Art Cashin: Gold Holders Will Have a Different Day For Themelves

It was a stunning interview with Art Cashin on King World News.  Art Cashin is the Director of Floor Operations for HSBC.  HSBC is one of the largest banks in the world.  It is rare when I hear a banker speak of dangers that lie ahead. 

Cashin expressed deep concern over geopolitical events taking place in the world, explaining that the markets have learned to discount the significance of these events and view them as short-lived occurrences.  With respect to these events, he said, “I fear mightily that somewhere people might miscalculate and one of these things could turn into the equivalent of a Lehman moment in which everyone assuming that the worst will not happen discovers that the worst has happened and are ill-prepared for it.”

Allow me to translate.  Another financial crisis could hit without warning.  Well, consider yourself warned by one of the financial industry’s most respected analysts.  When Art Cashin talks, people listen.  But, are they listening now?  I think the smart money is, so I went to the stock charts to see if I could find evidence to back up my conclusion.

I pulled up some charts on the stock indices.  On August 7, the stock indices all reached 4 month lows and sparked talks of correction.  Since then, all have risen to record highs.  However, all three major indices have been rising on lower and lower volume.  This suggests fewer and fewer people believe the markets can continue setting new record highs.  Perhaps the smart money shares Art Cashin’s opinion about the vulnerability of the markets and the economy.

Cashin also spoke of the ECB and its recently announced intent to print more money.  When asked about the possibility of our own Fed doing an about-face and printing more dollars, he said, “that’s a possibility” and went on to explain how Japan and now the ECB have started a currency war and effectively devalued their own currencies against the dollar.  To which he commented, “I don’t know how long the Fed can contain themselves.”

As I have written many times, it is not in the interest of our multinational businesses to have a strong dollar.  The Ford cars now being sold in Germany just got more expensive.  Hence, demand drops.  Conversely, the Mercedes being sold in America just got less expensive.  You guessed it, demand will rise.  Too bad for American industry.

This is what could cause the Fed to do a policy about-face and respond with another round of money printing.  More and more analysts now believe, despite Fed speak about rising interest rates, that rates will not rise any time soon.  Some say it will be 2016 before the Fed can even think about it.  And, while the Fed speaks of tapering and claims plans to do so have not changed, many are suspicious that Quantitative Easing of some kind will be reborn.

To this end Cashin spoke of gold saying gold could rise so fast it would seem like it happens in the blink of an eye.  It could happen over days or weeks but “gold holders will have a much different day for themselves.”