world full of liquidity
#1
Posted 04 January 2007 - 12:02 PM
It's the illiquidity, stupid !
#2
Posted 04 January 2007 - 12:09 PM
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
#3
Posted 04 January 2007 - 12:21 PM
#4
Posted 04 January 2007 - 12:23 PM
#5
Posted 04 January 2007 - 12:31 PM
#6
Posted 04 January 2007 - 12:34 PM
Liquidity = money supply which is still growing. Money has to be parked somewhere... either in banks or whatever. Only the fed has power to destroy money, hence the conservation of money principle.
Two myths above. Let me try to dispel them.
1. liquidity = supply of money + credit. Credit portion is dominant today.
If you have a home priced at $100,000, you may be allowed to borrow at 1:5 ratio (20% down) or 1:100 ratio (1% down) in different environment. In the first case, the supply of money+credit goes up 5 fold, 100 fold in the second case.
2. Credit gets destroyed by the market, not Fed. Fed is powerless, when market is leveraged at 100 fold and then wants to readjust to 5 fold.
Also, the assets behind the credit market are most inflated at 1:100 leverage. So, the asset price goes down, as the market adjusts to higher risk thus making the process more difficult.
Evidently all those people who went to work over the last few years who now have 401K's, etc etc don't count? Not to mention additional retirement savings by baby boomers. Just in case someone doesn't know, the end of the baby boom was born in 1964. That means they are turning 43. The lead edge is about 61. This is a huge chunk of the population moving into peak earning years, and focused on retirement.
If they are saving so much, why is the total savings rate in US falling negative?
MSM does not even talk about new hires or baby boomers to justify liquidity. The new buzzword is 'worldwide savings glut'. Supposedly, Chinese and Indians are saving so much, USA has moral duty to spend
It's the illiquidity, stupid !
#7
Posted 04 January 2007 - 12:38 PM
Liquidity = money supply which is still growing. Money has to be parked somewhere... either in banks or whatever. Only the fed has power to destroy money, hence the conservation of money principle.
Two myths above. Let me try to dispel them.
1. liquidity = supply of money + credit. Credit portion is dominant today.
If you have a home priced at $100,000, you may be allowed to borrow at 1:5 ratio (20% down) or 1:100 ratio (1% down) in different environment. In the first case, the supply of money+credit goes up 5 fold, 100 fold in the second case.
2. Credit gets destroyed by the market, not Fed. Fed is powerless, when market is leveraged at 100 fold and then wants to readjust to 5 fold.
Also, the assets behind the credit market are most inflated at 1:100 leverage. So, the asset price goes down, as the market adjusts to higher risk thus making the process more difficult.
Evidently all those people who went to work over the last few years who now have 401K's, etc etc don't count? Not to mention additional retirement savings by baby boomers. Just in case someone doesn't know, the end of the baby boom was born in 1964. That means they are turning 43. The lead edge is about 61. This is a huge chunk of the population moving into peak earning years, and focused on retirement.
If they are saving so much, why is the total savings rate in US falling negative?
MSM does not even talk about new hires or baby boomers to justify liquidity. The new buzzword is 'worldwide savings glut'. Supposedly, Chinese and Indians are saving so much, USA has moral duty to spend
Savings as reported by the Feds does not include 401K's...which is what I mentioned.
IT
#8
Posted 04 January 2007 - 12:41 PM
Two myths above. Let me try to dispel them.
1. liquidity = supply of money + credit. Credit portion is dominant today.
If you have a home priced at $100,000, you may be allowed to borrow at 1:5 ratio (20% down) or 1:100 ratio (1% down) in different environment. In the first case, the supply of money+credit goes up 5 fold, 100 fold in the second case.
2. Credit gets destroyed by the market, not Fed. Fed is powerless, when market is leveraged at 100 fold and then wants to readjust to 5 fold.
Also, the assets behind the credit market are most inflated at 1:100 leverage. So, the asset price goes down, as the market adjusts to higher risk thus making the process more difficult.
Let me expand my example.
Peter and Paul both have $100 each.
Paul writes $150 on the stock and wants to sell it to peter.
Peter only has $100, so he will borrow $50 from Paul. Paul gives Peter $50 and Peter gives Paul a $50 I.O.U.
Now Paul has $100+$150 from Peter, but minus $50 he loaned to Paul. So Peter has $200, Peter has a stock worth $150, but a loan of $50.
Total amount of money in the world is still $200, but stock is now valued at $150. The price of the stock has NO BEARING to the total money in the world.
The maximum value of the stock is $200 (total money supply). This game continues until Paul decides he's robbed Peter enough of his money.
#9
Posted 04 January 2007 - 12:47 PM
Evidently all those people who went to work over the last few years who now have 401K's, etc etc don't count? Not to mention additional retirement savings by baby boomers. Just in case someone doesn't know, the end of the baby boom was born in 1964. That means they are turning 43. The lead edge is about 61. This is a huge chunk of the population moving into peak earning years, and focused on retirement.
This goes way beyond a simple margin account.
IT
I'm under the theory that as the Boomers reach retirement, more and more will sell their stocks, Funds, etc. and move into cash. there will not be the buyers there, hence prices will fall.
Thoughts?