The very idea makes Mr. Santoli "very uncomfortable". That's funny because when we had a market-created sudden liquidity crunch last Fall, the very "simple" cause of a market collapse across all assets, he wasn't so quick to share his comfort level with his readers. Who cares where the liquidity comes from? The bottom line is that when liquidity is removed drastically and unexpectedly, markets tend to crash and when it's added drastically and unexpectedly, markets tend to rally strongly. To paraphrase Clint Eastwood in Unforgiven, uncomfortable's got nothing to do with it.
May 9, 2009
Nothing but a Liquidity Tsunami?
Barron's Michael Santoli is wondering if the rally off the March lows, which he has doubted every step of the way, seeing behind each green shoot a new reason for a resumption of the bear, can be "as simple as government-created free money meeting a skeptical investment world and washing over all asset classes at once".
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3 comments:
Very good post.
I would imagine you glance at "Calculated Risk" and, of course, Bloomberg.
Calculated Risk recently presented current readings of some key metrics re: liquidity. TED spread, Libor stuff, A2P2, etc. All have dramatically improved since the Fall of '08. All are relatively close to "normal" now.
As the metrics moved decidedly away from "crisis" and close enough toward "normal" - the market seemed to respond.
Many in the pundit class, however, cry that they "can't see what good this bail out money has done" and etc. Since they "can't see it" the rally must be a "sucker's rally."
Similarly, Bloomberg had a piece reflecting upon long term rates vs. the short end, and how equities have performed best when the long end of the yield curve is higher than the short end. As it is currently.
Reminds me of the "oil experts" who saw "no fundamentals" supporting the run up to over $100/bbl. because "current" supply and demand where matched.
Prior to the meltdown, however, if things had gone on as projected - demand would have outstripped supply by several million barrels per day.
The market looks forward, right? Net present value and all of that good stuff ...
Keep up the good work, my friend.
The Seldom Seen Kid
Thanks TSSK for reminding me I actually have (a) reader(s) and that I should post a little more often!
Back to your point, you and I both know that, according to the market fundamentalists, the market is always right...except when it's telling us something the government has been doing is actually working.
Post at your leisure ... quality over quantity.
Besides, I will be busy for awhile arguing with my local Brooks Brothers store.
I cannot understand why they do not plan to convert their entire inventory over to "Mao Suits" ...
Why can't they understand the wisdom of Kudlow, Dobbs, and Hannity?
Anyway, the next task for the market is employment - imo.
The credit metrics indicate that the hospital patient is now up and walking around. The employment stats, if they improve, will indicate the ability to "return to work."
Talk to you later - I must go and advocate my case for a nice navy blue Mao Suit with subtle chalk gray pinstripes ...
(Nice, right ? ...)
TSSK
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