Today Art Cashin, a market veteran who has been trading stocks for over 60 years, warned of a huge similarity in stocks today vs 60 years ago.

August 17 (King World News) – Art Cashin, Head of Floor Operations at UBS:  On this day in 1824, a large number of workers and spectators gathered at Spring Street in New York City. They were there to launch a magnificent feat that many thought would save Manhattan. By some reports there was even a band playing. 

For years locals had worried that so much building had been going on at the southern tip of the island (particularly from Wall Street to the Battery), that the sheer weight might tip the island over. Then, in the spring of 1824, came “the plan.” A retired craftsman waxing poetic in a tavern (where else) allowed as how the solution was simple. Naturally, the boys bought him a few rounds to pry out the secret. After a few more shooters, he revealed his secret. They could just saw off the island like at a soft point (around 14th Street), north of most developments, tow the bottom half into the harbor, turn it around and reattach at the former southern tip–thus, the buildings would be in the middle — well almost….but at least the island wouldn’t tip over. 

Whatever they were serving that night, it struck most listeners (even some of those still standing) as a good idea. Over the next few months, many brought friends to listen to this genius, and since they all had the price of a drink, he was willing to share. Soon folks were commissioning giant saws, dredge boats and even a giant block and tackle to re-affix the island when the task was done. 

But on this particular morning, the guy who had the plan, a man named Losier, did not show up. He realized the plan was a scam and, thus he was hiding in Brooklyn, fearing the mob would kill him. Naturally, the whole scheme collapsed, the island did not. 

Luckily, history rarely repeats, and Americans would never again get caught up with any guys with vague ideas to turn things around and, who keep proposing grand schemes that don’t work. (Right?) 

Traders had no plans that I am aware of about sawing an island in half, but many of the bulls had gathered, hoping to see if they could stretch this rally into yet one more session and for all intents and purposes, they were successful with help from a couple of retailing blue chips. 

The market started better, but a little bit mixed. The Dow was the leader of the pack and that had to do with two particular stocks. We noted that in the late morning update: 

Late Morning Update 08.16.22 
After several days of the upside, the market appears to be morphing into a bit of a consolidation day. The Dow appears to be benefitting by upbeat reports from the likes of Home Depot and Wal-Mart. So, that is keeping a bid under the retailor blue chips. The S&P seems to be pausing as it was approaching its 200-day moving average. The Nasdaq sees a shade of profit-taking. Some of the players fear the pullback in yields may be ending and we will see how they go from there. 

Let’s talk about the technicals. 

As we go to press, the S&P continues to flirt with the 4300 level. So, traders will study that as we wait to see if they assault the 200-day moving average. Most traders will also watch the yield on the ten-year. If it pushes above 2.85%, will that put some pressure on the high caps? 

For now, we will see if the consolidation phase continues.

Stay Safe. 

As we went to press and as European markets closed, the bulls managed to switch on the afterburners and the Dow kicked into high gear pretty well, thanks in large part again to Wal-Mart and Home Depot. Home Depot had traded favorably earlier, but there was some concern about the inventory level, however, in late morning, as Europe was closing (purely a coincidence, I assume). The inventory concerns disappeared and Home Depot accelerated. That allowed the S&P to start moving along smartly as did the Dow. 

The bulls continued throughout early afternoon, putting on a very good show and turning it from what looked to be a consolidation day into a clear extension of the rally. Then, just about 3:00 p.m., the S&P got up and virtually ticked exactly on that 200-day moving average (circa 4326) that we had alluded to in the late morning update.

The effect was instantaneous. It was if they had hit the third rail. All the equity markets rolled over and pulled back smartly in the next twenty minutes. I think that is an apparent consequence of the large amount of algorithmic trading that we are seeing, and some people probably have plugged the algorithms in that when you hit the 200- day moving average, step back so you do not waste any energy in case they stall out. 

The Dow, however, managed to regroup handily and turned back toward the highs of earlier in the session. They still managed to close solidly. Nasdaq was down as the concern about yields were in a bit of trouble in the afternoon. Nothing terrible, but just enough to cast a shadow over the high cap techs.

As a side bar, some friends were pointing out the current similarities between this year’s chart in stocks and the year 1962. I was in the business then as a trader in stocks, municipal bonds and chief cook and bottle washer in a small firm. I had not yet gotten a seat on the Stock Exchange. That would come two years later, but I do remember 1962 very clearly. 

Early in the year, there was concern about inflation, particularly steel prices, where U.S. Steel and other companies were hiking prices and drawing headlines. The new young President Kennedy said that his father had warned him that businessmen and chairmen were often “SOB’s” and promised to go after the steel companies. That sent a shudder through the whole stock market. Was this new young democrat a socialist? Would he be taking on companies left and right? Stocks pulled back very smartly, bottoming in June. They then rebounded and started a rally back somewhat smartly, only to top out around this time in August. They would then begin to rollover, only to have serious trouble with the Cuban Missile Crisis as we got into September and October. 

One can talk about the similarities, but let’s hope we don’t face another geopolitical crisis, although with the situation in Taiwan and Ukraine, one could readily see where people going nose to nose could send geopolitical shudders. We will worry about that if and when it comes along. 

Nevertheless, we will look to see if this rally begins to top out here and continues that parallel with 1962. We will also look to see if the rejuvenated bulls, who have now stretched this well beyond the expectations of many of us skeptics, keeps it going. 

Overnight, global equity markets are going their separate ways. In Asia, the markets are mostly showing only fractional changes and are leaning slightly to the upside. Tokyo is the star performer and there is little if any reaction for a rate hike from the Central Bank of New Zealand. In Europe, however, the story is different. Markets are marginally weaker and the big story there is the CPI data in London. British inflation has ticked at a 40 year high and that is raising yields on British gilts and most other treasury bonds in Europe. 

Here in the U.S., yield on the ten-year is up about 2.86% and that is putting pressure on U.S. equity futures. As dawn hits Manhattan, the Dow futures look to open down about 120 points. I think the game will be all about yields so we will keep an eye on that. Certainly, anything above 2.85% should put pressure on equities. 

Traders will look to see where things go with the S&P. It looks to open below 4300. If the bulls do regroup and mount a rally, obviously, we will be looking at that 200- moving day average for around 4326. 

So, we have another interesting day. We will see if the rally finally does begin to top out and fit the model from 1962 or whether what we have seen so far is a mere coincidence. The game is going to get more and more interesting. The percent retracement in the S&P has given a tailwind to the bulls and certainly has been a force in allowing this rally to outlast what many of us thought should be its duration. 

You know the drill. Stay close to the newsticker. Keep your seatbelt tightly fastened. Stay alert, nimble and stay safe. The ball is in the hands of the bulls even though we look to open down. Keep watching those yields.

Late Morning Update 08.17.22
So far, the jump in the bond yields has been the major influence of the morning and, keeping all three key indices without a strong enough bid to return to plus territory.  However, the bears did not try to double down so, this does look somewhat like the consolidation day.  Markets have, however, changed personality as we noted previously, right around the time Europe closes at 11:30 and noon New York time.

A quick look at the numbers.

The yield on the ten-year has stayed up around 2.90%.  We think primarily on the 40-year high in inflation in the UK.  The S&P has stayed below 4300 and never hinted at a retest of the 200-day moving average at 4326.

So, we will keep our eye on the yields, which, I think, are the primary influence today and, see if they do develop a second personality in the afternoon as they have several times over the last week in a half.

Stay Safe.


In Case You Missed It…

Rapidly Increasing Cash Flow
Ryan McIntyre:  Maverix continues its steady performance in 2022 with solid cash flow. It also benefits from exposure to near-term growth and long-term gold optionality on future resource growth and development. Moreover, Eric, there is no additional cost from its existing 125 royalties and streams. And Maverix expects its cash flow to grow significantly in the coming years. A good example of increasing cash flow is our royalty with Orla Mining which recently announced it achieved commercial production at its Camino Rojo mine. Maverix has a 2% royalty, which is expected to add 6% to our current revenue base.

Massive Growth Story
But more exciting than that, Eric, is the fact that Maverix has royalties on a trio of notable gold projects expected to come online in the next few years. The first is the expansion that is underway at Karora Gold’s Beta Hunt mine in Australia that will add over 10% to revenue by 2024. The next is Agnico Eagle’s restart and potential expansion of its Hope Bay mine in Canada in 2025 that could see production increase at two to three times the original capacity. Agnico’s mine expansion will add 10% to our current revenue base. The third one is the 5% royalty we own on the Gemfield project in Nevada owned by Centerra Gold that is expected to add a staggering 20% to Maverix’s revenue starting in 2026.

Massive Upside Leverage
And, Eric, if people believe the metals are headed higher then Maverix will unquestionably benefit, as its 90% margins are inflation-protected and it has a significant and growing portfolio that will benefit from the higher prices…Maverix Metals, symbol MMX in Canada and the US.

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