Powered By Blogger

About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, July 20, 2017

Financial System Liquidity

The end of the Fed's QE programs did hamper the economy and the stock market for a while, but
the view here was always that if private sector funding responded positively, the economy and the
market would be OK. Strangely, the US is now moving on quite a different plane. There is clearly
sufficient liquidity to fund economic expansion and rising capital markets. The surprise has been
the steady rise in private sector liquidity preference. Historically, as an economic expansion
matures, the basic money supply adjusted for inflation tends to flatten out and occasionally go
negative as consumers and businesses run higher spending budgets. But here we are with real M-1
up nearly 7% y/y on miniscule short rates. In a like manner, my short term credit supply / demand
pressure gauge would now be running strongly positive as banks hustled to meet rising loan
demand from business. Not this time out. The gauge now sits at a -5.4, which is more indicative
of recession or the initial stage of an economic recovery. With folks more interested in holding on
to their money, one outcome is that there is now a built-in tendency for the economy to grow rather
slowly and for inflation to remain subdued. There are unusual circumstances, too. Business
inventories are continuing to run on the high side, and the Trump /GOP threat to repeal ACA and
replace it with a stingier health plan has up to 50 million consumers worried about losing coverage
or paying higher premiums. This dumb, drawn out saga is leading people to defer spending and
build liquid kitties instead.

This strong contra-move in favor of liquidity preference by the private sector provides funds to
support the markets at present, but if it continues, it will eventually imperil the economy or keep it
running at stall speed.

Investor confidence is high, but it would be nice to see stronger business and consumer confidence.




5 comments:

anonymous said...

Good post,Guideline furnishes a man with data predicted that would get a handle on our calling objectives Here why not find out more about the educational work. A man may not understand which calling approach to manage picking, hot to scan for after it, what courses to take, what school to pick. Course makes this possible.

Linda said...

Good to know about this about financial system liquidity. Want to see his display pic now in order to find more about him for my http://typingspeedtests.net/8-what-does-reaction-time-mean website. Hoping to know more about him anytime soon.

roy said...

This could be a way out if you find out more look here like this one on the residency writing side and there you will find some more sample on this residency writings.

Anonymouse said...

Excellent post, So thus there ought to learn of various vernaculars or maybe in general tongue that accomplice the comprehensive network of various territories or frameworks for the good service joint efforts and affiliations.

Anonymouse said...

Wonderful blog post, This man is so regarded capable for the comprehensive network and individuals adore him since he did it such http://www.spss-research.com/spss-coursework-help/ site is really good for the students and innumerable for ordinary individuals.