Tuesday, March 2, 2010

March 2, 2010 Market Commentary By Art Cashin

On this day (-1) in 1917, markets were roiled by news about Mexico. The news also
helped to decide World War I (or so some think). Now don't get upset you little
historian, you. We know that you know that America had not yet even entered the
war (or even officially picked a side). But that's what today was all about.
As you recall, World War I was rather a mess even for a war. The European powers
had spent nearly four years pummeling each other and bankrupting themselves. The
net result was millions of soldiers and civilians dead but no winners....nobody even
had a clear lead.

So, bloodied, bruised and frustrated, both sides looked toward the U.S. - rich in
resources, factories and ambulatory young men (draft bait). They figured whoever
could get American productivity (and maybe manpower) on their side could win.
Thus, the games began.

The Germans set up plans for dummy U.S. corporations to buy up various strategic
materials. They even thought about setting up a major defense plant…..under an
America style name…..“General” this or that…..then taking huge orders (and money)
from the French and British and then either not delivering....or....shipping sabotaged

The Brits staged mass propaganda efforts, blaming every accident or problem in
America on German espionage. The Germans tried to foil the Brits by performing
actual espionage. It worked well. Even after the sinking of the Lusitania and the
explosion at Black Tom, the U.S. remained neutral. (At the time, German was the
most frequently spoken second language of much of America, very much like Spanish
So the Brits shifted to high gear. They leaked to the Germans (anonymously) that
America was leaning British. The Germans bought. The German Foreign Secretary,
Arthur Zimmerman sent a cable to their Washington Embassy suggesting that if
America budged, the Germans should offer Mexico lots of money and….post
victory....offer the return of New Mexico, Arizona, Texas, California, etc. The
Washington office sent a confidential telegram to their Mexican Consulate,
suggesting the offer.

The Brits decoded the message but obviously couldn't give it to the U.S. without
revealing that they had broken the German code. So....the Brits contrived a way to
claim they found the note. President Wilson was outraged and on this day he
released the secret German message. But the public thought it was just a British
setup. That is...until two days later....when Western Union broke 60 years of tradition
and released the telegram to Mexico. The public was outraged...America joined the
war....and the rest is history.

The markets will be looking for a message today but we’re pretty sure it won’t come
in a telegram. It could come in an international cablegram, however. We’re not sure
whether the post-mark will be Athens, Berlin or, maybe, London.

 March 2, 2010 Market Commentary By Art Cashin -

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