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BUY PROG = -500
FAIR VALUE = -600
SELL PROG = -700
CASHIN'S COMMENTS
MONDAY, DECEMBER 12, 2011
[AN ENCORE PRESENTATION]
On this day (-1) in 1930, American savers, the Federal Reserve and a Republican President all got a nasty surprise. The
banking system had been shaky for a year or two but it looked like things might finally be beginning to stabilize. That is
until today.
On this day, a major financial institution, The Bank of the United States went belly up. And, with it went the savings, "in
whole or in part", of over 400,000 depositors.
The Bank of the United States has been a historically unlucky name for several institutions. The first “Bank of the United
States” was proposed by no less than Alexander Hamilton. It was a privately held central bank for the United States some
125 years before the Fed was created. It was very controversial as Southerners saw it as a boon and tool of the mercantile
North while the South’s main industry, agriculture, didn’t need strong banking. The bank’s charter was allowed to expire
and the bank disappeared.
Without a strong central bank, however, the young government had found it very difficult to finance the War of 1812. So,
Congress proposed another Bank of the United States. This one succeeded for a while until Andrew Jackson and his
Southern coalition determined to kill it. They succeeded and the result, many feel, was the Panic of 1837, one of the worst
economic contractions in American history.
Now back to the other Bank of the United States.
In the early 1900’s, immigrants were pouring through Ellis Island and onto the streets of New York. A fellow immigrant
and a very successful garment merchant realized they would need a place to put their meager earnings and savings.
Perhaps to convey an image of governmental security or even an implied guarantee, he named his enterprise, “The Bank of
the United Sates”.
As previously noted, when it went under it had over 400,000 depositors. They all began to scramble for money anywhere
which tended to strain the other banks. The large New York garment industry was pushed to the edge and merchants
desperately sought credit. Lines began to form at other banks. Soon the nation was sinking into the Depression.
To celebrate meet a couple of auditors at the Olde TARP Trust Lounge. Have a few perfect Rob Roys and explain that
these days’ surprises are federally reserved for things like birthdays - not economic events. Crises, like dinosaurs, are now
ancient history. Then have several more sips.
The stock market slumbered its way to another 180 point gain. The impetus was the European Summit.
Hope Is Enough – At Least For Friday – The European Summit worked all night Thursday, and came up with a
treaty….er….plan….er….agreement. The markets reacted with a celebration that looked a lot more like a sigh of relief.
Most European markets regained about 80% of what they had lost in Thursday’s selloff. A few got all of it back.
The credit markets looked a little uncertain about how to evaluate the result. Yields on the more vulnerable sovereigns
initially rose, suggesting disappointment in the summit results. As the trading session progressed, the yields moved back
down to the levels pre-summit. Traders couldn’t decide if that was a vote of approval or a simple return to “Go” to
evaluate further.
The philosophic consensus seemed to be that Merkozy had told the delegates that some sort of “agreement” had to be
evident at wrap-up. Lacking that, nervous markets might turn into panicky markets. So, as they filed out, each delegate
gave the requisite thumbs up with rather sketchy details. The media pundits trumpeted that a “Lehman moment” had
been averted, but offered no details on how things had been achieved. Traders, at least those that we chatted with, thought
there was less here than met the eye. They said they’d rather wait to see how things played out as the upcoming week
moves on. It could get interesting with the FOMC and Quadruple Witch here in the U.S. and national reassessments in
Europe. Stay tuned!
Cashin’s Comments
Monday, December 12, 2011
Page 2
The Week Ahead – Based upon published data, the watercooler wizards are guessing that this week’s calendar may look
something like this:
Monday:
(1:00)
(2:00)
Tuesday:
(7:30)
(10:00)
(1:00)
(2:15)
Wednesday:
(7:00)
(8:30)
Thursday:
(8:30)
(9:00)
(9:15)
Friday:
(10:00)
(1:00)
(8:30)
President & Iraqi PM Meet
Three Year Treasury Auction
Treasury Budget Deficit
OPEC Report
Chain Store Surveys
NFIB Index
Business Invent.
JOLTS Survey
IBD Survey
Ten Year Treasury Auction
FOMC Statement
OPEC Meeting
Mtge Apps.
Import Prices
Export Prices
Initial Claims
PPI
PPI (Core)
New York (Empire) Fed Index
Current Account
Treasury Intl Cap Flows
Ind. Prod.
Cap. Util.
Philly Fed
Five Year TIPs Auction
CPI
CPI (Core)
-$140B
N.A
0.8%
N.A.
N.A.
1.0%
0.6%
+8K
0.2%
0.2%
-$106B
0.2%
77.6%
5.0
-0.1%
0.2%
Cocktail Napkin Charting - The napkins see support in the S&P at 1243/1247 then 1236/1240 and 1237/1231. Resistance
looks like 1264/1268 then 1273/1277 and 1282/1286.
Overnight - Markets are still trying to assess the “fiscal compact” agreement. There is some pullback in Europe, as
Ireland, Hungary and the Czech Republic are now saying “wait a minute” after their original agreement.
A good sign for the compact was that Italy was able to auction off some one year notes at a slightly lower rate than last time
and to some decent demand.
My concern, and one shared by many traders is that they still have not set up a “fire department”. That means there is no
plan or ready mechanism to quell any crisis that might spring up. That’s a risky posture.
Consensus - Europe still driving the bus but I think traders on both sides of the pond would like to tiptoe through the
session. Expiration week deals another wild card. Watch newstickers and stay very nimble.
Trivia Corner
Answer - Simon started with just seven pies. Eileen bought four; Maureen bought two and Janet bought one.
Today's Question - "Where's Santa when you need him." - Little Dick and Jane went to the neighborhood five and dime
to get a Christmas present for mom. Dick saw a shiny comb and took it to the register with all his money. "Sorry little
boy", said the cashier. "You are 24 cents short!" Jane smiled a sibling grin, grabbed the comb and put it, along with all
her money on the counter. "Sorry, little girl", said the cashier, "but you are 2 cents short." After an exchange of ugly
faces, they agreed to pool their money. However, the cashier told them that they still didn't have enough. How much did
Dick have? Jane...? and how much was the comb? (No taxes involved.)
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