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Art Cashin Interview

Tyler Durden's picture




 

On government intervention:

The slowness in the economy was slowing down. That's all been changed. But most of it's been changed with the help of the government. We've had Cash For Clunkers, we've had special tax incentives for first time [home] buyers. And that's been good. It's moved things around. Now the question is, can the patient sustain himself, that being the economy, when he comes off life support. And there is some doubt out there about that.

On excess reserves (update, the most recent number is nearly $1 trillion, an increase of $150 billion from the end of September):

 Well, first of all, I'm concerned about lending and the availability of credit. There's something called excess reserves. Now if you run a bank and I come in and I give you $1,000 in deposits, you have to reserve a certain portion of that according to the Federal Reserve's laws.
In ordinary times, you're in kind of a hurry to lend out the balance of that. So we'll call it 10 percent. I come in with $1,000. You've gotta keep $100 under the rules. But now you're ready to lend out $900. So what do we look like?  Well, excess reserves at banks at the end of September were $823 billion. You know what they were a year ago? $2.4 billion. And the year before that it was $1.4 billion. Now that tells me that either banks are so worried about lending that they've virtually stopped and they're holding on to all the money they can or that it's a combination of banks worried about risk and people saying, 'I'm worried about borrowing. I don't know if I wanna get in debt.' So without that liquidity, it's gonna be tough to get back to the old normal.

On the velocity of money:

Yeah. But here's where it gets dangerous. The good news out of the bad news is because that money has no velocity, we have no inflation. And the Fed talks about taking away the punchbowl. Now once that money gets velocity, once it gets lent or spent, then you can have inflationary pressures build. If I fly over Bob Pisani's house and I drop a trillion dollars in green pictures of dead presidents down on his lawn and he's so nervous he picks it up and puts it in his garage, that's no inflation. Nothing's really happened. But when he starts to spend it or if he starts to lend it, then money's got what they call velocity. And inflation could explode suddenly. No sign of it now, no sign of a great fear, although there's a new debate in the fed, but no sign of it now.

On the stock market bubble:

When you get phases like this…if you remember the dot com bubble, you had to be in. You went to cocktail party. We talk about fear and greed and supposedly the fear of losing money. Let me tell you, in doing this nearly 50 years, one of the most powerful fears and motivators of people in Wall Street is the fear of being thought stupid. When you go to that cocktail party and they say, 'Hey Bob, you playin' this rally? You're really long?' [You think] 'No, I'm kind of skeptical about it' and you think you're gonna be the butt of jokes. People actually risk money not to be thought stupid.

On the dollar:

Well, it's a very complicated topic in two ways. Ordinarily, if you looked at it as a stand-alone currency, you might say, 'really, I don't mind a weak dollar. I don't want it to be disorderly weak. If it's gonna drift down a little, let it drift down. That will make my products cheaper overseas.'  But the complicating factor here is we have the unseen elephant in the room. And that's China, because as cheap as the dollar gets, they're pegged to the dollar. So if you're Japan or if you're India or if you're Europe, you say, look, the dollar's killing us two ways. Number one, it's making American goods cheap. But it's making Chinese goods far more cheap. Therefore, they're very concerned. And this, I don't think, will continue in an orderly fashion, this benign neglect will not work.

On Chinese growth and the massive fraud driving the economy:

China is very perplexing because it's not just your debate about what do we know about the Chinese banking numbers. What do we know about the Chinese numbers as a whole? There is a great deal of cynicism about how valid some of these numbers are. The feeling is in the regional districts, they don't want to look bad in front of the powers that be. So if they're supposed to come in with certain numbers, those numbers come in. This has the potential to be Enron-esque on a national level. Is it so? I hope not. But I will tell you there are enough people around looking and saying this number doesn't actually add up with that. I mean, Japan is no slouch. But they're not showing exporting at anywhere near the level that China's showing. So there's an inconsistency in the region as to what's going on.

On buy and hold:

Buy and hold is dead if you're talking about buy and hold autopilot. At the same time, people shouldn't be in churning. You don't want those day trading days that we saw with the dot com bubble. People who were wiring for cable companies were said to be trading stocks in the back of the truck when they had a little room to go. What you wanna do is think of your portfolio somewhat like your car. It's not suddenly gonna flip in a day or a week. But you are gonna bring it in for check-up and service on a regular basis. So once you get a portfolio that suits you, you gotta go back to an advisor who you trust and say, okay, let's review where we stand. Is this still true about this industry? Is this so? And you have to work with that. I've had this happen to me a couple of times before. But I've managed to last 50 years in the business. And I will tell you this, there is nothing more painful -- ideologically and psychologically -- than being at a banquet thinking that the food is tainted and watching everybody else have a grand old time. It can be a little tough. But if you have strong suspicions about the food, you may feel better than they do in a day or so.

And much more. Must see clip:

 

 

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Fri, 10/23/2009 - 09:34 | 108088 Cognitive Dissonance
Cognitive Dissonance's picture

Art Cashin shooting from the hip is always informative and entertaining. I've been doing this for 20 years and I still listen to every single word he has to say.

He's one of those rare individuals who has enough self confidence and integrity that he will speak what he thinks is the truth rather than join the crowd in order to be liked and accepted.

I just wish I could join him for a few hours of private conversation after he's marinated a few ice cubes. Now that would be interesting.

 

Fri, 10/23/2009 - 09:52 | 108103 Screwball
Screwball's picture

I just wish I could join him for a few hours of private conversation after he's marinated a few ice cubes. Now that would be interesting.

I have often thought the same thing.  A few times when he was talking to Mark Haines (I like Mark most of the time, but he has drank a bit too much cool aid) and I thought; imagine all the stories those two could tell.  They witnessed the bubbles, but busts, 9/11, the scandals and perp walks.  They have seen it all, and one can only imagine what they can't tell. It would be an incredible read.

Fri, 10/23/2009 - 10:12 | 108119 Cognitive Dissonance
Cognitive Dissonance's picture

Mark Haines has shown potential at times but then flares out. Haines was trained as a lawyer and is thus a creature of the system. We must always remember a fundamental truth about being a creature of the system.

While the creature can push and pull at the system, they can never participate in its destruction because their own credibility, lively hood and ultimately their view of their own self worth is intimately tied to a functioning and valued system.

In fact, most creatures of the system will fight to protect the system even when they know in their hearts and minds it's wrong. It's almost impossible for a highly intelligent, highly educated cog of the system to participate in what to them would be a suicide of their ego and id.

I'll leave it at that but I have much to say on this subject. It really does point to why so many people can fully understand the fundamental and ultimately self destructive problems of a system, group, society or culture and yet not only do nothing to stop it but actually help it more forward towards it's inevitable implosion.

Fri, 10/23/2009 - 10:13 | 108122 Screwball
Screwball's picture

Understood.  At times I think Mark is brilliant.  Other times I just cringe and say; what the ****?

It's even worse I have admitted to watching the the most horrible business channel on TV.  Shame on me.

Well said though CD.

Fri, 10/23/2009 - 10:31 | 108129 Cognitive Dissonance
Cognitive Dissonance's picture

I almost feel a guilty pleasure when watching CNBC. I have it running on my desk top computer (volume off, one can only take so much) during my work day so I can watch what the crazies are talking about.

It's almost like driving (way too) slowly by a horrible car crash. As much as we would never admit it in polite company and even to ourselves, we almost need to see confirmation of how horrible the accident was, such as a severed head suddenly falling out of the shattered car as a rescue worker yanks open a jammed door.

See, I knew it was bad.

Same thing with CNBC. I tune in as much to hear Rick Santelli beat up on Steve Liesman as I do to watch MCC and Beaker spout idiotic circular logic back and forth in an out-of-control nuclear reactor that just lost its cooling water and is about to melt down.

 

Fri, 10/23/2009 - 10:28 | 108132 deadhead
deadhead's picture

I swear a few days ago when haines was doing the morning schtick with Art, I thought Art was going to clock him. I could see Art biting his tongue and he walked away as fast as he could as the interview was ending.

Art, do us all a favor and write a book.

Fri, 10/23/2009 - 11:17 | 108192 Screwball
Screwball's picture

Great idea DH, Art's book would be a must buy.

Yea, CNBC, is like watching the car wreck.  You almost HAVE to because you don't want to miss the next ridiculous thing they do or say.  MCC and Beaker are always good for pegging the stupid meter.

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Sun, 10/25/2009 - 12:58 | 110036 Lux Fiat
Lux Fiat's picture

Wow.  This one is still resonating several days later. 

I think that this gets at the heart of why foreign media and observers did a much better job of calling the current morass.  The train wreck was there for all to see.  But you had to have your eyes open.  And then not stand there frozen and transfixed.

JR Nyquist had some interesting comments in a recent post.  " Without order, society doesn't cohere. Instead, it flies apart, breaks up, and disintegrates. And, I would argue, a process of disintegration has been underway in the United States for many years. The breakup of the American order has been masked by American prosperity, which has continued throughout the process of social disintegration. To a very great extent, the financial crisis we are experiencing today is no ordinary economic downturn...Most citizens of the Republic do not realize that a breakdown has already occurred. But many are troubled."

Would be very interested in what else you have to say in this area.

Fri, 10/23/2009 - 17:02 | 108656 Anonymous
Anonymous's picture

agreed

Fri, 10/23/2009 - 17:04 | 108659 Anonymous
Anonymous's picture

agreed

Fri, 10/23/2009 - 09:32 | 108089 BetterOffDead
BetterOffDead's picture

"People actually risk money not to be thought stupid."

-so true

Fri, 10/23/2009 - 10:09 | 108117 Daedal
Daedal's picture

That's also the short-sighted philosophy of Helicopter Ben.

Fri, 10/23/2009 - 10:27 | 108131 BetterOffDead
BetterOffDead's picture

Very good point - it's probably his only motivation.  If he were to sit on his hands though, he'd be run out of the country.

Fri, 10/23/2009 - 11:39 | 108234 ghostfaceinvestah
ghostfaceinvestah's picture

Plus, pretty easy when it is someone else's money.

Fri, 10/23/2009 - 09:36 | 108094 LoneStarHog
LoneStarHog's picture

Hey, Art, if you really want me to take you seriously, then ADMIT that the U.S. Government (PPT) is MANIPULATING THE MARKETS! (e.g. Buying Futures)

You continually REFUSE to address this and POO-POO people when it is suggested on CNBS!

Old Motto:  America! Love It Or Leave It!

New Motto:  Grow A Damn Pair!

Fri, 10/23/2009 - 09:45 | 108101 Cognitive Dissonance
Cognitive Dissonance's picture

You bring up an interesting point.

In the short term, credibility is determined by the listener. If Art were to say "the U.S. Government (PPT) is MANIPULATING THE MARKETS! (e.g. Buying Futures) "he would be in the minority of people publicly saying so on TV or in any other form of widely distributed mainstream media.

Speaking the truth in this case would diminish his credibility among the only people who count as far as he is concerned, his employer and his clients/customers.

Art walks a fine line. We forget that he is not paid by his employer to speak the truth but to spout the company line. He is paid to say what he is told to say. Despite these limitations, Art does manage to speak quite frankly.

Fri, 10/23/2009 - 12:49 | 108324 Anonymous
Anonymous's picture

That's not the PPT...it's the banks
who got the money from Ben.
Same difference? Oh well....

Fri, 10/23/2009 - 09:41 | 108097 rhinotrader
rhinotrader's picture

CD, I agree, Art is the best in the business and I get some comfort being short knowing I feel like him. Been some frustrating months where everyone (who, I don't know) is buying.

Fri, 10/23/2009 - 09:42 | 108098 SWRichmond
SWRichmond's picture

If I fly over Bob Pisani's house and I drop a trillion dollars in green pictures of dead presidents down on his lawn and he's so nervous he picks it up and puts it in his garage, that's no inflation. Nothing's really happened. But when he starts to spend it or if he starts to lend it, then money's got what they call velocity.

This assertion is made constantly wrt money "supply", and it is patently false.  Mere knowledge of an increase in the available quantity of something affects its price, both immediately and in an ongoing manner.  What would happen to the price of wheat, should a huge new previously unknown supply of it be discovered, that could be released into the market at any time desired by the holder?

Think, for Christ's sake.

Fri, 10/23/2009 - 11:36 | 108230 Anonymous
Anonymous's picture

Sorry, you're wrong. Your assumption is that we all must assume that the banks can release that money for lending and thus push it through the system. With the toxic assets on their books and God knows what other kinds of derivative exposure, it's very doubtful that they could lend it even if there was a demand for it.

Knowing the $ is there does not equate (necessarily) to an ability to be loaned.

Fri, 10/23/2009 - 11:42 | 108238 Oso
Oso's picture

What he said is not inconsistent with what you are saying.  The supply of dollars has increased tremendously, which is why DXY keeps getting pummelled.  In this case, dollar = wheat.  now, if u went and spent that wheat, then the price of other things would rise.

 

there is no inflation in the real world.  WMT announced more discounting yesterday.  home prices continue downward, wages are not rising, and the price of most goods (having been manufactured in China), are not rising either, they re dropping! even food prices are dropping, im paying less at the hotbar at whole foods.

Fri, 10/23/2009 - 09:44 | 108100 Overpowered By Funk
Overpowered By Funk's picture

He's been around the block a few times, and has forgotten more about the equity markets than most of his peers will ever know. The average investor would do well to listen to Art every so often.

Fri, 10/23/2009 - 09:49 | 108102 Miyagi_san
Miyagi_san's picture

Art had a good run, but he's a realist in an absurd den of thieves. CD had it right

Fri, 10/23/2009 - 09:55 | 108108 Anonymous
Anonymous's picture

i can compliment cashin for being exceptionally articulate in his ability to explain complex topics with great clarity....

however, i don't buy his theories about why the stock market has done well....or that the banks are going to apply the goldilocks test for lending to get rid of all of their excess reserves.....

it may be that bernquacke is trying to build up dollar reserves as a counterweight against the chinese reserves....or my pet theory that they are part of a master plan at banking consolidation....or the banks will stand ready to buy treasuries as part of a non-existent qe exit strategy.....

Fri, 10/23/2009 - 09:58 | 108110 Anonymous
Anonymous's picture

all i hear from Art every week is - "this week will be very important" or "we are at very important resistnace levels". All the way from 850 to 1100. He never offers any real advice - just good stories that you would want to hear from grandpa. His daily column on UBS is very entertaining with all the "on the same day 100 years ago" but thats all, just entertaining no real investment value. Get off my screen, Art!

Fri, 10/23/2009 - 10:03 | 108112 Anonymous
Anonymous's picture

There is not a great deal of value in having 50 years experience in something that no longer exists.

That market no longer exists. It was based on a world with infinite oil and trading that did not occur 100 times in < 1 second.

I am confident he has zero knowledge about the programming on those computers. There is enormous danger in thinking that experience has value in the world of today. The French behind their Maginot Line were confident in the value of their experience building it.

Fri, 10/23/2009 - 10:44 | 108154 Anonymous
Anonymous's picture

there is a lot more to investing and understanding
markets than knowing about the programming on
the computers - much more...

and i also think that someone who has survived
this long as a trader has kept abreast of market
developments...

your maginot line analogy is entirely without
merit....

while i may not agree with him on all points
i hardly think that he merits relegations
simply due to his longevity...

Fri, 10/23/2009 - 10:06 | 108113 Anonymous
Anonymous's picture

Cash In? Its an Art.

Fri, 10/23/2009 - 10:08 | 108114 Bearish Spirits
Bearish Spirits's picture

Wow, looks like we're having a little "sell the news" event going on right now with existing home sales.  For Sept., up ~9% or so.  Maybe people aren't happy the median price is now $175,000.

Fri, 10/23/2009 - 10:10 | 108116 CharlesBronson
CharlesBronson's picture

Cash In? Its still an Art.

Fri, 10/23/2009 - 10:12 | 108121 Anonymous
Anonymous's picture

In the HFT business, UBS was often quoted by ZH to shoulder the SPY futures should I remenber well?
In an interview at CNBC this same gentleman was expecting a big down day at Ramadan time if I remenber well?
What a swamp!

Fri, 10/23/2009 - 10:22 | 108126 Rainman
Rainman's picture

My favorite Cashin-ism was during the March lows.

" The Street can't figure out when the next shoe will drop or whether Imelda Marcos' closet will open up and a thousand shoes will fall out ".

A classic.

Fri, 10/23/2009 - 10:26 | 108130 Anonymous
Anonymous's picture

Im really surprised that Art left out the most important point in the second paragraph on excess reserves.
That the undisclosed toxic assets still on the books may exceed the reserves!!!

Fri, 10/23/2009 - 11:41 | 108236 ghostfaceinvestah
ghostfaceinvestah's picture

Bingo!

If those SIVs ever come on balance sheet...

Fri, 10/23/2009 - 10:48 | 108158 Anonymous
Anonymous's picture

I am not impressed. The usual gobbledygook from Cashin. "Clunkers good, housing credit good", until it is taken away and the sales crash, Art. Giving speed to the cancer patient is not really "good" at all, from a long term perspective.

Fri, 10/23/2009 - 11:52 | 108245 crzyhun
crzyhun's picture

Art is true blue...as one who has seen him since the 80's. A rare breed.

 

Fri, 10/23/2009 - 12:46 | 108318 Careless Whisper
Careless Whisper's picture

Props to cnbc for that interview.

Fri, 10/23/2009 - 13:11 | 108355 TumblingDice
TumblingDice's picture

wise fellow this Art is.

Fri, 10/23/2009 - 15:01 | 108492 gossamer
gossamer's picture

Art is one of the very few reasons to I tune into CNBS.  He is the real deal.  Traders edge at about 5 til 9am gets me tuned in.

Another reason I watch CNBS is to get a laugh. Haines is such a tool, he talks the line he's paid to. The Washington/Wall St. corporate line(all is well in Pleasantville) gets a chuckle out of me every time.  We can at least feel warm and cozy while Pleasantville is turning into Peasantville.

Fri, 10/23/2009 - 16:31 | 108596 phaesed
phaesed's picture

You have to hand it to this man, there's a reason to listen to the man who's lasted longer than any other on the floor.

Fri, 10/23/2009 - 22:34 | 109088 Sqworl
Sqworl's picture

GE got Tarp, no pay cuffs there!  keep watching cnbc horror show!  Its all BS, I liked it when Mark was drunk on air...

Fri, 10/23/2009 - 23:42 | 109160 Anonymous
Anonymous's picture

Art Cashin extended interview...he's been around a long time and he's seen it all...and he is wise.

I do believe the only reason he would sit down for a formal interview - i've never seen him do it before -- is that we wants to be on the record for warning anyone who listens or trusts his opinion -- to think hard about what's to come.....

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