As the world seems to hurdle from one crisis to another, today a 43-year market veteran warned that massive volcanic eruptions are now wreaking havoc on the world and the trend is gong to continue for many years, even though no one in the mainstream media is talking about this. There is also an important note about Japan and a warning about which market is the most manipulated and distorted in the world.
By Art Cashin Director of Floor Operations at UBS
November 12 (King World News) – “On this day (+1) in 1927, N.Y. Governor Alfred E. Smith cut the opening ribbon as a remarkable feat of engineering was completed. It was, of course, the Holland Tunnel, connecting New York City (Baghdad on the Hudson) with Jersey City (the Athens of America).
The cultural implications of this event paled even the collapse of the Berlin Wall. But the city fathers of Jersey City had anticipated the cultural devaluation that could result from this invasion from the East. And like other threatened civilizations had throughout history, they opted to go underground.
Thus the learned Lyceums which had stood on every corner were now disguised as Saloons. The classical reading salons were camouflaged as candy stores. Even the native's renowned expertise in higher mathematics was taught underground. Their seminal work on "set theory" was passed from generation to generation on cryptic pieces of paper that strangers in the Federal government called "policy slips". And they had their ground breaking work in "probability, permutation, fractal geometry and chaos theory" encoded in innocuous terms such as "a 4 horse parlay" or "a six race round-robin". There is even a theory that today's reported learning gap with Japan and Europe would disappear if problems were rephrased to replace terms like delta and beta with terms like Whirlaway and CountFleet.
To celebrate go to the Horseshoe section of Jersey City (formerly called the Acropolis) and visit the Institute for Advanced Studies (the sign in front says Stash's). Arrive after 11:30 a.m. if you wish to skip the discussion of flaws in the recent proof of Fermat's Theorem and a dissertation on the Heisenberg Uncertainty Principle. Around noon they begin sipping shots of Old Overholt with India Pale Ale Chasers. And then they grapple with that old conundrum of logical positivism – – "If a drunk falls off a barstool and nobody hears him fall…does he make a noise…and more importantly can we drink up the money he left on the bar?"
I don't know how much money was left on the bar yesterday but there wasn't much money moved into the market. On Veteran's Day, the market looked like the EKG on a Maine potato.
Stocks Stroll To Another Record High – The equity market in New York opened mixed to slightly better in light volume. That themeless trading would continue through the session.
In late morning, I sent this summary of the rather indifferent trading:
Traders had assumed that oil below $77 might put pressure on equities. So far, no go.
It's been teflon all morning as a claim of an AP headline on Israel gearing up for terror attacks was shrugged off by both stocks and oil.
It may be the holiday effect. Columbus Day and Veterans Day have mild up biases historically.
Run rate later.
(At the close we saw the indices live up to that mild upward bias.)
The Dow waffled around the unchanged line through the morning and into the afternoon. Trading was slow but the tape did move along.
Shortly after the noon hour, I sent this follow-up:
Slower than yesterday but not by as much as holiday might indicate. Run rate at 12:30 projects to an NYSE final volume of 640/720 million shares.
Oil/equity relationship not lockstep but "influence" seems apparent.
(Trading slowed markedly late in the session with the NYSE closing volume coming in at only 614 million shares.)
Stocks struggled and stumbled a bit shortly after 1:00 but the slump never turned into an actual selloff.
They regrouped in the final hour and managed to close the averages fractionally higher despite a small "market on close" sell program. Another waste of carfare and a clean shirt.
Little Things Mean A Lot – Sometimes – Our sharp-eyed friend, Peter Boockvar over at the Lindsey Group, noticed a couple of odd things going on in Tokyo and wonders if they are related.
Here's a bit of what Peter wrote:
After the very weak day in the Japanese JGB market that I pointed out yesterday, the weakness continued overnight with another 4 bps jump in the 10 yr yield. It’s now up 8 bps in two days. While we’re of course talking about miniscule rates, the 10 yr yield is up 17% in two days after word that Abe may delay the VAT increase next October and this is occurring in the face of the BoJ’s 30% increase in QE. The yield at .533% is at a 7 week high on a closing basis. The Nikkei closed up on the day but at the lows of the day and the yen is higher. The JGB bond market is the most manipulated and distorted in the world so we’ll have to see how this plays out but Japan is also the most indebted nation in the world (as a % of GDP) that can’t handle higher rates of any kind. Abe will soon decide whether to satiate his bond market with another tax hike or risk putting the country back into a recession with it. Tough choices.
I believe the postponement of the tax is only a rumor so far, and the tax wasn't due until October of 2015. Further, one day's action is hardly a trend. But Peter's comment will enhance our vigilance on Japanese yields and strength in the yen. What is the Japanese word for vigilante?
Move Over Al Roker Or Maybe Al Gore – As freezing temperatures and snow and sleet headed as far south as Texas, our good friend and the iconic market strategist at Raymond James, Jeff Saut decided to shed a little light on the early freeze.
Here's a bit of what Jeff wrote:
…….. as winter storm warnings went up across the board in the northern climes of the Midwest. Once again the most misused term in weather was uttered, Polar Vortex. Ladies and gents, there is ALWAYS a Polar Vortex, but the shift in the Hadley Cell Winds has allowed the Polar Vortex to come down further into the U.S. than it has in decades. I have written about this ad nauseam ever since Iceland’s Eyjafallajokul volcano erupted and brought European aviation to a near-standstill back in April 2010 (see photo). What has happened is that since said eruption we have had more volcanic ash in the atmosphere than in recorded history. That has caused the “cell winds” to take a dramatic shift toward the North and South poles. Recall that north of the equator the cell winds rotate counter-clockwise and south of the equator clockwise. They carry the hot equatorial air into the troposphere where it moves toward the poles, typically 30 degrees north and 30 degrees south of the equator. Recently, however, given the volcanic ash, the cell winds have moved decidedly more toward the poles, which is why we are getting droughts and floods in areas where previously this has not happened. Regrettably, this weird weather is here to stay for a while and certain companies like FedEx (FDX/$171.74/Strong Buy) are going to have to adjust their business models for it.
Separately, some meteorology buffs around the NYSE claim their private studies suggest that the Northeast may be in for the coldest winter in 40 years. Where the heck is global warming when you really need it?
Consensus – Futures suggest the string of higher highs may be in jeopardy. Watch the crude level. Stay wary, alert and very, very nimble.
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