Cashin's Comments for 9/14/2006

September 14, 2006
CASHIN'S COMMENTS
THURSDAY, SEPTEMBER 14, 2006

[AN ENCORE PRESENTATION]

On this day in 1812, a very valuable piece of real estate committed suicide - - or at least that's the way it seemed to the guy who had just acquired the property.

His name was Napoleon Bonaparte and the property in question was called Moscow, a metropolis of some cultural and governmental note in the Russian Empire. On this day, Nappy and his boys entered the city to find it virtually deserted by its nearly half million citizens.

As he set up headquarters in town, awaiting the surrender of Czar Alexander (and the Empire) his staff brought him reports of scattered building fires. Napoleon at first thought the fires were the result of his own troops carelessly looting abandoned buildings. He gave the order to shoot looters and put out the fires. But as soon as the fires were put out, the buildings (and others) were in flames again.

What the "Little Corporal" did not know was that the Czar's generals had ordered all the prisoners’ dungeons be unlocked. And they promised freedom and land to any prisoner who stayed behind and set fires in the city. Soon 90% of Moscow was on fire, and Napoleon had to flee his headquarters through streets that one of his general's said looked like "the entrance to HELL!"

The Czar's boys liked the results so well that over the next three weeks they burned barns, stables and grain bins all around Napoleon. And, when the snows came, within a month, Nappy found himself with an army that was ill fed, ill clothed and ill-equipped. Thus one of history's great military minds lost both a campaign and his army. (Of the 500,000 men Napoleon led toward Moscow only 30,000 survived to return home, a nearly 95% casualty rate.)
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The bears escaped the heavy casualties they had suffered in Tuesday’s rally but they did not come near mounting a counterattack. On the other hand the Bulls kept the pressure on with another up day but it lacked the energy and assertiveness of the prior day’s rally.

Stick With The Program Please! – The day was dominated by the program traders trying to start a new parade to the upside. But, although the drums beat and the horns blared they never actually stepped out. To underscore my “program driven” contention, let me note that the Dow closed up 0.4%. The S&P closed up 0.4%. The NASDAQ closed up 0.5%.

As I have noted time and again over the years, indices weighted differently, computed differently and peopled by vastly different components should not show that unique kind of symmetry by accident or coincidence. It was the program button pushers, we contend, that produced such a dead heat.

Despite the unusual parallelism, there was noticeable strength in some of the chips and techs. When rallies narrow down to that group, floor traders tend to fly the caution flag. We’ll see, in the next few days, if the old rule of thumb still has potency.

Today – There should be lots of focus on Retail Sales (8:30). Lagging auto sales may drag the combined number into mild negative territory. Ex-autos there may be a slight plus tick.

Import prices are guessed to rise about 0.3%, a bit of a relief from July’s +0.9%.
Business inventory growth is also expected to slow a bit.

Markets – Bonds produced about half of Tuesday’s rally and most of Wednesday’s. Traders will check off on rates once again.

Consensus – Triple witch weeks are always whacky. They are still pushing against top of range but with slightly weaker internals than back in May.

Art Cashin