www.armstrongeconomics.com
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.
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