Paulson and Fed Chairman Bernanke may have threatened Ken Lewis in order to force the merger with Merrill. There was already buzz around on Bernanke's possible risk to re-appointment based on Volcker's recent questions about, and criticism of, current Fed policy. The Cuomo comments appeared to put Chairman Bernanke further out on a limb.
The traders' perception of the situation is concisely summed up by our good friend, Dennis Gartman, in his uniquely eloquent fashion.
If what Mr. Lewis has accused Dr. Bernanke of…. being directly complicit in withholding information from the BofA’s shareholders and from the American taxpayers regarding the Bank’s problems with assimilating Merrill Lynch… is even tangentially correct, Dr. Bernanke is economic and political “toast.” Having read, re-read and re-read again the article on our flight home from New York last evening, all we can imagine is that either Dr. Bernanke shall have to stand down very quickly, or that we shall have to go through weeks, or perhaps even months, of hearings into what transpired between the three gentlemen in question. With each hearing.. or with each rumour of hearings… the dollar will come under further and greater selling pressure. This, we fear, shall not be pretty. This, we fear, shall be ugly beyond belief. Nothing…absolutely nothing good can come if it, for a very, very long while into the future.
Dennis then speculate on a possible replacement:
If Dr. Bernanke is forced to stand down, then we fear… and the market properly fears… that President Obama will replace him with someone far more politically centre-left than is Dr. Bernanke. Given the President’s far-left-of-centre economics, it is illogical to expect him to appoint anyone other than someone amenable to left-of-centre monetary policies. Hence the dollar’s weakness…and hence further weakness to follow.
Dennis's comments parallel much of the buzz we heard on the topic on the floor yesterday. That's probably natural since Dennis, himself, was a floor denizen for years in the Chicago pits.

Cashin's Comments
Friday, April 24, 2009
Page 2
As noted, however, concerns about Bernanke's vulnerability and several other potential market movers caused only conversation. Neither the bulls nor the bears were able to seize control. That may indicate we are at some kind of fulcrum point. The competing forces are at a point of temporary equilibrium. That could mean real fireworks next week as the tie is broken. Rest up on the weekend.
Cocktail Napkin Charting – In Thursday's Comments, we said the napkins suggested S&P support looked like 833/837. Yesterday's intra-day low was 835.45. The S&P never got close to the resistance at 860/865. Thursday's high was just under 853.
For today we'll stick with those numbers. So, S&P support 833/837 and resistance 860/865. For the Dow, the napkins suggest support at 7790/7800 and resistance at 8040/8050.
A History Of Retests – Mark Hulbert, in his MarketWatch column today looks at bull markets retesting their lows. In the 33 bull markets since 1900 which he examined, 19 had a significant retest. He cites the bottom in 2002 as a good example:
Consider what happened after the 2000-2002 bear market came to an end on Oct. 9, 2002, at the 7,286 level on the Dow Jones Industrial Average. Over the next 49 calendar days, the Dow turned in a 23% rally. That's remarkably similar to the current rally, which as of Thursday night is 45 days old and in which the Dow has risen 22%.
But, following that 49-day rally in 2002, the Dow declined for a few months, in the process setting up a retest of its Oct. 9 low. By the subsequent March 11, for example, the Dow stood at 7,524, just 3.3% above the bear market low.
That analogy may become apparent (or be disproved) next week. Leaks about the stress tests and tons of treasury auctions may be the catalysts.
Populist Outrage May Flare Again – All the talk about the possible bankruptcies at Chrysler and GM are raising anxiety. If the automakers go under, many expect another larger flare-up of outrage at Wall Street. Citing the bank bailout versus autos being allowed to fail, the clamor will be great. This is going to be one ugly summer.
Consensus – Some banks will be told (secretly) how they fared on the test. Some of that may leak out (from the winners?). Format of the tests will be released at 2:00. Stay nimble and be very careful.
Trivia Corner
Answer - There were only 15 bees in the mobile hive. (The stray bee was a dead giveaway.)
Today's Question - What special property do the following words have in common? FIRST, CALMNESS, CANOPY, LAUGHING, STUPID, HIJACK, DEFT.