Art Cashin's most valuable stock market lessons and the stories behind them.

This week, at the age of 83, Art Cashin, UBS' director of floor operations and a longtime presence at the New York Stock Exchange, passed away.

Cashin was a renowned historian of the stock market, yet he was not an academic. Rather than relying on academic research, Cashin taught through storytelling.

He frequently shared stories to illustrate his favorite theme: The importance of considering multiple perspectives before arriving at a conclusion.

Cuban Missile Crisis: Buy when the missiles are flying

In the early 1960s, Cashin experienced the constant threat of a nuclear attack, which taught him that investment decisions are not always based on logic.

He spent a considerable amount of time with one of his earliest mentors, an over-the-counter trader in silver stocks whom he called Professor Jack, back then.

I was not yet a member during the Cuban Missile Crisis. It was the early 60s, and news spread quickly that the Russians had pressed the button and the missiles were flying. At the time, the options market was not yet on an exchange; it was over-the-counter and required calling around. With little money, I was looking to make a $100 bet by buying a put or some other options. However, everywhere I called, I was unable to execute any trades. Frustrated, I rushed to the bar and found Professor Jack already there. I burst through the doors, exclaiming, "Jack, Jack! The rumors are that the missiles are flying!"

He ordered a drink, saying, "Kid, sit down."

He instructed me to buy missiles when I hear them are flying, not to sell them.

Did you say, "You buy them, not sell them?" when I looked at you?

He stated, "If you're incorrect, the trade will never settle, and we'll all perish."

How do you determine the right price?

Cashin's stories often illustrated some aspect of investing.

Numerous studies have been conducted on the process of determining the appropriate price to pay for a stock, known as "price discovery." These studies have examined the factors that influence supply and demand, as well as the information available to buyers and sellers during transactions.

John Pierpont Morgan was approached by Charles Lewis Tiffany with an expensive diamond stickpin, but he declined the offer.

Tiffany knew that J.P. Morgan loved diamond stickpins, so she sent him an exquisite example worth $5,000.

In present dollars, $5,000 was significantly less than $150,000 in those days.

My man will leave the diamond stickpin with you and return to my office. He will come back tomorrow. If you accept it, you may give him a check for $5,000. If you decline 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 a rewrapped box containing a note that read, "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."

Tiffany read the note and saw the offer for $4,000. The man knew he could still make money on the offer, but felt the pin was still worth the $5,000 he was asking.

The man was informed by the jeweler that he could return the check to Mr. Morgan and convey his hope to do business with him in the future. Upon unwrapping the box, Tiffany discovered a check for $5,000 and a note stating, "Just checking the price."

How do smart people read the tape?

Cashin believed that the market reflected all available information, even if some came to different conclusions. When the market moved for unclear reasons, Cashin would offer plausible but not obvious explanations.

He enjoyed recounting a tale of a man who interpreted market data differently than others during a national crisis.

On November 22, 1963, President John F. Kennedy was assassinated.

Cashin informed me that he was upstairs when the market began selling off. A broker on the floor, Tommy McKinnon, contacted him. Cashin was in the order room when McKinnon inquired, "Is there anything on the tape regarding the president?"

He said, "Merrill Lynch is all over the floor, selling," and I asked, "Why?" He replied, "Something about the president."

"I returned to the news ticker. The bell would ring once for regular news, twice for special events, and three times for dynamic news. The bell rang three times. I ran back about 15 feet to the ticker. The headline read, "Shots Fired at President's Motorcade in Dallas." I ran back to call the Exchange to inform Tommy. Before he could answer, the bell rang three times again. It read, "President Rumored to Have Been Hit." I returned to call him again. The bell rang three times once more. It read, "President's Motorcade Diverted to Parkland Hospital in Dallas." At that point, the Exchange was shut down."

"The astonishing thing to me was how Merrill Lynch knew about the parade cancellation before it was reported on the news ticker. It was a lesson in Wall Street for me. In 1963, presidents didn't travel much, so the manager of the Merrill Lynch Dallas branch told his employees to go watch the parade while he kept a skeleton crew at the office. They went out to watch the parade, but later returned down in the dumps. The manager asked them what was wrong, and they said the parade had been cancelled. The manager was confused, as he had heard nothing about it. Suddenly, they heard loud sirens and realized that the parade had turned right and was no longer coming their way."

"This guy was a good manager who called the salesmen together and asked for a bullish reason to pull the president out of a parade. However, nobody could come up with one. He then asked for a bearish reason, and they immediately thought of assassination. Despite being 10 blocks away, they started thinking about a nuclear catastrophe, natural disaster, and other reasons to sell. They found 100 reasons to sell, and he instructed them to begin selling for the discretionary accounts and call their clients to inform them of the situation at the parade."

Merrill Lynch manager Cashin was the ideal stock market detective, urging investors to look beyond the surface and analyze the underlying causes of market events.

How do you tell a story about the stock market?

In 1997, Cashin had been writing his daily column, Cashin's Comments, for almost 20 years and it was estimated to reach up to 2 million people daily. The column always started with an analysis of a significant event, such as the 1918 flu epidemic in the United States.

He connected the day's market events to a history lesson he had given earlier: "The pre-opening Wednesday morning U.S. stock futures looked like they were suffering from the flu. Several earnings reports were not as positive as expected and some of the outlooks were gloomy."

Although Cashin did not study literary theory, he recognized that certain stories were more convincing than others. He understood that concise narratives with a clear narrative arc were the most effective way to communicate information.

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 makes it a story.

He once stated that he has been fortunate to simplify complex situations or problems by using stories or parables.

He not only uses stories, but he also personifies the entire market: He frequently described the market as being "in a tizzy," or that traders were "circling the wagons" to defend a particularly important level of the market.

Let's continue with the tale of J.P. Morgan, Tiffany, and the topic of price discovery.

Understanding a stock's value for Cashin was not about using a mathematical formula; it was about comprehending what others were willing to pay.

"What is the best way to determine the true value of a property or stock in a transaction? If you offer your house for three quarters of a million dollars, is that your actual price? How can I determine the difference between your initial offer and the final price? Morgan, in his natural intelligence, discovered that he could offer the buyer slightly less and gain an advantage if the buyer accepted. If the buyer refused, then that was the final price and he had to pay."

Tiffany's story had a dramatic arc, with rising action, a climax, falling action, and a resolution. The action rose when Tiffany's man presented the stickpin to Morgan with a $5,000 asking price, and Morgan countered with a $4,000 offer. The climax occurred when Tiffany declined the counteroffer. The falling action happened when he sent the courier back with the note. The resolution occurred 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."

People remember stories with dramatic arcs more than those without, as Cashin realized, because they evoke stronger emotions.

What Art Cashin taught me

A journalist's job is not just to present facts on a piece of paper; it's to create a story that has an emotional impact on the reader.

Art Cashin recognized that the sticky notes were insufficient, and he demonstrated this to me intuitively.

Finally, a story about Art Cashin

For 60 years, Art Cashin shared tales, but many stories circulated about him. He spent much of his time in bars.

A menu from Eberlin's, a renowned Wall Street hangout founded in 1872, was given to me by Cashin years ago. The menu, from the mid-1960s, listed a martini or Manhattan for $1.20.

On the list of entrées, there is this:

SPAGHETTI (a l'Arthur Cashin) ................................................... $2.75

At Bobby Van's, his go-to spot in his later years, I inquired about the origins of the spaghetti dish named after him one evening.

"Cashin informed me that Eberlin's opened at 6:00 a.m. and all the guys who had been out drinking the previous night came in for something to eat. Since my preferred breakfast was spaghetti in a red sauce, they named the dish after me."

It is baffling to me how Cashin was able to spend numerous years on the NYSE floor and in bars while still producing his nightly Cashin's Comments.

He declined to share the recipe for Spaghetti (a l'Arthur Cashin) with me, and I'm not certain if his family is aware of it.

Rewritten: 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).