One of the recurring themes of Macro Watch is that “Liquidity Drives Asset Prices”.
For instance, on March 6, 2021, Macro Watch published a video called “Liquidity Tsunami May Drive Asset Prices Much Higher.” It argued that:
“The injection of so much additional Liquidity into the Financial Markets over such a short space of time, if, in fact, it does occur, has the potential to cause the speculative frenzy in the Financial Markets to intensify and drive asset prices much higher.”
That is, in fact, what happened.
Read: Liquidity Tsunami May Drive Asset Prices Much Higher
However, six months later, when signs emerged that the tide of Liquidity was about to go out, Macro Watch turned bearish.
On September 25th, Macro Watch published, “The Liquidity Tsunami Is About To End Abruptly.” It warned:
“Now, however, it appears that the Liquidity Tsunami that has been pushing asset prices higher is about to come to a very abrupt end. If so, the steady appreciation of asset prices that investors have grown used to is likely to slow down and then stop. The risk of a significant correction in asset prices during the months ahead is probably much greater than most investors imagine.”
Read: The Liquidity Tsunami Is About To End Abruptly
Since then, Macro Watch has published six more videos warning of the very negative impact the anticipated reversal of Liquidity could have on asset prices and the economy.
On October 15th: Stormy Weather Ahead
“With credit growth decelerating rapidly, inflation higher than the Fed had expected, the economy already slowing, sky high asset prices and Fed Tapering just around the corner, investors should be worried.”
Read: Stormy Weather Ahead
December 6th: Very Bad Things May Happen Due To The Fed’s Hawkish Pivot
“Asset Prices have never been more inflated relative to income, speculation is rampant, and leverage is very high. In this environment, if the Fed becomes more aggressive in tightening Monetary Policy, very bad things could happen in the financial markets, especially to highly leveraged investors.”
Read: Very Bad Things May Happen Due To The Fed’s Hawkish Pivot
December 20th: Risks Are High And Rising
“The risk of a significant correction in asset prices is high. That risk will steadily increase over the next three months as the Fed reduces and then ends the Liquidity injections that have driven asset prices to record levels.”
Read: Risks Are High And Rising
January 20th, 2022: Aggressive Fed Tightening May Sink Markets
“The Fed’s aggressive acceleration of tightening is likely to put significant downward pressure on asset prices during the months ahead, particularly given how expensive most asset classes have become relative to past norms.”
Read: Aggressive Fed Tightening May Sink Markets
March 13th: Fear The Fed
“Investors need to be aware of these risks and Fear The Fed.”
Read: Fear The Fed
April 15th: Stocks, Property and The Economy May Crash This Year
“The probability of falling Asset Prices combined with very weak Credit Growth means the risks of the US slumping into a Recession later this year are high.”
Read: Stocks, Property and The Economy May Crash This Year
Nasdaq peaked in November. The Dow and S&P 500 peaked in January. Since then, the selloff has been brutal.
Macro Watch subscribers understood what was coming and why.
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Separately, to see a list of books that helped teach me that Liquidity Drives Asset Prices, click HERE: Economic Books I Recommend.
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