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August 4, 2016

Market Commentary
By Art Cashin

Prepared by UBS Financial Services Inc.

Cashins Comments

Fair Value


An Encore Presentation

Buy Program


Sell Program


On this day in 1892, in the quiet and respectable town of Fall River,
Massachusetts, stunned and curious neighbors peered out from behind lace
curtains as police arrested the local Sunday school teacher. Her name was
Lisabeth. She was 32 and unmarried, which in the cruel custom of those
politically incorrect times, led some folks to call her "a spinster."
Anyway, she lived with her father, Andrew, and his second wife Abby in their
quiet little way in this quiet little house. That is until this day when the police
hauled Lisabeth (Lizzy) Borden off to jail, charging her with the ax murders of
her father and step-mother. The grisly details of the murders caught the
attention of the national press and soon everybody in the nation seemed to
be talking about the murders and the evidence (imagine that..well it was
over 100 years ago). All this media attention prompted a jingle that
catapulted the crime onto even more front pages across the nation.
"Lizzy Borden took an ax and
gave her mother forty whacks
when she saw what she had done
she gave her father forty-one."
Despite all this notoriety, a jury acquitted Ms. Borden of all charges. (Back
then DNA were just three letters in the alphabet.) (Many believe the murders
had been committed by the Borden family's maid - although she was never
charged.) Lizzy, even though acquitted, was hounded by the press, thus
becoming a recluse until her death in 1927.
To mark the day, take the family out for some chops and a few slices of this
or that or maybe even a New York Cut. But watch the incisive remarks, they
can be lethal. (And, if you don't like the wine list..just try some O.J.)
Wednesday's market started out choppy but got its act together with the
help of an upside reversal in crude.
Dow Ends Seven Day Selloff U.S. stocks opened slightly weaker, primarily
under the influence of downticks in foreign markets.
About 15 minutes into trading, the bulls managed to regroup and pushed the
Dow back up into plus territory.

Cashins Comments

August 4, 2016
Page 2 of 3

The post-opening "rally" flattened out around 10:30, when the crude inventory data hit. There was a slight build
in crude inventories and that initially sent crude lower.
After a few minutes, traders apparently noted that there was a countervailing drop in products, especially
gasoline. That helped turn the price of oil higher and seemed to spook the shorts. I noted some of that in a
midmorning email to some friends:
This morning's inventory selloff in crude quickly morphed into what looked like a nifty little short
Equity types fear the squeeze may have a one day shelf life so they're not doubling down on the crude
pop. Let's see how oil closes.
The equity/oil skepticism level became a bit more obvious as the session wore on. Crude pushed up above the
$41 level, but stocks primarily churned sideways.
That relationship continued into the closing bell with stocks getting a final half hour boost from a market on close
buy program.
The final volume on the NYSE was just under 900 million, a bit higher than the three week average. Advances
beat declines by a little better than 2 to 1, showing the bulls clearly had the upper hand.
The BOE Makes Its Moves The Bank of England made a series of moves this morning. I will defer to my
friend, Peter Boockvar of the Lindsey Group, who as usual has a quick and typically lucid analysis. Here's a bit of
what he wrote:
Not only did the BoE cut interest rates by 25 bps as fully expected, they expanded sovereign QE by 60b
to 435b from 375b pounds and they are adding a corporate bond buying program but that is modest,
just 10b pounds over the next 1 years. They also added a short term lending program for banks to
cushion the impact of low rates. The vote was 9-0 to cut rates but there were 3 dissents on sovereign
QE and 1 on the corporate bond buying. As to be expected the pound is getting hammered and gilts
are spiking higher with the 10 yr falling by 16 bps. Their 2s/10s spread is narrowing by 4 bps to the
lowest in 8 years. Sorry banking system.
Bottom line, the BoE is now falling further into the same trap as the Fed, BoJ and ECB and for some
reason hoping to see a different result. An even lower cost of money is not going to change any
behavior but at the same time an ever flatter yield curve will further damage bank profitability. Pension
funds, insurance companies and savers will be further starved for returns. Unfunded pensions will suck
further funding from corporations away from growth initiatives. Further down the line, as the Fed is
experiencing now, how does the BoE expect to get out of this. I thought for a moment that maybe
Mark Carney was different than his peers but he today has proven that he is just the same as the others
in believing too highly of the abilities of central banks to generate economic growth and showing no
sense of humility about their effectiveness. Creating asset bubbles is their only real skill set.
The multiple BOE moves were a good deal more extensive than many had expected. The pound fell and most
stock futures rallied.
Overnight And Overseas In Asia, most markets have moved higher with Tokyo leading the way.
In Europe, stocks were up and added to their gains on the BOE moves.
Gold and oil are down a bit and treasury yields are a touch softer after the BOE.
Consensus The rather extensive BOE moves indicate some real concern and thus may inhibit the Fed a bit
more. Keep an eye on oil to see if the reversal holds.
Stick with the drill stay wary, alert and very, very nimble.

Cashins Comments

August 4, 2016
Page 3 of 3

Trivia Corner
Answer - 1, 5, 14, 30, 55, ____, 140 / Ans. 91 - Starting with "0" it is the previous number plus a progressive
"square." Thus (0 + 12 = 1); (1 + 22 = 5); (5 + 32 = 14); etc.
Today's Question - If a guy wears a clean blue shirt every day but can only get to the cleaners once a week to
drop off his week's laundry and pick up last week's laundry, how many shirts must he own?


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