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"It Feels Like 1997" Warns Art Cashin, "Watch High Yield"
Submitted by Christopher Gisiger via Finanz Und Wirtschaft,
Wall Street veteran Art Cashin warns of a currency war among emerging nations similar to the Asian financial crisis in the late Nineties. He doubts that the Federal Reserve will be able to raise interest rates this year.
Financial markets around the globe are panicking. After a wild ride on Monday, US stocks closed another 4% lower. Since the record high of May they’ve lost over 10% and are now officially in correction mode. The last time stocks dropped that much was four years ago. Everything depends now on China, thinks Art Cashin. The director of floor operations for UBS at the New York Stock Exchange and highly respected Wall Street Veteran compares today’s situation with the Asian financial crisis of 1997. He severely doubts that the Federal Reserve will be able to raise interest rates in this environment.
Mr. Cashin, the global stock markets are in turmoil. What’s going on on the trading floor at the New York Stock Exchange?
On Monday morning, traders were looking at two aspects in the opening. One concern was that sellers from other markets, perhaps from Europe and from Asia, with their markets down significantly more than ours, decided to raise money over here. That’s because when you can’t sell what you want, you sell whatever you can.
And what was the second aspect?
In recent weeks, mutual funds in the United States had the lowest percentage amount of cash in history. So when you had a negative week like last week that might get some people concerned. They go for redemptions, trying to get their money out. But if a fund does not have that money handy because of the low amount of cash, it then has to sell stock to raise money.
Why is that concerning?
It becomes a self reinforcing problem: The more the redemptions come in, the more the funds have to sell stocks and the more the market looks weak causing even more redemptions. So the key thing is now what happens in China.
What are your thoughts on China?
There were two surprises: Number one, there was a great believe over the weekend that the People’s Bank of China was going to move in to try to provide some economic stimulus and get things moving. Then there was also an expectation that if the Chinese stock market shows weakness that the government would come in and buy securities as they have done in the recent past. Neither one of those things happened. And that was a double shock to markets everywhere. People said: «Woah, wait a minute! This could turn into free fall if they’re not going to try and protect their markets.»
Is the situation in China out of control?
It’s not necessarily out of control yet. But if they don’t provide some stability pretty soon it will begin to affect not only the markets over there, but – as we saw today and somewhat last week – it affects markets all around the world. Financial markets are correlated. We learned that back in 2008 when the fall of Lehman spread all around the globe.
During your career on Wall Street, you’ve seen many stock market corrections. How severe is the situation right now?
It resembles the situation during the Asian financial crisis in 1997 and 1998. That is part of the concern that is developing here: It’s not only China. China’s move toward a devaluation began to spark emerging countries into freeing up their currencies or to devaluing them. And that’s the equivalent of a currency war among the emerging nations.
Another scary development is the crash in energy markets. On Monday, the price of WTI oil dropped temporarily below 38 $. How does that affect the stock market?
People keep talking that cheap oil means more money to spend. But we’re not seeing that at all. I think that the weakening of the oil price is counter-beneficial: Here in the United States, a lot of the employment that we picked up after the recession came from energy related areas like fracking. And now they’re certainly not employing any extra people and in some cases they’re laying off. Also, as oil is going down it is putting more pressure on stocks. You see the big oil companies trading lower and they're all prominently represented in different stock market averages.
Way down are also the shares of investor darling Apple. How concerned are you about the bear market in Apple?
Apple is the most capitalized stock in the world. That’s why they use to say: «As Apple goes, so goes the nation». The stock has been down almost since the day they put it in the Dow Jones Industrial. That’s kind of an irony. Some people in the trading community are beginning to go beyond the idea that iPhone sales in China are slowing or not growing as fast as they hoped. And there is some concern about new local competitors like Xiaomi. And that’s a whole new thought: People hadn’t thought of true competition for Apple and that’s one of the things that’s beginning to weigh on the stock price.
Everyone is looking at the Fed now. Do you think they’re going to raise interest rates despite the panic attack in the financial markets?
I have said all along that I did not believe that they would hike rates this year. As much as they want to hike rates, they have a problem in that the IMF and the World Bank asked them not to raise interest rates. That raises the bar a great deal because if they raise the Federal Funds Rate despite those warnings and something happens they would lose their credibility. People would say: «Hey! You have been warned about this and you went ahead anyway. Now, look what’s going on.» That would be a great loss of credibility.
But doesn’t it hurt the credibility of the Fed too, when it gives in to market pressures and thereby looks like it’s susceptible to blackmail?
Vice-Chair Stanley Fischer will be speaking later this week at the Jackson Hole conference. I think he will be addressing the problem of inflation and that it’s not growing in the pace they want it. That will give the world a hint that the Fed is not quite ready to raise interest rates.
What are the signals you are looking for to stay on top in such a market?
I continue to monitor the high yield market and see where that goes. The high yield market has been of some concern of the last several weeks. If that begins to show appreciable weakness than I would think the caution flags stay up.
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Yellen raises interest rate soon.
Mr. Cashin, the global stock markets are in turmoil. What’s going on on the trading floor at the New York Stock Exchange?
"Welll not much besides clueless CNBC idiots talking bullish because as you know, we don't trade on the NYSE floor anymore."
Once the algos start realizing that they can achieve more with the markets on the downside (by making money, becoming sentient, causing fear), more so than the last few years of when the markets are only elevating to the upside, they will emotionlessly turn on their human owners and make this house of cards their own.
No wonder people like Art Cashin are disgusted at what this market has become. You could tell by the way he responded to Bob Pom Pom Pisani yesterday at the close.
This time is much worse, for the entire economy
Layoff / Closing List: http://www.dailyjobcuts.com
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Just the beginning.
A fictional society, economy, monetary system and underlying markets can only be held up by propaganda for so long.
The fallout will be breathtaking.
Buy your put options!!... Get your put options cheap!!! ... Get them while you can... [balances on soap box] This suckers rally is going to last maybe a week and a half..
This is nothing like 1997. '97 had huge demographic tailwinds for the US and the globe representing a giant, growing, young sponge that could absorb massive quantities of credit / debt. 1997 represented an overvalued market but there was huge continued econmic growth and upside plainly visible at the time.
Now, population growth is declining and many places outright shrinking. The liquidating old dominate net popultion growth...the sponge is entirely soaked...and rates at ZIRP. There is nothing under this market but CB tricks and fraud.
Look at the charts in the link to see top 12 populations change from 1997 til now...
http://econimica.blogspot.com/2015/08/slowing-engines-of-growth-examinedor.html
The fictional parts also include the shape of the Earth. It's flat: http://ifers.boards.net is a good forum for researchers, and an excellent book "Zetetic Astronomy" can be read in its entirety here: http://www.sacred-texts.com/earth/za/za00.htm
Your comment is so left field, you should leave us alone.
Just because you're not mature enough to receive the information yet is no reason to be divisive.
~"He doubts that the Federal Reserve will be able to raise interest rates this year."~
The Fed isn't going to raise interests rates this year or any other. They can't. They're stuck. Raising rates will kill the USD. The funny bit is, (if your humor runs to the macabre), is that not raising rates will kill the USD.
Go long rope and short nooses and pick your lamp posts now. It's going to get crowded.
Actually, raising interest rates will kill the US budget. Thanks Obama for that extra $10 trillion. It is being paid by savers and retirees.
"Pom Pom Pisani" hahahahahahaha You sir, have made my day with that.
on a duller note...ZH has published a few articles on collapsing shipping costs. Even..unprecidented collapses in container pricing. This isn't China's fault!! Demand around the globe is sliding into some abyss. So, if demand around the globe is sliding into some hadean realm....why do we keep hearing that it all depends on China...when China depends on it's export market?
One could argue that it is China's fault for a couple of reasons--
1) Overbuilding of container ships. No doubt many of which came from Chinese shipyards.
2) Producing simulated products that look like the real thing but fail immediately and thus decrease demand for selfsame products as pissed-off consumers wise up to what the "Made in China" label really means.
But I do agree that China is massively dependent on its export market and is witnessing it go poof-- along with the illusion of 7% annual growth. The money to buy the overseas commodities necessary to build the next round of ghost cities has to come from someplace real. And Realville isn't charging forward with purchases of Chinese products at the level necessary to produce the capital required for such a scheme.
Matt Miller on Bloomberg TV just asked a question quoting Zerohedge and asked Liz Ann Sanders of Charles Schwab whether HFT makes things worse and if she agrees with ZH....? :)
The NYSE floor is the curtain in front of the Wizard of Oz machines.
Art- cash-OUT already ! Idiot shill calling for a rescue, GFY ! RIP
Ahhhh Yes! Nothing like the calming sound of fan motors at a server farm!!!!!!
When does Sky Net go live again?
She will. It's getting priced in as we speak.
Financial Markets are correlated.
no shit......................sherlock!
Im always underwhelmed by Mr Cashin
BTW Cashin, its not 1997. Asia and Russia are the prime creditors of the world. Not the debtors. Its diffrent like night is to day
Thats ol' 'spats' Cashin for ya, ..mutherfukker is so old, he has a rotary cell phone...only 3 digits on his SS number too...this old bastards favorite song is 'Putting on the Ritz'...damn guy tried to use his buggy whip as a USB cable the other day...
Well at least he isn't too old to call bullshit.
He'd probably clean your clock like a real man.
lol
Geez, you just can't catch a break anywhere, can you?
dUPE
Another dupe!
So a group of countries will pledge a few billions to fix a problem from a few few fuck ups and then the world embarks on a 3 year epic bull market? Ohhhh, I'm soooooo scared. You take your nap old man!
Support? Isn't that code for Print money QE to infinity?
"It feels like 1997"... Really?...
Say that one more time Art... Cause I really want to believe this is 1997 and not 2015!!!
Can we go back to 1997 and start over?
1913 would be better.
I wasn't alive then.
Exactly.
1913 would be better.
Beggars can't be choosers!...
Another "Terminator" reference? I think so.
If we could go back in time and terminate the promotors of both the Federal Reserve and Internal Revenue code?
The possibilities might be limitless by now. But of course, there is human nature...........
1907 would be a better year to start from. 6 years to stop Dec 23rd 1913...
last 30 minutes of trading in London the Dow moved 200 points to move plus 400....
on volume nowhere close to yesterdays....
the bullshit is so fucking obvious......
any Joe Blow or Mary Dumbass who has any savings in this shit show is a fucking moron....
any Joe Blow or Mary Dumbass who has any savings in this shit show is unbalanced and unethical that suffers from OCD fucking moron....
Fixed it for ya!
Art has been at the markets so long he just can't say it's his heroin addiction addled Grandson.
C'mon Art - loss of credibility for the FED if they raise rates!?!? Oy vey.
"If central banks purchase stocks in order to support equity prices, what is the point of having a stock market? The central bank’s ability to create money to support stock prices negates the price discovery function of the stock market."
-Dr. Paul Criag Roberts
Thanks Goat Sucker.
The things I do for the rest of you:
http://www.paulcraigroberts.org/2015/08/23/central-banks-become-corrupti...
A bear talks turkey :
http://uk.businessinsider.com/gerard-minack-says-bigger-crash-could-come...
I'll be willing to bet dimes to donuts that we see Apple's iPad sales start to drop off a cliff. Once a person has one or two in the house there is really no need to upgrade. Ours just sit around and collect dust for the most part. The kids grab them evrty once in a while but the novelty has worn off. The only people who will upgrade are the fan boys, everybody else is bored with them.
I hear they are nuticious with a little grey poupon on them.
A quick check on used iPad prices at ebay does not support your theory.
You mean the fact that the same iPad I bought for $400 last year for my wife on Ebay will not even net me $200 now doesn't supoort my theory? I beg to differ.
edit: Shit, upon deeper examination, I can get one for under $150.
I have only looked at full sized Retina iPads and the used prices are surprisingly high, IMO.
That's because of that capital "R" in the name.
Right up there with "Corinthian Leather."
2 iPads, no house. Searching the streets for unencrypted WiFi access.
They did not have HFT computers in 1997. Now the US can control every market using HFT. Citadel, the unofficial arm of the Fed, has been banned from trading in China. Did it play a role in the collapse of the Chinese markets?
There has been no significant correction in US markets for the last four years due to total control of markets by the Fed.
The infinite spying by the NSA, especially economic spying, helps the US control every market.
Forward to more fraud.
You're wrong, the first trading algos were actually written back in the 1960's and
used by the Harvard endowment fund..
Its the sheer deployment thats different now, and the competition to get any edge means
corners are cut.
What percent of trading was done by algos in 1997? Could the Fed sell $2.7 billion worth of gold in a nanoscond to control gold prices in 1997?
In 2012, 84% of all trades were handled by computers. The control of markets by the Fed has steadily increased as HFT as increased.
84% of All Stock Trades Are By High-Frequency Computers … Only 16% Are Done By Human Traders04/26/2012
As of 2010, 50-70% of all stock trades were done by high frequency trading computer algorithms.
http://www.zerohedge.com/contributed/2012-17-26/84-all-stock-trades-are-...
Maybe not HFT, but LTCM. Hmmm...what happened with them in 1998...
I'm curious how much "support" was printed the last 27 hours?
"how much "support" was printed the last 27 hours?"
Does not matter if the "support" does not get to the consumer. The consumer died an early death with O Care.
blah blah blah. Mr. Fed, save us! blah blah blah.
I, for one, will not be shedding a single tear when the pawns and pets of the 1% are dragged through the streets.
CBs everywhere were helpless and useless in 1997, 2000, 2007 (heck, even 1991).
tick tock. tick tock. living inside a broken clock.
Zero fucks will be given.
Cramer is Sooo much more fun to watch rather than this sober ass clown and he's available on weekends for your kids b-day party (don't trust him alone with your child though).
Wow..he sounds very serious...he knows the big picture and so he is sharing a few tidbits with us...you know he wants to cover our backs with some keen insights into the market..his picture looks very serious also...I guess we must be careful...
http://www.factset.com/websitefiles/PDFs/hedgefund_ownership/hedgefund_o...
How high will apple go this week {from where it is now}?
forget the fanboyism as well as the over the top zh bashing
the hedge funds have to back stop apple more than any other tech stock
particularly, I'll venture to say, those with shorter WAM.
surprised to see some dumping baidu. seems myopic.
Jews must be destroyed? Talk about fanboyism.
your Latin needs work {Iudaeorum}
I'm 1/4 myself.
And that's the last rejoinder you'll get from me.
I consider you a Jewish Supremacist troll, which is one thing.
But you're also obtuse, predictable, and boring.
Which is another.
'It feels like 1997 again"...that was 18 years ago...hell...I don't even remember my feelings 18 years ago..much less where I was...oh yea I remember now...I was making a kid with my wife...yea that was a terrible year...
As much as they want to hike rates, they have a problem in that the IMF and the World Bank asked them not to raise interest rates. That raises the bar a great deal because if they raise the Federal Funds Rate despite those warnings and something happens they would lose their credibility. People would say: «Hey! You have been warned about this and you went ahead anyway. Now, look what’s going on.» That would be a great loss of credibility.
Possibly the stupidist fucking thing anybody has ever said about FED credibility EVER. Art is an ass hat. If you have to talk out of both sides of your mouth, then just STFU. The FED lost all credibility when it violated its own 6.5% and 2%, unemployment and inflation targets months and months ago. The FED is clearly only one thing: data dependent.
You guys remember when (just before the election), the August unemployment rate came in at 8.1 and the market was expecting 8.6%, or something like that, and Art had big fucking temper tantrum on twitter? Now - he's drinking the fucking cool-aid too.
Fuck you Art Cashin
"And that’s a whole new thought: People hadn’t thought"
Pretty much sums up Q3 2011 on.
Sum good news:
House GOP leaders are eyeing a package of healthcare bills this fall that will target some of the most despised taxes under the Affordable Care Act.
Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Committee's Health Subcommittee, said he expects a comprehensive bill repealing healthcare taxes to be ready sometime after lawmakers return from recess.
“We’re going to continue to focus on ObamaCare implementation, but we're also looking at a number of the tax provisions that need to be repealed,” Brady said in an interview on Monday.
http://thehill.com/policy/healthcare/251839-house-gop-adds-healthcare-ta...
good news is it getting rightfully declared unconstitutional, along with the federal reserve
The chance of either of those happening are even lower than zero.
Isn't the definition of "insanity" repeating the same action, but expecting a different outcome?
Everyone in China knows the stock markets are little more than a crafty sham, but it has all been justified in the same way post-Soviet Russia created its oligarchs - China needed its own brand of billionaires and petty regional millionaires - a million millionaires
It's nearly a perfect storm for senior Chinese leadership to step away from failed Japanese, US and European doctrines of Central Banks propping up fake stock prices, real estate bubbles and unpayable government debts.
No doubt China is no different with its malinvestment, ghost cities, yada yada.
But the question is does (when) China break from all the bad practices that it inherited from the West?
Do they even try?
Maybe its juvenile to speak of the Spirit of Bandung again, but some political force in the world has to stand up for markets, human ingenuity, a non-Orwellian state of constant war and even a level playing field for everyman.
China built its culture on being master-traders, not mercantilism.
Hard to believe it's China, but maybe that is how far down the rat-hole we are.
For all the hardliners, just make a few public statements about UST being unpayable and divest. Between fixed income interest rates and bankrupt US pension funds (namely half of all cities and counties) China lights the match to a long fuse the Federal Reserve fashioned. The bigger the Fed balance sheet grows the more illegitimate US hegemony becomes - which is measured in aircraft carriers off your coast. Maybe by 2017 a new global currency paradigm will be needed, but how to deal yourself into that negotiation.
China can develop its own interior using the same debt strategy for Africa and the IMF. It does not need sell one item to Walmart to keep the country moving. Will there be pain. Sure. But when has China not known suffering and still survived?
Isn't the definition of "insanity" repeating the same action, but expecting a different outcome?
Classically speaking, yes, unfortunately the comment was in a relativistic context, therefore it is one of the dumbest things ever said by that person.
My definition is doing the same thing over and over expecting the SAME result
Like repeatedly striking a tree with an axe and being surprised when the tree falls down?
no the definition of insanity is doint the same thing over and over again (reflating bubbles) and expecting them to always work. the fed may launch qe4 but the outcome will be very different.
That chart looks like that because the Federal Reserve made it look that way.
The Federal Reserve brought this to life, and only the Federal Reserve can keep it alive.
I miss Mark Haines.
It was fun watching Art and Mark talk through the market bullshit.
It gave the markets some credibility and class.
It just ain't there anymore.
If you were in daycare in 1997, you better ask for help.
Why do all those traders on the floor of the Exchange have Swastikas.......................errrrr.. Amerkan flags on their arms?
It's a 911 thing.
Floor traders are patriots.
What does 911 have to do with patriotism? It was a criminal act. Not an act of war.
What does 911 have to do with patriotism? It was a criminal act. Not an act of war.
They are fucking asswipes and useless eaters.
Mr. Cashing Out explains why he expects fairy godmamas all over the world and beyond space to come to rescue him and Suze Orman. "They" is at fault.
"But if they don’t provide some stability pretty soon it will begin to affect not only the markets over there, but – as we saw today and somewhat last week – it affects markets all around the world."
"We have seen the enemy and they are us." Provide some stability. Check please.
Think ol Art is a bit long?
"87"
An audit of the Fed would say "Fuck you" better than if your momma had said it.
Fuck you, Cashin[in]!
The inflationists at the Fed created this problem a long, long time ago.
When does Apple get taken off the DOW?
"if they do not provide some stability pretty soon"
Okay! I was taught, and told, my whole life that capitalism is self correcting, and it will Price things where they should be valued. NOW, all I hear is INTERVENTION by central banks and government to do the above "Provide Stability". What they mean is "Fuck free markets! We want manipulation to sustain unreal valuations, so WE can get rich!"
Were the capitalists who told me that markets are free and self correcting just phoney liars? What they really want is government communism to sustain equity share prices for their benefit?
"INTERVENTION": thats what Central Planning is good at ( so they think)
YES. These days you trade with/against Gamekeepers turned Poachers. How can you expect a Control & Command system (China) who in the first place has not lied to markets on their DNA to embrace the dogma of free markets ? It is like asking the Cardinals to turn Atheists. I say trade not invest in deformed /rigged markets with collapsing price discoveries where values are just the targets/desires of the formidable Predators who own printing presses, etc. Sucking of liquidities across asset markets excaerbated by the recent blood baths of the carry traders viz China shall create even more volatilities leave alone all the Spins on interest rate hike. "Free markets" supported by real Regulators/Referees can only take place when the whole financial system becomes subservient to the Real Economy of Goods & Services that has also to be freed from the Control Freaks. Until then, this dogma only lies in the Economic History Tomes of the Ivory Towers.
The most dangerous bubble is in bonds. Mutual fund redemptions are scary for the equity markets; bond-fund redemptions will crush bonds like a paper cup. Remember bond funds are the "safe" option in most 401(k)s.
The death of the American consumer and Middle Class is all that matters now. No charts or money-printing will help this "market" over the next few years until the American consumer can breath again. And that won't happen until .gov is massively downsized.
Now there is a real conundrum.
The debt-backed monetary system has been supported in large part by mass consumerism, in a way that is eventually economically, environmentally, and energetically unsustainable. Allowing the suburban American consumer to "breathe" again will be impossible. Our economic structure will have to change radically to address the final collapse of debt-backed money.
.
Lol I am amazed by how many people are shocked by China's recent policy moves and are sensationalizing it. China's move to devalue was because other currencies were too low against it in the emerging world. Nothing shocking about it and people think there is going to be a new currency war. CNY actually gain far more value than what was devalued in recent years. A lot of hyberbole about China's devaluation.
As far as Chinese stock market, you must understand Chinese authorities replaced credit with equity and allowed more chinese people to own stocks, so naturally when masses open accounts and trade stocks, you get volatility. It would make no sense in trying to remove volatility with extravagant measures and treating it like a economic doomsday scenario. There is more pressing issues in China like slowing growth in general. Hence the reason for float devaluation. EMs more than happy to allow their currencies devalue in a floating manner to the downside.
Gosh thanks for that Captain Art Obvious
MY VERDICT: NO SEPTEMBER RATE HIKE
In a speech in March, Fed Chairwoman Janet Yellen said she wouldn’t feel comfortable raising short-term interest rates if core consumer-price inflation were to weaken.
Mont-over-month the core CPI ticked up 0.1% last month after rising 0.2% in June. Year-over-year core CPI Index (ex Food and Energy) was up 1.8% from July 2014 but over the past three months, core prices also climbed at a 1.8% annualized rate.
This was the fourth time in 5 months the 12-month change was 1.8%. And that’s down from a 2.6% annualized increase in the three months ended April, signaling emerging price pressures have subsided with the dollar strengthening recently putting renewed downward pressure on import prices. And a 0.4% advance in the shelter index was the main contributor to the increase while the indexes for medical care and apparel also rose.
In contrast, the index for airline fares fell sharply, and the indexes for used cars and trucks, household furnishings and operations, and new vehicles all declined.
Core CPI has run below the Federal Reserve’s 2% objective for 38 straight months and ran at 1.3% from a year earlier for each of the first six months of the year. The core CPI declined 0.2% in the 12 months ended in April, the biggest year-to-year drop since October 2009.
The energy index continues to show a 12-month decline, falling 14.8% over the past year while the food index increased 1.6% over the last 12 months but these are not included in FED’s core CPI.
Sources:
http://blogs.wsj.com/economics/2015/08/04/grand-central-signs-of-stabili...
http://www.bloomberg.com/news/articles/2015-08-19/fed-inflation-goal-bec...
http://www.bloomberg.com/news/articles/2015-05-22/core-u-s-consumer-pric...