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Liquidity Bubble's Impact on the Markets
And while the tech boom of the late 1990's was driven by some very real secular shifts caused by unique technological innovation which, aside from the exuberance associated with some of the dot com names, brought a marked benefit to the global economy, how does one explain the subsequent ramp up as the credit bubble was being inflated and subsequently imploded? Simple - it was all liquidity driven. ... the underlying market did absolutely nothing for the duration of the entire credit bubble. And the scariest part of the chart is the tail end: even with the unleashed dam of liquidity, the market still has a massive retracement ahead of it before it can recover the adjusted losses it has suffered since the last credit bubble. Ironically a 50% run up in the S&P has not been enough to offset on an apples-to-apples basis the unprecedented liquidity efforts let lose by Chairman Ben. HT: Powerline for the link & ZeroHedge for the analysis. It appears that the addict has finally reached the stage of addiction where the drug no longer produces the desired result and the Fed, acting in true addict fashion, is presently engaged in administering ever more massive doses of the drug in hopes of recapturing its earlier impact. This will end badly. Charts at link (well worth your time). Posted by: AzCat 2009-08-31 |
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