The head of floor operations at UBS, who has followed the Dow since its triple digits days, and has been covering the market for the past 40 years, shares his ever amusing insights with Eric King. Art Cashin, whose daily comments on "napkin charting" and requisite market "nimbleness" are now legendary, and have appeared many times on the pages of Zero Hedge, discusses such matters as market topping, various levels of deterioration within the economy, the ongoing wage deflation, the shift of US society to a welfare state, the deflationary collapse of the economy, and the imminent response by the Fed: never one to mince words, Cashin observes with pinpoint accuracy "if you ask small businesses why aren't you borrowing, their answer is 'send me a customer, don't send me credit.'" and concludes "the Fed is walking a tightrope in a hurricane and it's going to be tough." We just found the understatement of the weekend.
On the near-term market charting:
It certainly feels like it could be getting into a kind of topping mode.
On the economic headlines:
While we are seeing the headline numbers are pretty bad, behind the headlines there are some equally disturbing numbers. The government, we are hearing, because of tight budgets, people are being asked to take 1, 2 or even 3 furloughs a week without pay. That's wage deflation, and that's gonna put a strain on things: consumers are going to hold back.
On the headline improvements in Non-Farm Payrolls (well, one can scrap that after yesterday):
The layoff seem to be slowing because business was taking the other approach. If you want to stay working I am going to have to cut your salary and/or your benefits.
On the traditional dynamo of economic growth - small businesses:
Small businesses account for 50% of our GDP, they account for 60% of new hiring. We are not seeing new hiring because small businesses are not buying into this. So the recovery has not hit main street yet. If you ask small businesses why aren't you borrowing, their answer is "send me a customer, don't send me credit."
On whether the stimulus is losing its ability to impact the economy:
Back in February 2009 I wrote, "there is nothing stimulative in the stimulus package." It was more social engineering. Number two, it was trickled into the economy: politicians may have outsmarted themselves figuring if they put it all in too early we would have a snap recovery, and it would start to wear down as you go into the election. By trickling it in, we never got a full recovery. And it may be that they have to pay for it now. The most popular political bumper sticker I here is 'if you're in, you're out.'
On whether we are wallowing through what could be depressionary cycle:
Well, are certainly wallowing through a no-growth recovery. For example the GDP that came out included a very large estimate in non-durable inventories. [discussed previously on Zero Hedge] We are beginning to see some of the bulls downgrading GDP growth to about 1.5% [as Goldman did on Friday], which is barely above stall speed, and certainly not the kind of growth we need to get people jobs.
On whether the Fed will raise rates and/or do Quantitative Easing, and on the leaderlessness at the Fed.
We've had more and more signs of potential deflation and the Fed is terrified of that...They've got to come up with something inventive, something as they call it, 'new quantitative easing.' And yet that brings the concern if they do something that is dramatically different, will people say 'What do they know that we don't know? What is the big cause of this?' So the Fed is walking a tightrope in a hurricane and it's going to be tough."
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