Historic Short Squeeze Will Create Massive Panic & Contagion

Saturday, March 22, 2014
By Paul Martin

March 21, 2014

Today 50-year veteran Art Cashin, who is Director of Floor Operations at UBS ($650 billion under management), warned King World News that the world may be about to witness a historic short squeeze that will create massive panic and contagion around the globe. According to Cashin, this would “mean some bleeding hedge funds, and they are going to have to scramble to raise liquidity.” This will mean panic. Below is what Cashin had to say.

Eric King: “Art, I wanted to ask you about the yen today because sentiment levels are incredibly depressed. There are only 22% bulls on the yen, and if I contrast that to the euro, the euro has 72% bulls. So the yen may be poised to surprise people with a major rally. Is that something you see as possible, Art? Would that be part of an unwind of the carry trade?”

Cashin: “We saw some of that, strangely, when the Crimean situation came to a boil. And you saw some people in the Asian regions using the Japanese yen as a safe haven — as a flight to safety. When Mr. Abe announced ‘Abenomics,’ they started with what everybody called ‘The Idiot Proof Trade.’ The hedge funds and others bought the Nikkei Index, and they shorted the yen. The assumption was that he was going to drive the yen down far enough to excite trade — mercantilism — over there (in Japan).

The presumption was that this would only be good for Japanese stocks, but bad for the yen because its very government and its (central) bank were trying to drive those values down. Now, we’ve seen some resistance to that. And as I say, when we’ve had minor crises or the perception of crises, the yen is turning into a bit of a safety currency.

I think you are right, there are too many people on one side of the ship, and it may begin to change itself. The Japanese have not succeeded in changing their trade picture far enough with the weakened yen, and that may all come back to bite them. And we here on the floor (of the New York Stock Exchange) are watching that situation very, very closely because if Abenomics begins to become unwound, it could get rather ugly over there.”

The Rest…HERE

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