Art Cashin suspects outside forces are playing a role in the GameStop trading tumult

Published Thu, Jan 28 202111:51 AM EST

If this week's Wall Street tumult is the David vs. Goliath battle as is being portrayed, David may be getting a little outside help. That's the view of market legend and historian Art Cashin, the director of floor trading at UBS, who has seen some of these so-called short squeeze battles play out before, and knows of a number of others through history. While the story of retail investors gathering on social media – Reddit's WallStreetBets most prominently – to gang up on hedge funds has a certain romance to it, Cashin suspects something more is at play. "It's not tremendously new," Cashin said during a "Squawk on the Street" interview for CNBC. "Now, the Reddit format is a very sophisticated chat room and I … have some suspicions that it is not a democratization. I'm not sure that everything you're reading is coming from the little guy, the public." "I think there may be some big professionals in there that want to turn the crowd into a mob and get them to attack the hedge funds by buying this," he said. "That lends you great support and puts buying power under a stock you want to see higher." The reference is the move this week from large swaths of retail investors who have bought up some of the most-shorted names on Wall Street , like GameStop and AMC Entertainment . The buying pushed the shares up dramatically, but it also caused major losses at big trading firms that have large positions and were forced out of them. While the action caused some history-making moves in the market, Cashin said the Street has seen this kind of thing before. He referenced the Northern Pacific Railroad short squeeze that led to what became known as the Panic of 1901 in the market. He also referenced events as far back as the ancient Sumerians trying to short the grain markets 5,000 years ago as well as the Long Term Capital Management hedge fund blowup in 1998. In essence, the events all focus on positions that get overextended that are then exploited by others. "This is not the discovery of fire," Cashin said. "This has happened so many times before." When the picture from current events gets clearer, it will be up to regulators to see if any trading laws were violated and to sort out the players involved. Cashin suspects there's more than currently meets the eye about this situation than a bunch of amateurs able to clobber the Goliaths of Wall Street. "They have the blessing of making it look like it's the little guy against the big guy," he said. "I have serious doubts when it's all going to be investigated that that will in fact turn out to be true."

Art Cashin, director of floor operations at UBS.

David A. Grogan | CNBC

If this week's Wall Street tumult is the David vs. Goliath battle as is being portrayed, David may be getting a little outside help.

That's the view of market legend and historian Art Cashin, the director of floor trading at UBS, who has seen some of these so-called short squeeze battles play out before, and knows of a number of others through history.