Art Cashin is not a believer in the efficient-market hypothesis.
In his morning note on Tuesday, Cashin responded to a question he’d been getting about why he includes lengthy, detailed chunks of what people were talking about during the previous day’s trade in his morning note.
“First and least important,” Cashin wrote, “I think they give you a sense of what I and, by proxy, other traders are thinking and looking to as event unfold.”
They are, in this way, a sort of “Monday Morning Quarterback” of the prior day.
But real value, Cashin admits, is how this look back informs Cashin’s view on what markets are, and more importantly, what they aren’t.
“Second, and more importantly, I hope they convey that the market is not the random event that academics and other commentators would have you believe,” Cashin writes. “They show the mileposts and targets that traders look to and also show how the markets react to those targets, whether they hold or are breached.”
And so in this view, Cashin is broadly taking a swipe at the efficient-market hypothesis, a school of thought that basically argues markets are rational and unbeatable. The idea is that in an efficient market, prices either reflect all known information about a security or if prices don’t reflect this information, they will soon revert to whatever the surfacing of this information dictates.
This efficient market would, then, in a way, argue that stocks are going up for a reason
unrelated to the people buying and selling those stocks. An efficient market is, in this sense, then merely a thing that acts not
because of the people trading it, but almost
in spite of these traders.
The upshot, then, is that an individual will not be able, over time, to beat this efficient market.
It is, of course, no surprise that Cashin, a 50-year veteran of the New York Stock Exchange floor, doesn’t see things this way.
“It would be easy to just tell you just what happened,” Cashin wrote on Tuesday, “but I think it is useful to know what I and others are looking for or looking to as the process plays out.”
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