Fwd: Cashin's Comments

FAIR VALUE = -235 BUY PROG = -135 SELL PROG = -335
CASHIN'S COMMENTS
MONDAY, APRIL 13, 2009
[AN ENCORE PRESENTATION]
On this day in 1788, the people of New York City once again helped shape American politics. And, why not, you may think, wasn't New York City about to become the suave, urbane first capital of the new U.S.
Well you'd be right about the first capital but on this day the rioting mobs in the streets tended to make it seem somewhat less suave or urbane. (Those residing west of the Hudson may, however, think such action is, in fact, locally typical.)
Anyway, press reports and street gossip had inflamed the populace about a particular problem - - most said it was a raging problem. It was "grave robbing." It seemed the local medical community needed bodies for research. And according to street rumor, local doctors were paying good money with no questions asked for cadavers.
Not only would that lead to possibly insulting and even uprooting the interred - - there was a chance....this was New York City after all - - that it might lead to certain entrepreneurs making a profit by making you one of the dead on your walk home (thus eliminating all that burying and unburying - efficient but rather anti-social).
Therefore, on this night, roving mobs swept across the city seizing and attacking anyone known to be a doctor, to have played doctor or, maybe to have been any part of the medical profession. Little wonder then, that later when George Washington was sworn in as the first U.S. President (on Wall Street no less) he avoided mention of a comprehensive medical health plan.
The bulls appeared to find just the right medicine in Thursday’s session. Skeptical traders suspected it might have been the placebo effect rather than a wonder drug.
Wells Fargo Wagon Pulls Into Town Loaded With Goodies. Market Parties – Thursday morning, before the opening, Wells Fargo allowed as how its first quarter earnings might be good. In fact, they suggested, they might be very, very good. Even before the opening bell rang, the pleasant preview had WFC, and almost every other financial, churning sharply higher.
While Wells Fargo was the primary source of Thursday’s rally, the bulls tried to make hay with other data. Initial unemployment claims dropped for the first time in several weeks. They even cited the divergence between Wal-Mart sales and sales of its rival, Target. Wal-Mart sales slipped while Target’s rose. Some bulls claimed that suggested consumers might be getting comfortable enough to “trade up” a bit – trading cheapest price for a bit of variety. That helped other retailers.
But, it was the Wells Fargo story that was the main driver. WFC shot up 32% on the day. It contributed to somewhat similar moves in the other financials. Bank of America erupted for a 35% gain. J.P. Morgan spiked 19% and the moribund Citigroup moved up 13%.
The sharp Thursday rally bailed out the Dow (and other indices) for the week. By Wednesday’s close, it looked to be a down week. The Thursday rally allowed the averages to rise dramatically for the fifth week in a row. An added benefit of Thursday’s rally was a long-awaited dip in the VIX index. It gave the bulls a touch more credibility.
While Thursday’s rally was helpful to the bulls, it was not exactly perfect. The bulk of the run was in heavily shorted areas like the financials. Some other sectors that had led the rally previously seemed to pause.
Traders will watch this week very carefully. There’s even a chance they have moved too far. We’ll see as we approach a volatility cycle around tax day (Wednesday) and option expiration (Friday). We’ll see what the Easter Bunny has left, or, maybe, where they have hidden the Matzo.
The Week Ahead – Based upon published data, the watercooler wizards are guessing that this week’s calendar may look something like this:
Monday: Earnings Seasons Shifts Up
No Key Indicators
London Closed
Tuesday: Chain Store Surveys
(8:30) PPI 0.0%
PPI (Core) 0.2%
Retail Sales 0.1%
Retail Sales (ex Autos) 0.3%
(10:00) Business Inventory -1.2%
(5:00) ABC/Washington Post Conf. Index
Wednesday: Tax Day
(7:00) Mtge. Data N.A.
(8:30) CPI 0.2%
CPI (Core) 0.4%
New York (Empire) Fed Index 34

Cashin’s Comments
Monday, April 13, 2009
Page 2
(9:00) Treasury Intl Cap Flows N.A.
(9:15) Ind. Prod. -0.9%
Cap. Util. 69.5%
(10:30) Crude Inventories N.A.
(1:00) NAHB Housing Index
(2:00) Fed Tan Book
Thursday: (8:30) Initials Claims +10K
Housing Starts 540K
Building Permits N.A.
(10:00) Philly Fed Surveys 30.4
Friday: ECB’s Trichet
(12:00) Chairman Bernanke
(9:55) University of Michigan Conf. Index 58.0
Traders will watch to see if this week's data strengthens the media presumption that the rush to recession is decelerating or even starting to bottom. We worry that some of these "green shoots" may turn out to be poison ivy.
Let's Hope The Professors Are Misreading The Data – In the midst of Thursday's nifty rally, a rather ominous article was being passed around. It was a "Heard On The Street" column by Justin Lahart on the DJ Newswire (it was reprinted in Friday's WSJ).
The general topic of the column was the divergence between corporate credit market performance and the economy. Lahart cites a study by three economists that examines a newly constructed bond index that could predict the economy. Here are the two final paragraphs:
In a forthcoming paper in the Journal of Monetary Economics they show that spreads on low- to medium-risk corporate bonds, particularly those with 15 or more years until maturity, predicted changes in the economy phenomenally well, forecasting the ups and downs in both hiring and production a year before they occurred. Since writing the paper, they extended their analysis back to 1973 and found bonds' predictive ability still held.
It would be better for everyone if it doesn't hold in the future. With the massive widening in corporate-bond spreads last fall, the economists' model predicts industrial production will fall another 17% by the end of the year, and the economy will lose another 7.8 million jobs on top of the 5.1 million it has shed since the recession began. Ouch.
Those are some really ominous projections. Let's hope the new indicator isn't as accurate as it is suggested to be.
Cocktail Napkin Charting – Over the weekend a variety of very smart people have picked up on the divergence between the credit contraction of the last several weeks and the stock market rally. Several note that this same phenomenon occurred a couple of times last year. In each of those cases, the stock rally reversed and reversed badly.
The S&P managed to rally to an intra-day high of 857 which is pretty close to the uptrend line connecting the highs of this particular rally. We need to note also that this is option expiration week and that pesky cycle (still indefinable) is due around tax day. That would make for a wild week.
Resistance looks like 860/865 with a more critical cluster at 875/880. Support looks like 820/825 and then the critical 800/805.
Consensus – Thursday's rally may have left us a bit overextended. Earnings season accelerates and, as noted, it's Expiration Week. Easter Monday closes in Europe may hold back volume. Say alert and remain very, very nimble.
Trivia Corner
Answer - The series of threes was:
A) Frankincense, Gold & Myrrh
B) Liquid, Solid, Gas
C) Past, Present, Future
D) Reading, Writing and Arithmetic
E) Length, Width, Height
Today’s question: There is a country much in the news today whose name (American style) begins with what sounds like an item of menswear. The name of the country’s capital begins with the same item sound. What country is it?