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Silver Oak?


Investors are committing cash that was previously sidelined.

"They were very special. They're all blends we make from quite a few vineyards that we keep separate."
-David Duncan, CEO of Silver Oak Cellars

Following the 6.0 earthquake, David Duncan rushed to his winery to discover hundreds of shattered wine bottles strewn across the cellar floor.

Obviously, he was devastated since many of these bottles were "one of a kind", specially used in blending wines. I too was devastated because Silver Oak cabs are one of my favorites! I feel terrible for the good folks in Napa, as well as all of the Californians who have been affected by the tragedy, but it does remind me of a story.

The year was 1906 and on April 18, at 5:12 a.m., the Great San Francisco earthquake arrived, devastating the city by the bay. About 3,000 people were killed and of the city's 410,000 population, between 225,000 and 300,000 were left homeless. It is still regarded as one of the nation's worst natural disasters along with the Galveston hurricane of 1900, and more recently, Katrina. Two days before the quake hit, the famed "boy plunger" (Jesse Livermore) began shorting stocks. In particular, he got the unwavering sense to sell short Union Pacific shares, one of the leading rail stocks of the day. News of the earthquake was met with mild selling at first, but when it was determined how extensively the quake was going to impact American/British insurance companies, the rout was on. While over the ensuing months there were ups and downs, Livermore held his short positions, and actually added to them. When the Bankers' Panic of 1907 "hit," Jesse made a fortune; but that's a story for another time.

Fortunately, loss of life and property was contained in the recent Napa quake and there was no selloff in our equity markets. In fact, many of the indices I monitor notched new all-time highs yesterday. The S&P 500 (SPX/1997.92) actually traded to 2001 (A Space Odyssey?), but in this case, HAL could not keep the "buy side" algos working as the SPX closed below its second millennium mark. It also does not, as of yet, take my second scenario off of the table. That would be, "Is this going to be just a peak-a-boo 'look' to new highs, or something more."

Yesterday the D-J Industrials fell short of new all-time highs (read: non-confirmation), while the SPX tagged them. Buying was somewhat strong at 70% of Total Upside to Downside Volume. Of interest is that investors have recently committed sideline cash, leaving their cash levels at the lowest in 30-years (a tip of the hat to Jason Goepfert of SentimenTrader fame).

Further, Jason notes the SPX closed at a 10-year high on the lowest volume in at least six months, the seventh time it has done so since 1940.

This morning the futures are flat and the euro currency is lower on more anticipated easing by the ECB.
No positions in stocks mentioned.
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