Conservative Economics

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Subject: liquidity

In business, economics or investment, market liquidity is an asset’s ability to be sold without causing a significant movement in the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to a business’s ability to meet its payment obligations, in terms of possessing sufficient liquid assets, and to such assets themselves. (Wikipedia Jan 2010)

Calling the top

Buyback Bubble Pops! A long way down

The buyback bubble can

It is always somewhat foolish to attempt to call the top of a bull market or the precise moment when a speculative bubble pops, but sometimes its better to be foolish than sorry.

During the ides of July 2007, when the Dow Jones Industrial Average was gently massaging 14,000, signs appeared that air was finally beginning to leak out of the Great Buyback Bubble that has long characterized the US equity market.

The headlines were about a liquidity crunch, sub-prime lending, and banking risk, but the buyback band kept on playing, as if these events were in some parallel universe.

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Featured articles on inside pages

Stock buybacks

Accelerating to a buyback-option blowout

By Q1 2006, stock buybacks had multiplied to five times the level of 2000. Buybacks grew by 25% in 2005, with corporate profits after taxes increasing only 5.5%. At these rates, buybacks will exceed after-tax profits by 2009.
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Securities Analysis

Efficient Market Hypothesis: No proof

The Efficient Market Hypothesis continues to impede understanding of how capital markets work. This hypothesis suggests that world capital markets are guided by crowds of rational, competing, profit-maximizers, each trying to predict future market values of individual securities. The Efficient Market Hypothesis has never been proven.
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US Politics

What is the future of private pension plans?

Between 1999 and 2002, US private pension funds lost US$ 1.2 trillion in value. It would almost seem that pension fund managers had been speculating with retirement money, attempting to beat each others' short-term performance statistics, with little interest in safeguarding the assets of plan beneficiaries. More ...

US equities

Households save more and invest in equities

Government economic stimulus programs that have sent money directly to US households have resulted in more saving and less spending. Low interest rates have encouraged individuals to move from debt instruments into equities. More ...

US Bonds

The collapse of the dollar and US bonds?

The extreme spending of the Obama government, combined with irresponsible bank lending policies promoted by Barney Frank and Chris Dodd, portend rising interest rates, the collapse of the bond market, and the end of dollar supremacy. More ...

World Economy

Working off the US trade deficit

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the 'deficit' is in dollars, the US has no problem in 'paying it off'. More ...

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2011-02-23 13:39