With continued uncertainty around the world, today legend Art Cashin comments on Draghi, Brexit, ECB, Gold, Bitcoin and oil.
March 27 (King World News) – Here is today’s note from legend Art Cashin: this day (+1) in 1979, at 4:00 a.m., the struggle between human response and technology safeguards took a strange turn. It all began with the sudden flash of warning lights in the control panel of an electric utility. Within seconds, the control room was filled with the sound of alarm horns.
The Control Room, of course, belonged to the Unit II nuclear reactor on Three Mile Island just south of Harrisburg, Pennsylvania.
One question that has never been answered (and maybe never will be) is – how much influence did a new hit movie have on the actions of authorities during this crisis. Less than two weeks earlier a movie called the “China Syndrome” had opened around the nation. Its premise was that a nuclear meltdown at some power plant could devastate “an area the size of Pennsylvania”, as one character in the movie noted.
Anyway, the real life accident happened like this: The flashing lights and klaxon horns were warning that a water pump had shut down. The pump fed water into the steam generator. With no new water coming in, and the reactor core turning more of the existing water into more steam, pressure began to build.
Automatic safety devices sensed the pressure and began to shut down the nuclear reactor. The pressure remained high since the reactor cools slowly.
So, the next auto device kicked in. It was a flow valve that drained some of the water (and pressure) from the hot water reserve tanks. So far all the safety devices had worked perfectly. This valve, however, failed to re-close as it was designed. Not to worry. The computer detected the leak and turned on some pumps to replace the water.
Enter the human factor. Someone saw the tank refilled by the pump and overrode the computer, shutting the pump off. With the other valve still opened, the water continued to drain. The core became exposed and overheated. The fuel jackets began to melt and nuclear pellets spilled into the water. Now we had a crisis.
To mark the day attend a lecture on safety in circuit breakers in this the 21st century. It’s the 21st Century for gosh sakes! Relax!….Dave, I sensed you are distracted. My sensors tell me there is doubt in your mind. Do not doubt, Dave. Every contingency is accounted for, accounted for, accounted for……
There was no meltdown in the stock market Tuesday, but there was a bit of a scare in midafternoon.
Bonds drifted lower overnight, causing treasury yields to rise a tick or two. The financial sector celebrated as if yields had gone soaring.
Also helping the opening pop was the energy sector as WTI again pushed hard against the resistance at $60.
Led by those two sectors, the Dow gapped higher on the opening. While energy and financials stood out, the opening rally was broad enough to see all eleven industry sectors in the S&P move higher.
The bulls spent the first hour churning sideways, consolidating the opening gains. Then, around 10:40, the bulls tried to extend the rally.
Unfortunately, the rally was stopped cold at resistance points from last Friday (Dow 25,800 and S&P 2830/2835).
In late morning, they made another move to try to restart the rally but they couldn’t even get back to the earlier highs. Frustrated by the failure to punch through the resistance, some of the buyers pulled away and the indices began to ease back below the opening price.
The ease back continued into midafternoon, when the Dow was able to circle the wagons just below 25,550. Then they tried to rally again but again the effort was half-hearted at best.
The bulls did get help in the final minutes, when a sizeable buy indication showed up for the close. The closing pop added about 80 points to the Dow.
Another Pair Of Eyes – My good friend, Peter Boockvar, the investment guru at Bleakley Advisory, vented a bit this morning on the comments of Mario Draghi of the ECB.
Here’s a bit of what Peter wrote:
Mario Draghi might be finally listening to me but grudgingly and not fully understanding. He said today in Frankfurt, “If necessary, we need to reflect on possible measures that can preserve the favorable implications of negative rates for the economy, while mitigating the side effects, if any. That said, low bank profitability is not an inevitable consequence of negative rates.”
Remember, we are now almost 5 years into the ECB negative rate experiment so there is plenty of evidence of its impact. It’s poison for one’s banking system and I believe should be repudiated. So if and when they act, they would likely tier the impact like other NIRP loving central banks have done (SNB, BoJ and Denmark). The Euro STOXX bank stock index is up .7% after 5 straight days of losses in response to the possible lifeline.
Overnight And Overseas – Equity markets in Asia were rather mixed overnight. Japan and India closed with modest losses, while Shanghai and Hong Kong closed with moderate gains.
Markets in Europe are also seeing mixed results. London is seeing small losses as we await non-binding indicative votes on possible courses of action on Brexit. Paris and Frankfurt are seeing fractional gains in light trading.
Among other assets, Bitcoin has rallied slightly and is trading just under $4100. Gold is a bit firmer, while crude has eased back off the $60 resistance level. The euro is a shade higher against the dollar, while the yield on the ten year is a tick, or two lower.
Consensus – We will again be on watch for the Brexit votes in Parliament, which did not take place yesterday. Also several ECB speakers are scheduled.
Bulls need to reassert control as some cocktail napkin chartists warn of a possible rounding top.
On the other side, April/May has a generally positive seasonal pattern.
Stay wary, alert and very, very nimble.
***KWN has now released the powerful audio interview with the man who says gold is about to breakout and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***Also just released: Greyerz – European Analyst – The Tables Might Soon Be Turning In Favor Of Gold CLICK HERE TO READ.