"Things Could Theoretically Turn Into What I Call A Lehman Moment"
Courtesy of Finanz und Wirtschaft, interview by Christoph Gisiger
Wall Street veteran Art Cashin does not fully trust the record levels at the stock market and draws worrisome parallels between the geopolitical tensions over Ukraine and the Cuban missile crisis.
From the assassination of President Kennedy via the stock market crash of 1987 and the Fall of the Berlin Wall through to the burst of the dotcom bubble, the terror attacks of 9/11 and the collapse of Lehman Brothers: Art Cashin has experienced all the major world events of the last half century at the floor of the New York Stock Exchange. Currently, the highly respected Wall Street veteran keeps a close eye on the geopolitical tensions in the Middle East and on the situation in Ukraine which reminds him of the Cuban missile crisis «The markets are edgy and nervous», says the Director of Floor Operations for UBS Financial Services while constantly checking the quotation board. Like many traders here, he is somewhat skeptical of the huge stock market rally that started in March 2009. «I think it is a question of the extraordinarily low interest rates», he explains.
Mr. Cashin, September is historically the most difficult month of the year for equities. What is your take on September 2014 so far?
So what are traders talking about at the present time here at the New York Stock Exchange?
How do you handle these concerns in your daily business as stock market operator?
What are the signals you are looking for to stay on top in such a market?
And what are the risks monitors signaling?
So what is your take on those super low rates?
During your career on Wall Street, you have seen the coming and going of several Fed chiefs. How would you grade Janet Yellen so far?
With the end of QE3 and the return to a somewhat more traditional monetary policy, investors will likely put their focus more on the fundamentals like revenues, profit margins and earnings. In what shape is Corporate America?
On what side of this debate are the traders here on the floor at?
Also, some skeptics argue that you cannot trust this really since it is based on unusually low trading volumes. Especially at the end of August we have seen some of the lowest volume days over the past seven years.
How did the trading business change over the last few years in general?
In May of 2010, the Flash Crash made the world suddenly aware of what can happen when robots are in charge in the trading arenas. How vulnerable is the US stock market today to a similar threat?
I am, of course, prejudiced. I prefer the trading system that we have had through the years. Here on the floor, not one stock traded at a penny during the Flash Crash. That was only in the electronic markets. And that was because here were humans who looked at each other and said: «That does not make any sense. There is no news out, there is no event. Let’s slow down and see where things are going.» As a consequence, the prices here on the floor tended not to be distorted in a manner that they were in other places. So as far as market structure is concerned, I think it is very helpful to have humans around. I prefer that somebody is watching the market as trades are being executed – just as I would not want to fly in an airplane with no pilot.
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