The Role Of (Il)liquidity In History’s Greatest Bear Market Rally
Liquidity -- or, perhaps more to the point, a lack thereof -- matters.
It matters in drawdowns and it matters in rallies. Failing to appreciate this leaves one bereft when it comes to explaining the ferocity of selloffs and the rapidity of rebounds after routs.
There are a number of ways to measure liquidity, but one thing we can say with some degree of certainty is that market depth never really recovered after the February 2018 correction which was, of course, defined by an "extinction event
Thank you. It has been strangely amazing . This is why you do not fight the FED. I am and was a Bear by inclination. I had to take an active part in this obviously historic market. You have been a good guide Mr. H. I do believe it will be 2 years till we can catch our breath. Hope you keep writing because it would be too easy to become lost without you.
Ha, you beat me to the praise, but seriously, I couldn’t have discovered this website at a better time (around February or March) considering the wild ride we’ve been on.
I’ve said it before and I’ll say it again: thank you, H, for the education! Prior to finding your website, I would wade through all the garbage on CNBC or seekingalpha (which is ironically where I first came across your work) and just feel frustrated that nothing about the markets makes sense. I couldn’t understand why valuations seemed crazy or why the market was discounting the corporate debt that was accumulating over the last decade. Now I finally feel like it’s not all just chaos. Your website should be required reading in business school because it explains a hell of a lot more about how the financial world actually operates than any textbook or professor that I had.
Also, your ability to understand and present all angles is unparalleled. I appreciate that you don’t pretend to know what the market will do next because, as you’ve said, if anyone knew that, they wouldn’t be telling everyone else about it. Subscribing to your site is some of the best money I’ve ever spent.
One of the most important skills our educational system generally fails to help us learn is the ability to synthesize large amounts of information into an understandable essence. H has access to raw information most of us don’t and the time and skill to synthesize it into usable conclusions like no one else I have found. I might well have been one of those professors of which dayjob speaks. If I had been, I would have been reading H’s material along with my students. I know I will be reading this as long as H writes it.
I concur. Very well put Joe and Dayjob.
Keep up the great work Mr H. Now take a well-deserved holiday!
Turbocharged rally will require something to sustain it, no? Is lack of liquidity or breadth sufficient?
Thanks a lot H!
What dayjob said.
I guess most of your readers will gladly travel down the rabbit hole with you on any number of occasions if it promises the same level of education about modern markets.
@ Michael: probably not, but the prospect of more stimulus might do the job. In a very perverse way the current rise in COVID19 cases might even be positive for markets insofar that it increases the chances of future stimulus (fiscal as well as monetary).