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Thomas J. Feeney
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Tom Feeney began his work in the investment industry in 1969. Clients have included cities, states and major corporations, as well as numerous religious, charitable and other not-for-profit organizations. In his early career Tom served as Executive Director of Stewardship Services, Inc.,... More
My company:
Mission Management & Trust Co.
My blog:
Measure of Value
  • Insights From A Market Veteran 1 comment
    Dec 21, 2012 6:49 PM

    Over a long career, I've developed a short list of authors, analysts and commentators whose views are consistently worthy of attention. Head of floor trading for UBS, Arthur Cashin, is one of those individuals. While his work on a day-to-day basis is oriented to short-term trading, Art is one of the most reliable repositories of market history and investor trading patterns. He offers valuable insights.

    CNBC commentator Bob Pisani interviewed Art this week and asked about his expectations for the year ahead. For those who missed the interview, I'll relate the major thoughts offered.

    Regardless of how the fiscal cliff is resolved, taxes will be increased and government spending will be reduced. This austerity will provide "a bit of a pinch."

    A strong believer in reversion to the mean, Art expects record corporate profit margins to begin to shrink.

    Pointing to past episodes in which bondholders tried to anticipate and frontrun Fed actions, Art cautions that when the Fed wants to unwind its balance sheet--currently so big it "could sink a battleship,"--bondholders may well try to step in front of the Fed. That becomes all the more likely now that the Fed has provided unemployment and inflation targets that will guide its actions. The result could well be that the Fed will realize far less than optimal returns when it begins its balance sheet unwinding process.

    Staying on the theme of central banks, Art marveled at the success over the past year the European Central Bank has had in preventing runs on many European banks. He worries, however, that such runs could yet appear, should depositor faith disappear. He anticipates that it may be a delicate balance for the ECB to maintain the necessary confidence.

    On the positive side, Art observes some signs of China's slowdown bottoming. At the same time, however, he recognizes that there is widespread doubt about the accuracy of the Chinese government's official numbers.

    Incoming Japanese Prime Minister Shinzo Abe has verbally pushed hard for the Bank of Japan to assume a pro-inflation stance. Indications are that the markets may experience aggressive yen weakening. With that tendency evident in much of the world, we could well experience currency wars in 2013.

    Art has long cast doubt on the wisdom of unfettered Fed money printing, and has cautioned investors not to have blind faith in central bankers' ability to succeed in overcoming deteriorating fundamentals. On a short-term basis, he recognizes the upward seasonal bias as year-end approaches. At the same time, so strong are the political crosscurrents, that he expects rumors or actual successes or failures relative to fiscal cliff negotiations to be the most important market-moving factors in the days ahead.

    From all of us at Mission, I wish our readers a Merry Christmas and a new year filled with good health, enjoyment and great satisfaction in all that you do. Each of us should consider how our behavior affects the wellbeing and happiness of those with whom we interact.

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    What is Art's prediction for US and world equity prices in 2013?
    22 Dec 2012, 12:26 AM Reply Like
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