King World News, Mr Cashin shares his views on the US equity market, Oil, Bonds, and pretty much everything in between. These are some of his main statements during the interview.
The market looks “tired” as the S&P 500 hovers around 1400. It looks like a consolidating phase. Traders are watching Europe as the EU credit problems are “reasserting” themselves. Primarily, yields on Spanish and Portuguese debt has been rising. Although nowhere near Greece, the widening of spreads between the two countries and Germany reveals that traders are once again becoming less comfortable with the EU’s financial health. Also, EU PMI data last week showed that economic growth was limited and the region will “perhaps” hit an overall recession soon.
Traders should keep their eyes on “money supply.” Currently, the FED has been printing new currency but it isn’t necessarily hitting the market. As such, unless the “velocity of money” (IE-money supply) rises, inflation won’t be an issue.
Also, Cashin believes the FED probably won’t utilize a full-fledged QE program but will apply a “tweaked” stimulus activity.
US Bond prices were lower last week as yields moved higher. Art Cashin’s view is that the current move has been triggered by the Chinese. His rationale is based on size of the selling which could only be done by a sovereign seller. Also, according to bond dealers, funds from sales weren’t reinvested in other assets but were being parked in cash.
Geo Politics isn’t being priced well in the market, and its Cashin’s biggest worry towards the trading markets. When asked what the market reaction to a war with Iran would be, Cashin answered that it would trigger a massive spike in Oil. Also, flight to safety could create a 1000 point drop in the Dow Jones.
For the complete audio interview, at King World News