Cashin’s Comments AN ENCORE PRESENTATION 02.09.10

Cashin’s Comments AN ENCORE PRESENTATION

On this day in 1825, the United States selected a President. No, not in an election but in the House of Representatives. Imagine, Congress deciding who should be President. But that's what it said in that funny document the U.S. Constitution. In the previous fall election no candidate had received a majority of electoral votes Andrew Jackson got 99. John Quincy Adams got 84. Henry Clay got 37 a fourth
candidate; Wm. H. Crawford got 41.

Crawford had been the Secretary of Treasury for eight years and might have been the logical compromise choice. But he suffered a stroke during the campaign and fell behind the others and out of contention.

So in the House, Clay's people threw their support, along with as much as Crawford'sas they could muster, behind Adams. So, Jackson, who had the most popular votes and the most electoral votes, was denied the Presidency.

Jackson's people never forgave Adams, and killed nearly every proposal Adams sent to Congress - - whether it was good for the country or not. Thus, the plan for a national bank died. So did the plan for a national university. And the two sides added so many "spite" riders to the tariff bill that it became a contributing factor to the Civil War.

To celebrate stop by the Constitution Inn. Sip an old fashioned, and nod knowingly as political pundits tell you today's politicians have lost touch with how cooperatively the government used to operate.

Thanks to weekend snowstorm the government in Washington was closed yesterday. Despite expectations that did not help the stock market.
Dollar Dallies But Stocks Stumble Anyway – For much of Monday’s trading, the dollar rally stalled amid swirling rumors of possible rescue meetings to try to solve the emerging Greek crisis. For a while that allowed oil and gold to rally a bit. It also allowed stocks to churn sideways.

Then in early afternoon, stocks began to sell off. The selling began to accelerate in the final hour. Traders began to rush about trying to find the trigger for the accelerated selling.

They found that the dollar had begun to firm up a bit, but the lack of reaction in the after-markets for gold and oil cast doubt on the dollar as the trigger. There was some buzz that they were reacting to some unspecified comment from Bernanke. A quick search of the newswires could not locate a comment. In the end, the selling was chalked up to internals and technicals. Some sellers held back waiting for stocks to show the same kind of rebound bounce that was seen in gold. When the clock started to run out, the procrastinators had to bring the sell orders to the market. At least that was the conclusion of the ice cube marinators.

The Monday selloff also broke with the recent cycle of starting the week with an up day. In 17 of the last 19 occasions, the week’s trading had begun with a rally. So much for patterns.

The Job Producing Engine Won’t Turn Over – It is a widely accepted thesis among economists that the small business area is the source of most job growth. That’s why a Bloomberg story yesterday caught my eye. It was headlined – “No Job Growth for Small Business Spurs Recovery Doubt”. Here’s how it began: Feb. 8 (Bloomberg) -- Small businesses are becoming the Achilles heel of the U.S. recovery by limiting growth and
job creation.

Companies with fewer than 500 employees, such as Phoenix Technologies Ltd. and Sonic Corp., helped lead the economy out of the four recessions since 1980. This time, they continue to cut capital spending and dismiss workers, eliminating 3,000 jobs in January, according to Roseland, New Jersey-based Automatic Data Processing Inc., the world’s largest payroll processor.

Improvement in the unemployment rate, which fell to 9.7 in January from 10 percent in December, may stall later this year if these firms aren’t hiring, and growth likely won’t meet the median 2.7 percent annual rate forecast for 2010 by 67 economists in a Jan. 14 Bloomberg News survey.

“Will you have a sustainable recovery a few years down the road without getting some small-business spending? No,” Cary Leahey, senior managing director at Decision Economics Inc. in New York and a former White House economist, said in an interview. ……

The pullback in spending and hiring by small firms may threaten the recovery itself. Here’s a bit more: “It suggests that a V-shaped economic rebound is even more unlikely than suggested by many standard economic indicators,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York, which sees gross domestic product growing 2.3 percent this year.

The National Federation of Independent Business’s index of small-business optimism has been near historic lows for 15 consecutive months, declining to 88 in December from 88.3 in November, the federation reported Jan. 12. During the four prior recessions, it dipped below 90 only once.

Optimism ‘Stalled’

“It has been a very difficult year, and 2009 did not end on an uplifting note,” William Dunkelberg, chief economist for the federation in Philadelphia, said in the report. “Optimism has clearly stalled, in spite of the improvements in the economy.”

As these Comments are going to press, the latest NFIB survey hit the newswires. It showed a very minor tick up (1.3 points). That left the index below 90 for the seventh straight time. There were still layoffs shown with staff reductions averaging one-half worker per firm among the thousands of members. Since the NFIB says its members produce half of America’s GDP, these numbers are critical. Asked to describe this morning’s report, Dunkelberg used the word “lousy”.
Sounds about right to us.
Hark! Do I Hear A Bugle? Is That The Cavalry Coming? – The Euro is rallying this morning and, thus, so are U.S. stockfutures. The catalyst appears to be an announcement that ECB President, Jean-Claude Trichet, is leaving a meeting inSydney early to return to Europe. The presumption is that he is returning to help set up some kind of rescue package forGreece. Since it’s a long plane ride, we don’t expect any hard news soon. That could keep the rumor alive.

Cocktail Napkin Charting – In Monday’s Comments, we said the napkins suggested the first S&P support band might be 1048/1052. The selloff stopped well short of that, with the low stopping at 1056. But, since that was also the close, there was some sense that we were saved by the bell. For today, the napkin levels look about the same. First support at 1048/1052 and then more critical support at 1040/1043.
First resistance looks like 1063/1066 with a backup 1070/1074. Consensus – They look to start out better. Watch the dollar and rumors on a rescue. Stay very, very nimble.

Trivia Corner
Answer - (An apology - a poor grasp of English let our wording imply that each answer might be just four letters long.) A) "Hand" (Handsome; Handpick; Handbill; Handbook; Handrail). B) "Life" (Lifeline; Lifestyle; Lifelong; Lifeboat; Lifelike; Life size). C) "Bat" (Dingbat; Bat boy; Batman; Vampire Bat). D) "United" (United Kingdom; United Nations; United States; United
Way). HERE