Two of the wittiest men on Wall Street are about to sit down and chat — we’re covering it here live.
But first, the details.
UBS’s Art Cashin has been on the floor of the New York Stock Exchange for over 50 years, and what he’s known for, more than trades, are his his epic stories, razor sharp wit, and brilliant humour.
He’s sitting down with Barry Ritholtz, author and founder of Ritholtz Wealth Management. They’re at the Big Picture Conference, a gathering for finance folks and investors in NYC.
And given what’s happening in politics and markets today, everyone here is talking about how they could use some of Cashin’s comedy to end the day on a decent note.
So here we go.
Ritholtz is up first, telling the story of how he started having private dinners with Art Cashin. “When you get an opportunity to sit next to Art a dinner… you shut up and listen to what Art has to say.”
So Ritholtz asked Cashin how he started on Wall Street.
“The New York State Liquor Authority and the New York Bartenders Association have asked me to be brief,” said Cashin.
He started off on Wall Street by bypassing college and heading to the NYSE floor. He had to take an exam, and he was 17.
The attendant at the exam told him it would take him an hour and a half, but it took him around 15 minutes and he passed with flying colours.
“I went up the elevator dreaming of being a Vice President in a week,” said Cashin. But he went to his physical and the doctor said he couldn’t get hired because he had varicose veins from running cross-country.
Cashin got around that, though, through a family connection and ended up trading on the floor with a salary of $US39 a week.
“It was the beginning of the age of folk music,” he said, “I figure if i’m going to make $US39 a week I can do better than this… so I put together a group. I talked my way into an audition… with the Chairman of ABC/Paramount Records.”
Cashin and his band performed 3 or 4 songs and the execs said that if the guy they had just seen didn’t work out, they would sign Cashin’s band to a record deal.
The guy they had just seen, however, was Ray Charles.
“So I went back to Wall Street,” said Cashin to a laughing crowd.
All this means is that Cashin went back to learning about finance at bars over scotch Old Fashions.
One of the most important lessons he’s ever learned is price discovery. “I love it because there are University libraries filled with books… trying to explain it. And here I was at 18 and I learn it from a story… and it’s simple. it’s about JP Morgan the banker and Tiffany the jeweler. Tiffany knew JP Morgan loved diamond stick pens… he sent one over to JPM with a note… “
The note said the price was $US5,000 “if you choose to accept it you can send your man over to my office with the $US5,000, if you choose not to you can send your man over with the pen.”
The man goes to Tiffany the next day with a note and the pen. It said that $US5,000 was too much “and enclosed is a check with $US4,000.” If Tiffany didn’t want it, he could send it back and keep the pen, said the note.
Tiffany decided to send the money back. He knew he had the write price for the pen. When he opened the pen box, though, he didn’t find it.
Instead there was a a check for $US5,000 with a note from JP that said, “just checking the price.”
Onto another story — one about a bright mind on Wall Street on the day Kennedy was shot.
The broker on the floor who Cashin would succeed a year and a half later asked him ‘hey kid is there anything on the news ticker about the President?’
Cashin went to see what was up and saw that Merrill Lynch was all over the floor selling. The traders just said they knew it had something to do with the President.
After a while he sees the headline on the ticker and bells are ringing to signal something important ‘shots reported fired on the Presidents motorcade.’
‘President reported shot.’
‘President transported to hospital…’
‘The President has been shot,’ the news came in as a deluge.
Months later Cashin found out Merrill traders knew what was up because the bank had an office down in Dallas. Since the President was in town, the traders in that office went to watch the President’s parade. They came back with the news that the parade was canceled.
They didn’t know why, they just knew that the sirens and noise went in the direction of the hospital, and not on the parade route.
The Merrill traders’ boss asked them, ‘why would the President be pulled out of a parade? ‘ They tried to think of a bullish reason and couldn’t.
But the bearish reasons came out easy. ‘Whatever it is it can’t be good,’ said the Merrill boss. And they all started selling.
“That was another lesson to me, about Wall Street and being a detective about what’s going on,” said Cashin.
This story took Cashin to a story from the 1980s. He was reading tape and someone asked him if he was watching the oil stocks — ‘internationals are weak but domestics are strong,’ said his fellow. ‘Must be trouble in the Mid-East.’
Cashin lied and said he seen it. Then his fellow trader said, “you watching Occidental… must be trouble on the border of Egypt and Libya.”
After a while the trader said, “you watching Cone Mills?”
Cashin was surprised — CM was a jean company.
The trader said, “don’t you read anything?” CM has a plant to manufacture their jeans cheaply in Northern Africa. That, said the trader, must be where the trouble must me.
Cashin went home (“fed the dogs, beat the kids”) and saw on the news that there were clashes in the area to avenge the assassination of Egyptian President Anwar Sadat.
The lesson is connect the dots, “that’s what I learned on Wall Street, and why it is the best business on earth,” he said.
“I can’t tell you how much benefit my career has had,” said Cashin, “by my ability to say ‘this probably was caused by that’ and sound reasonable. I’m surprised at the number of people that look at the stock market as if were a random event… These are the same people that go to the race track and think the horse they pick had to be fixed.”
In 2008, during the crash, Cashin said things were strange. There was “a sense of unreality” that suggested manipulation.
“I will go to my grave telling people… I think it was Lehman that caused AIG to be bailed out. I think every central bank in the world called the U.S. and said, ‘are you out of your mind… these guys are everywhere.’ That was an important turn of the tide,” said Cashin. “What I’ve never gotten people to admit… the meeting in Nancy Pelosi’s office… there was a very sincere discussion of declaring martial law in the U.S…”
Politicians were afraid that if there was no money in banks and ATMs Americans would go crazy, Cashin explained, “I’m waiting for that to come out so that people know how close we came.”
At that point Barry Ritholtz wanted to have another discussion.
But Cashin broke in, “there are ice cubes waiting to be marinated!”
After a few words and questions, Cashin dropped his mic and walked off stage (not really).
If you want to see Art Cashin’s complete talk, you can watch the video here.