As the price of crude oil trades near $65, Art Cash and Yra Harris discuss trouble brewing in Europe and Alice’s looking glass.
One Of The Most Successful Inventions In History
April 10 (King World News) – Here is today’s note from legend Art Cashin: On this day in 1849, the U.S. Government issued patent #6281, for a very remarkable and stunningly successful product. The product was so simple yet useful that most people think it’s been around for centuries. No smarty, it was not the telephone nor the fax nor even the radio, this product sold ten times as many items as every telephone, fax or radio ever made.
Pointedly speaking, short of matches maybe no other product has sold so often or in such volume. The product is….the safety pin!
And its invention was a bartender’s delight. In a saloon conversation a customer complained of the problem of fastening things easily without cutting your finger or harming the person wearing what you were fastening. After a couple of rounds, a guy named Walter Hunt opined that the solution to the riddle was not so tough.
After calling for a piece of string steel (to the left of the olives and two shelves down from the boiled eggs – – doesn’t every saloon have them) he began to twiddle.
Egged on by cynics and buyers of rounds he first resolved a loop at the end to give the gadget spring. But what helped was a spring with two pointed ends. Amidst hecklers and more drink buyers Hunt showed that by hammering one end (with a bartender’s muddle); you could cap the sharp end of the pin. Thus in less than three hours Walter Hunt had invented one of the most widely sold items in human history. But it wasn’t over. The cynics at the bar said it would never work. Another round please! But one guy said, “Hunt, I’ll pay you $100 for the rights”. And Hunt said, “Sold!” Thus in three hours and ten minutes Hunt had conceived invented and then sold the rights to one of the simplest yet most successful inventions in history.
It’s hard to imagine. Whoever heard of a clever guy sitting at a bar giving away million dollar ideas for free? Pass those peanuts, please.
Traders weren’t exactly working for peanuts yesterday but their efforts were far from decisive to say the least.
President Trump decided to slap about $11 billion in tariffs on various European exports in response to the WTO’s finding that EU was unfairly subsidizing Airbus.
Traders were a bit impressed that the proposed tariffs looked functional, unlike some earlier tariff proposals.
The new tariffs would be on things like wine and cheese. That meant that U.S. citizens could look for similar alternative products, like domestic cheese or wine. Some earlier tariffs had been slapped on things that did not have domestic alternatives, so that meant U.S. citizens were forced to pay higher prices to offset those higher tariffs.
But, while the newly proposed tariffs seemed to make some economic sense they, nevertheless, suggested ongoing trade wars with some economic consequences.
After an initial shrug, European equity markets began to sell off on fears that the proposed tariffs could push an already weak European economy into full recession.
The weakness in markets across the pond helped U.S. markets to gap down on the opening. Also contributing to the early weakness was an IMF announcement that it was cutting its estimate of global economic growth this year.
U.S. stocks gapped down on the opening and for the first thirty minutes of trading, they wallowed at the opening low levels.
Stocks then regrouped and tried to pare their losses over the course of the morning. Those efforts met with only modest success.
The mild rally attempt seemed to exhaust in early afternoon and prices began to drift lower.
The afternoon pullback was more of a fade than a selloff. The Dow managed to hold above its opening lows but both the S&P and Nasdaq closed at lower lows.
Interestingly, all three of the key indices saw a rather intense whipsaw in the closing minutes of trading. Traders guessed it may have been the result of someone misjudging the close and then quickly reversing.
A stock pullback was due but many felt this one was incomplete. We’ll see soon.
A Decoder Ring For The ECB – My friend, the CME guru, Yra Harris put out a brief note on what we may expect with this morning’s ECB announcement. In an age of negative rates, things can have aspects of Alice’s looking glass.
Here’s a bit of what Yra wrote:
There are so many issues plaguing Europe right now, and surprisingly, Brexit is not the most significant. On Wednesday morning — yes, Wednesday — the ECB announces its rate decision and it is expected that rates will remain unchanged, with the main refinancing rate at zero. The only possible news will be that the ECB actually engages in a tiered financing. This would mean that some banks would get relief from the -0.40% rate that the ECB charges banks to deposit cash at the central bank. There have been rumors that the ECB was planning on raising interest rates in the hope that boost for some European domestic rates would help lift the equity valuations of some profit-stressed financial institutions.
BUT DO NOT INTERPRET A TIERED SYSTEM AS THE ECB RAISING RATES AND IS CERTAINLY NOT HAWKISH. The algos may construe such a headline in that manner but it would be an error. A tiered system might lift European stocks as the severely depressed bank stocks have been a huge drag on several European indices.
The DRAGHI circus performs at 7:30 CST as the Magician of Frankfurt attempts to work the press with the prestidigitization of obfuscation. The European economy has slowed but it would be difficult for Draghi to reverse course and begin a new round of QE as it would lead to a LOWER EURO, which would certainly raise the IRE of President Trump. But the light is at the end of the tunnel for President Draghi because his term expires October 31, 2019.
Draghi wants to hold things together for his successor, Jens Weidmann. Draghi will get the usual questions about the current weakness in Europe, the negative effects from the China/U.S. trade dispute and why hasn’t there been more fiscal stimulus from European policy makers. As usual, Draghi will admonish the eurocrats for failing to establish a greater synchronized fiscal system, as well as not creating a centralized bank insurance scheme. Round and round we go.
Overnight And Overseas – Once again, Asian equity markets put in a rather mixed performance. Tokyo closed with a moderate loss. Chinese markets had fractional moves, with Shanghai up and Hong Kong down. India sold off as election concerns begin to weigh on markets.
In Europe, markets are showing small gains in rather light volume.
Among other assets, Bitcoin rose again and is trading just under $5300. Gold is flat and crude is a notch higher on product draw downs. The euro is virtually flat against the dollar and yields are unchanged.
Consensus – The ECB is likely to hold center stage for the morning. FOMC minutes will be pored over for any leaning toward a cut. Brexit marathon continues
Stay wary, alert and very, very nimble.
***KWN has now released the powerful KWN audio interview with Egon von Greyerz and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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