Liquidity Crisis

QUESTION: I have attended the last 2 conferences and you have said the “liquidity” in the stock market will become tighter coming into 2020 and that there will be less stocks available to buy. Does that have something to do with this inflow of capital from Europe as people become more aware? I read your article about the Emerging Market crisis with great interest and remembered what you said. Is there more information you can share with us on this topic?

CDH

ANSWER: Since Quantitative Easing has failed, capital was driven into non-traditional investments to simply try to earn income. There were institutions buying farmland just to lease it out to get 5% annual income. Others ran off into Emerging Markets. Spanish banks are heavily invested in Turkey. The problem is that this trend has caused a liquidity crisis insofar as capital has been invested in assets that are not liquid. Add to this corporate buybacks that are reducing the supply of stocks available.

All I can say is thank God for Socrates. There are so many global trends emerging that by themselves are confusing and would be impossible for a standard domestic analysts to forecast from a personal interpretation perspective. The combination of investment shifts into real estate, Emerging Markets, and corporate buybacks have created an interesting risk factor for liquidity during a financial panic.

 

Latest Posts

CBO Issues Dire Forecast for US Debt

The US Congressional Budget Office is warning that the federal deficit has hit a point of no return. It is far too late to cut wasteful government spending. Politicians have [...]
Read more

The Danger of Traveling with Gold

Two men were pulled over while driving on I-20 in Texas, carrying $250,000 worth of gold bars. US law permits and encourages law enforcement to confiscate assets. Civil asset forfeiture [...]
Read more

The Tyranny of Centralized Government

For centuries, the main reason no government has ever survived its own greed for money and power is that whoever is in power at present constantly assumes that this time [...]
Read more