Art Cashin speaking at the NYSE on Dec. 30th, 2022.
Art Cashin, UBS’ director of floor operations and a fixture at the New York Stock Exchange for nearly 60 years, died this week at age 83.
Cashin was one of the great historians of the stock market, but he was not an academic. His method of teaching did not involve citing academic studies. Instead, he taught by telling stories.
In an attempt to explain why people should think deeper about what they are doing, he often told stories that illustrated a favorite theme: Why the obvious answer is not always the correct answer.
Cuban Missile Crisis: Buy when the missiles are flying
Cashin had to live through the constant specter of a nuclear attack in the early 1960s. One such incident taught him that sometimes investment decisions are not entirely logical.
Back then, he was spending a considerable amount of time with one of his earliest mentors, an over-the-counter trader in silver stocks whom he called Professor Jack. Here’s how Cashin told it:
“We were not quite to the Cuban Missile Crisis. We were getting there and I was still not a member yet. It was the early 60s, and word spread that something had happened and that the Russians had actually pressed the button and that the missiles were flying. The option market wasn’t on an exchange in those days, it was over-the-counter and you had to call around. I had virtually no money, and I was looking to see if I could make a $100 bet by buying a put or some such things. And everywhere I called I couldn’t get anything done. So I cleaned up and rushed down to the bar. And Professor Jack was already in the bar, and I came bursting through the doors as only a 19- or 20-year-old could. And I said, ‘Jack, Jack. The rumors are that the missiles are flying.’
And he said, ‘Kid, sit down and buy me a drink.’
And I sat down and he said, ‘Listen carefully. When you hear the missiles are flying, you buy them, you don’t sell them.’
And I looked at him, and I said, ‘You buy them, you don’t sell them?’
He said, ‘Of course, because if you’re wrong the trade will never clear. We’ll all be dead.'”
How do you determine the right price?
Cashin’s stories often illustrated some aspect of investing.
Volumes have been written explaining the concept of “price discovery” — that is, how anyone determines what the right price to pay for a stock should be. Scholarly papers have been written about supply and demand, as well as the information available to buyers and sellers at the time of the transaction.
To explain price discovery, Cashin liked to tell the story of the time the jeweler Charles Lewis Tiffany tried to sell an expensive diamond stickpin to John Pierpont Morgan.
Tiffany, Cashin said, knew that J.P. Morgan loved diamond stickpins, which he used to put in his tie. One day, the jeweler sent a man around to Morgan’s office with an envelope and a box wrapped in gift paper. Morgan opened the envelope, and in it was a message from Tiffany: “My dear Mr. Morgan, I know of your great fascination with diamond stickpins. Enclosed in this box is an absolutely exquisite example. Since it is so exquisite and unusual, its price is $5,000.”
In those days, Cashin noted, $5,000 was north of $150,000 in present dollars.
The note continued: “My man will leave the stickpin with you and will return to my office. He will come back tomorrow. If you choose to accept it, you may give him a check for $5,000. If you choose not to accept it, you may give him the box back with the diamond stickpin.”
The next day, Tiffany’s man came back to see Morgan.
Morgan presented him with the box rewrapped in new paper, along with a note, which said, “My dear Mr. Tiffany, as you’ve said, the stickpin was magnificent. However, the price seems a bit excessive. Instead of $5,000, enclosed you will find a check for $4,000. If you choose to accept that, you may send the pin back to me, and if not, you may keep the pin and tear up the check.”
The man returned to Tiffany, who read the note and saw the offer for $4,000. He knew he could still make money on the offer, but felt the pin was still worth the $5,000 he was asking.
The jeweler said to the man, “You may return the check to Mr. Morgan, and tell him I hope to do business with him in the future.” Tiffany then took the wrapping off the box, opened it up and found not the stickpin, but a check for $5,000 and a note that said, “Just checking the price.”
How do smart people read the tape?
Cashin passionately believed that the market reflected all available information — even if some were able to come to different conclusions than others. Often when the market moved for reasons that were not obvious, Cashin would come up with some plausible but not obvious reason why.
He was fond of telling a story about a man who looked at the markets during a national disaster and read the tape in a very different way than everyone else.
Art Cashin
Adam Jeffery | CNBC
It was Nov. 22, 1963 — the day President John F. Kennedy was assassinated.
“I was upstairs,” Cashin told me, “And the market was selling off. And a broker on the floor, Tommy McKinnon, called up. I was in the order room. And he said, ‘Is there anything on the tape about the president?’
And I said, ‘No. Why do you ask?’ And he said, ‘Merrill Lynch is all over the floor, selling.’ And I asked him why, and he said, ‘Something about the president.'”
“So I went back. The news ticker had a bell that would ring once for ordinary news, twice for something that was special, and three for really dynamic news. And the bell rang three times. And I ran back about 15 feet to where the news ticker was. And the headline was, ‘Shots Reported Fired at President’s Motorcade in Dallas.’ And I ran back to call the floor of the Exchange to tell Tommy. And before he could pick up, the bell rang three times again. And it said, ‘President Rumored to Have Been Hit.’ And I went back to call him again. And again, the bell rang three times. And it said, ‘President’s Motorcade Diverted to Parkland Hospital in Dallas.’ And that’s when they shut the Exchange down.”
“The amazing thing, to me, was how did Merrill Lynch know before anything was on the news ticker? And it was a lesson to me in Wall Street. Presidents didn’t travel much in 1963 and so the manager of the Merrill Lynch Dallas branch said, ‘You guys go out and watch the parade. I’ll keep a skeleton crew here.’ They went out to watch the parade. A little while later, they all came in down in the dumps. And he said, ‘What’s the matter? You were supposed to watch the parade.’ And they said to him, ‘The parade got cancelled.’ And he said, ‘What do you mean?’ And they were here. And the parade was way up there. And they heard the sirens go loud. And the parade turned right.”
“And this guy was a good manager. And he called the salesmen together. And he said, ‘Give me a good bullish reason to pull the president out of a parade.’ And nobody could think of one. And he said, ‘Give me a bearish reason.’ Nobody thinks, assassination. They were nowhere near there. They were 10 blocks away. But they start thinking, nuclear catastrophe, natural disaster, blah, blah, blah. They find 100 reasons to sell. He said, ‘Begin to sell for the discretionary accounts. Start calling our clients. And tell them, ‘We think something bad happened at the parade.'”
For Cashin, that Merrill Lynch manager was the perfect stock market Sherlock Holmes: Don’t just consider what you hear. Think beyond what happened.
How do you tell a story about the stock market?
By the time I met Cashin in 1997, he had been writing a daily column, Cashin’s Comments, for nearly 20 years. It was estimated to reach as many as 2 million people a day. It invariably began with an analysis of an important event: “On this date in 1918, the worldwide flu epidemic went into high gear in the U.S.”
After a brief history lesson, he tied that event to the day’s market events: “Pre-opening Wednesday morning, U.S. stock futures looked like they might be coming down with the flu. Several earnings reports were less than glowing and some of the outlooks were cloudy.”
Cashin never took a course in literary theory, but he understood that some stories were far more persuasive than others. He knew that condensed narratives with a clear storytelling arc were the most memorable, and therefore this was the most effective way to convey information.
For Cashin, storytelling is only partly about facts: A series of Post-it notes on the wall, each with a separate fact about something going on in the market that day, is not a story. It’s how you connect the facts and weave it into a narrative that make it a story.
“I have been fortunate enough over the years to be able to look at very complicated situations or problems and be able to reduce them to understandable items by using a story or a parable,” he once said to me.
He not only uses stories, but he also anthropomorphizes the entire market: He routinely described the market as being “in a tizzy,” or that traders were “circling the wagons” to defend a particularly important level of the Dow Jones Industrial Average.
Let’s get back to the story about J.P. Morgan, Tiffany and price discovery.
For Cashin, understanding what a stock was worth was not about a mathematical formula. It was about trying to understand what the other guy was willing to pay:
“How can I, in a real estate transaction, in a stock transaction, whatever, delve into your mind and find out what will you really accept? You offer your house at three quarters of a million dollars. Is that really your price? How do I find out what the difference was? And Morgan, in his natural genius, figured out that he would offer the guy somewhat less, and if the guy took it, that was to Morgan’s advantage. And if the guy refused, then that was the price and he had to pay.”
Cashin’s secret sauce was a natural gift for telling stories with a “dramatic arc” — that is, stories with rising action, a climax, falling action and a resolution. Even the short Tiffany story contains all these elements: The action rises when Tiffany’s man presents the stickpin to Morgan with a $5,000 asking price, and Morgan counters with a $4,000 offer. The climax occurs when Tiffany declines the counteroffer. The falling action happens when he sends the courier back with the note. The resolution occurs when Tiffany opened the box and found not the stickpin but a check for $5,000 and a note that said, “Just checking the price.”
Cashin grasped that these kinds of stories pack more emotional resonance than stories that don’t have the dramatic arc, and that’s why people remember them.
What Art Cashin taught me
When you’re a journalist, it’s easy to look at the news as a pile of facts on a bunch of sticky notes — but this isn’t what makes a story. It’s how you arrange those facts into a narrative that matters. A good narrative has emotional resonance.
Art Cashin understood that intuitively. He helped show me that the sticky notes weren’t nearly enough.
Finally, a story about Art Cashin
Art Cashin told stories for 60 years, but there were also a lot of stories about him. He spent a lot of time in bars.
Years ago, Cashin gave me a copy of a menu from Eberlin’s, a restaurant founded in 1872 and a fabled Wall Street hangout, long since departed. The menu was from the mid-1960s: a martini or Manhattan was $1.20.
On the list of entrées, there is this:
SPAGHETTI (a l’Arthur Cashin) …………………………………………… $2.75
I asked him one night at Bobby Van’s, his preferred watering hole late in his career, why was a spaghetti dish named after him?
“It was a hangover cure,” Cashin told me. “Eberlin’s opened at 6:00 a.m., and all the guys who had been out drinking the night before came in for something to eat. My preferred breakfast was spaghetti in a red sauce, so they named the dish after me.”
How Cashin managed to spend decades on the NYSE floor and in bars — and still released his nightly Cashin’s Comments — is a mystery to me.
I know one thing: He refused to give me the recipe for Spaghetti (a l’Arthur Cashin). I’m not even sure his family knows.
Excerpted from the book, “Shut Up and Keep Talking: Lessons on Life and Investing from the Floor of the New York Stock Exchange,” by Bob Pisani (Harriman House, 2022). More
