Cashin Comments

FAIR VALUE = 240
BUY PROG = 140
SELL PROG = 340
CASHIN'S COMMENTS
FRIDAY, MAY 1, 2009
[AN ENCORE PRESENTATION]

On this day in 1863, there occurred one of those unique accidents of history that some feel changed the course of world events. Until this day Confederate forces had generally bedeviled, confused and confounded a larger and better equipped Union Army. Confederate successes were clearly the result of the strategic genius of Robert E. Lee. But military theorists feel that a good deal of the credit belonged to another man who was, and is, regarded as one of the great tactical geniuses in the history of American warfare.

Lee's forces were deployed to defend Fredricksburg, Virginia. General Joseph Hooker took his Union forces across the Rappahannock River to outflank Lee's men near Chancellorsville. Enter Lee's ace in the hole the brilliant "Stonewall" Jackson. Jackson disguised a band of his men and infiltrated Hookers lines. He told his remaining forces to stand fast and shoot anything that moved. Jackson and his men accomplished their task and began to head back.

Unfortunately, one of his other soldiers followed his mandate all too clearly. Seeing a movement in the bushes he fired, mortally wounding the returning Jackson. With Jackson out of commission the battle was a draw (costing a mere 30,000 lives). More importantly, to some, Lee would come, three months later, to the decisive battle of the war (Gettysburg) without the man who had become his right arm, Jackson.

To celebrate have a mint Julep, on the charge, at Picketts and explain, very carefully, to a co-worker that Pogo was insightful, particularly for a place like Wall Street, when he observed "We have met the enemy and they is us!"

The stock bulls got shot down Thursday afternoon after holding their ground through the morning.

Less Worse News Gives Morning Boost. Political Tone May Have Aided Pullback – The bulls got help from the data releases early Thursday. Initial Claims dipped instead of rising as many had predicted. The Chicago Purchasing Managers' index rose to 40.1 from 31.4. That allowed the bulls to press further on the gains made yesterday.

The rally sustained through the morning. But as noon approached, the President went on TV to announce that Chrysler would file for bankruptcy. He maintained that "a small group of speculators" refused to cooperate and, thus, forced the bankruptcy filing.

On the announcement by the President, bids began to disappear and stock prices fell. That prompted a bit of a buzz on the floor and trading desks. Was the Chrysler bankruptcy "a surprise"? It had been rumored for weeks and those rumors had intensified sharply in the last three days.

That prompted some to wonder if it was the tone rather than the news itself that spooked markets. They seemed to feel the tone renewed the populist anti-Wall Street comments that gave grown since TARP hearings began.

Whether it was the news, itself, or the tone of its delivery, the TV appearance clearly coincided with the rally fade. Despite several afternoon attempts, the bulls were unable to regain the morning momentum.

Traders were fascinated by the amount of churning that occurred around the 875 level in the S&P late in the day. It almost looked like one team was determined to have the S&P close above 875, while the other pushed hard the other way. The final two hours saw that level crisscrossed many times. In the end, the bears eked out a minor victory with the S&P closing just under 873.

Benefits Of The Flu-Pandemic? – We had the pleasure to marinate some ice cubes with our old friend, Ron Insana, last evening. Among the many things that popped up (and fascinated me) was Ron's view that the flu outbreak might present an opportunity if the government handled it right. Ron points out that one of the great terrorist threats is presumed to be the threat of a biological weapon.

Ron suggested that the surprise sudden flu outbreak presents a perfect opportunity to study how the various health safety facilities function. By monitoring how we and the world handle the flu threat could tell us a great deal about how we might handle a man-made virus. It can also tell us how biological weapons might impact public psychology and economic affairs. It would sure fit Rahm Emmanuel's suggestion that no crisis be allowed to go to waste.
Cashin's Comments
Friday, May 1, 2009
Page 2


Let's hope some folks in the government are as sharp as our pal, Ron.

Busted Short Sellers – A friend of ours who closely monitors stock lending also dropped by the FoF last evening. He reported that two different trading operations had closed their doors in the past week. They had been around for a while and had concentrated on short selling.

He said he didn't see one large position as forcing those decisions. Rather, he suggested, they were just run over by the rally which pushed many of their key shorts into pain territory.

We'll check back with him in a couple of weeks to see if the casualty list grows.

Are They Eligible For Tarp Funds? – The always sharp-eyed Andy Lees reports from his UBS perch in London that Helmerich and Payne may not be able to collect $116 million owed to them by the Venezuelan state oil company. Andy also notes that Williams Cos wrote off $241 in uncollectible Venezuelan payments. Maybe that's what that handshake was all about.

A New Twist From The Fed – The Fed has raised a few eyebrows by announcing that it will try to help the commercial real estate market by extending the maturity of its TALF program to five years.

The reason the eyebrows are raised is that the Fed had said that keeping maturities short was part of its safety switch to keep the money expansion from becoming inflationary. By keeping commitments very short, the Fed claimed it could turn on a dime if inflation showed up. By going to five years that argument is weakened, perhaps appreciably so. We'll watch the TIPs bonds to see if that concern takes hold.

Cocktail Napkin Charting – As noted above, the bulls have been having a lot of difficulty trying to close the S&P above 875. While they managed to push to an intra-day close to 890, the 875 magnet pulled them back.

On the napkins, the near-term support looks like S&P 860/865 with critical support at 847/852. The comparable levels on the Dow are probably 8110/8120 and then 8000. Despite the recent rallies, the charts hint the rolling top we mentioned days ago is still quite possible.

Consensus – We may get to see if the calendar had any influence in the rally on the last two days of the month. Factory orders, the national ISM and the University of Michigan data all hit close to 10:00. May Day holiday has many global markets closed and, thus, those open may be less liquid. Let's see if bulls can re-gain momentum. Be careful today and stay very nimble.

Trivia Corner

Answer - Sam was able to set the correct time by looking at the Grandfather clock when he got home. Let's say it showed 2:10. Two hours & 10 minutes had elapsed since he left. He spent 1 1/2 hours at Bob's. That meant his total travel time was 40 minutes. So he added 20 minutes to the time he left Bob's and set the clock.

Today's Question - Don't blow out those candles - At a birthday party for Don, they discovered it was the birthday of one of the guests, Pete. If you reverse the digits of Don's age, you will get Pete's age. The difference in their ages is 1/11th of the total of their two ages. How old are Don and Pete?? (P.S. Don is older.)