"2015 Was Like Commuting By Rollercoaster" - Art Cashin Reviews The 2015 Market And Shares His 2016 Outlook

When it comes to the modern market, experienced, carbon-based traders such as UBS floor director Art Cashin (who have traded through not just one rate-hike cycle but several) seem like an anacrhonism from a bygone era: after all, we live in a day and age when "traders" are nanosecond collocated servers located in ultracooled New Jersey warehouses, where the only thing that matters is responding to flashing red headlines in the fastest way possible without much thought for what the underlying data actually means.

Which is why the opinion of someone precisely like Art Cashin is all the more relevant - he brings a sense of rationality to what only central-planners can call a "market."

To that end, as Art notes, "on Tuesday night, CNBC's Bob Pisani brought a crew over to Bobby Van's to tape our annual year-end interview while I marinated some ice cubes." Here are some highlights from Cashin's interview.

First, here is a quick take on what Cashin learned about 2015: "2015 was like commuting by rollercoaster. There were heart-stopping drops, there were nearly vertical ascents, and when it was all over you got off just about where you started and it cost you money. And not only was that true of the stock market, it was true of the yield on the 10 Year. The 10 Year is virtually where it began the year."

"One of the most difficult markets in 50 years"

Cashin continues, looking at the deplorable performance by the active trading community and how nothing made sense: "If you look at the record of the hedge funds this year, they would say "annus horribilis" a really rotten year. This has been one of the most difficult markets in 50 years because usually I have to spend time to figure out what action causes what reaction and how do things fit in, and in the past several weeks it really hasn't fit, sometimes things have come completely awry. You had for example non-farm payrolls came in perfectly, all the media pundits came out and said, 'Ok, the rate hike is a lock' and what happened that day - the yield on the 10 Year plummeted. So there are inconsistencies and I think that may be due to the fact that so many people are involved in the currency and carry trade."


On the ongoing profit recession, Cashin says that profit margins tend to regress to the mean and that may be a problem for 2016: "You have difficulty with the multinationals between the dollar and a variety of other problems. Competition, things are beginning to slow in China but I think there'll be pressure on profit margins and that will naturally lead to pressure on earnings. Revenues will continue to be a problem. Take a great company like IBM - they haven't seen a revenue increase in 5 years. This is a very difficult time and again the multinationals - we don't know what the dollar is going to do when the Fed hikes next week as they claim they will do."


Finally, here is Cashin's geopolitical outlook for 2016: "You could have attacks on the middle east and the oil supply and suddenly you can have a black swan event and that could disappear instantly. You've got millions of migrants moving into Europe, very, very expensive and that could also turn into a problem. Then lastly you have  the ISIS problem."

And on the potential geopolitical black swans in the coming year: "Brazil is trying to go through an impeachment process, that could be a wildcard. Equally so Venezuela where they've had recent elections - instead of worrying about energy companies going under, you might find an entire country going under. Venezuela might not be able to produce anything. I am quite worried about Europe that the extreme right wing is picking up on what happened in Paris. If that happens the whole Euro and the Eurozone could come apart.


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