We'll have more on liquidity in the next day or two, some interesting stuff going on.
From MarketWatch, November 10:
....Our call of the day from Stock Traders Daily and portfolio manager at Equity Logic, Thomas H. Kee Jr., links up the latest crypto selloff and selling of tech names this year to drying up of stimulus-related liquidity.
“When excessive amounts of liquidity flood the economy excessive risk-taking is a natural byproduct, but when the liquidity spigot dries up those assets that experienced irrational exuberance often reprice to more prudent levels quickly,” Kee told MarketWatch in emailed comments on Wednesday. “Two obvious groups that benefited from the excessive liquidity influenced by stimulus were big tech, and cryptocurrencies. Each of these is being repriced now, because each of these were excessively valued due to stimulus, but these do not represent the overall market,” he said, adding that that selling could be a “precursor to conditions ahead.”
“Although crash conditions are isolated to stocks like Amazon, Tesla, Meta, etc., and virtually all cryptocurrencies, the reason this is happening can affect other asset classes too, just not as acutely or immediately. The broader market, housing, private equity, bonds, all of these assets rely on new money inflows to appreciate too, and the new money from stimulus is gone,” said Kee. What connects them all is that “new demand for these assets has dried up.”
And with central bank stimulus no longer reliable for providing new money inflows, asset demand is now dictated by natural flows. The amount of fresh cash invested in the economy measured by the so-called Investment Rate, he said.
Dating back to 1900, that marker indicates what happens when liquidity peaks and troughs. Kee notes that the peak marks the best time to sell and troughs vice versa, for the purposes of longer-term investing....
....MUCH MORE
