In A Sea Of Money Printing, What Happened To All The Liquidity?

Tyler Durden's picture

Volatility is depressed, micro dominates and as Goldman notes several of the key emerging themes of the last few years have lost their discovery value. There are many questions that investors should be asking as the second half of 2014 approaches (and the much hoped for 'recovery' picks up steam); but perhaps the most important one given the taper is "In a sea of liquidity, what happened to all the liquidity?" The supply of stock and volumes are down. Did you know Verizon’s current market cap is larger than Russia’s float?

Via Goldman Sachs,

Despite the market reaching all-time highs, the backdrop for trading activity remains depressed. US cash equity trading volumes have declined 50% since their Oct-2008 peaks, the VIX is back to sub-12 levels and the total supply of tradable stocks has declined by roughly 25% in the last decade (Exhibit 1). Layered on top of this is the impact of the well-publicized shift to passive investing where turnover is 10X lower than active management (Exhibit 1).

With the market awash in liquidity from central bank easing (and low rates) this frustration remains acute among investors. We note the following:

Outside of the United States, only four countries have more than 50 stocks with over a $10 bn market cap (Japan, the United Kingdom, China and France). The picture is similar when looking at trading volumes; just four countries have over 50 stocks that trade over $20 mn/day, which include Japan, China, the United Kingdom and Canada. See Exhibit 2.

Over two-thirds of the world’s market cap is in the top five markets. In order to reach the market cap of the United States, one would need to sum the next 2-14 countries (including those listed on the Euronext and OMX).

Only three of the countries included in the MSCI Emerging Market index have total market caps that are larger than Apple (the largest stock in the United States). Scorecard: Johnson & Johnson is larger than South Africa, Verizon is larger than Russia and Delta Airlines is larger than Greece. See Exhibit 4 for other comparisons.

And then there's Japan...

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LawsofPhysics's picture

So, the Japanese are rich?




BuddyEffed's picture

rich as in enriched like uranium?

NidStyles's picture

I read the title as:

"In a sea of monkeys, what happened to all of the liquids?"

0b1knob's picture

All the liquidity went to Belgium to buy US treasuries.

Flight to safety continues.   Something wicked this way comes....

Headbanger's picture

WTF have I been saying here about the liquidity crisis!!??

Money is being destroyed by all the malinvestments and defaults

And just look at the implosion in money velocity


NoDebt's picture

That is certainly true, but the problem is that the money spigot is not directly over top of the money drain.  They're on opposite sides of the tub from eachother and lots of stuff blocking it's flow in between.

If you're near the spigot, you're swimming in the stuff.  If you're near the drain, you're dying of dehydration.  Most people are living closer to the drain.

Headbanger's picture

Most excellent observation Grasshopper.

I really like it.

TheReplacement's picture

Yes but once the weight of all that "money" overcomes the obstacles it will flood toward the drain as physical assets flow in the opposite direction - inflation.  Once the "money" hits the drain it will be sucked into oblivion and the tail will whip to deflation.  That's my take.

Handful of Dust's picture

All my 'liquidity' is under the sofa cushion. Safe and sound.

Headbanger's picture

Mine too!

And it's called a VZ-58!

Damn it's a small world..


And speaking of liquidity, we must protect out "precious bodily fluids"

And do deny them you essence..

Flakmeister's picture

Three and a half trillion in CAPEX since 2005 has resulted in 1 mmbpd less production of crude (exclusive of US shales and Tar Sands)....

The oil patch is becoming a black hole....

Cattender's picture

Never mind the Economic shit now that this IRAQ THING IS HAPPENING!!!! OMFG!!!!! Save Us OBUMBA!!!!!

Bunga Bunga's picture

They will buy the Rockefeller Center again.

doctor10's picture

Its all being sucked up by banks and insurence companies to backstop an increasingly shaky house of cards the 700 trillion dollars worth of derivatives-which in the absence of cheap energy, welfare state taxation rates, and unregulated lawful markets-isn't worth shit.

Four chan's picture

it was traded to the tbtf's under zirp for bad mbs, the banks bought everything.

remember the dual mandate of the fed

1 capture all assets through boom and bust it creates.

2 enslave a free people to debt.

TeethVillage88s's picture

Not only did the liquidity go to purchasing their own stocks and probably to enhance financial portfolios...

- There is a systemic loss of smaller US Banks (Credit Unions did well in 2008, but perhaps they are targets now or now have poor manager who came from larger banks) (total number of Banks, Downward Trend)

- Public debt/government debt increased by 1970 from Vietnam which caused a lot of hand wringing (Chart doesn't show Ronald Reagan Spending very well, Probably since there are accounting tricks/strategies where agencies use bonds for Trust Funds)

- Household Debt Increased from the 1980s (I think this is the chart, Steep Increase Mid 1980s, then leveled off then steep increase mid 1990s)

- Wikipedia: Household Debt $12.9 trillion by Q2 2012

- By 2013 looks like maybe $13.199 Trillion Households and Nonprofit Organizations; Credit Market Instruments; Liability, Level

- And looks like Total US Debt $60-62 Trillion

- Private Banks don't Invest or Encourage CAPEX Capital Expenditures or good Capital Formation though in a Recess or a Depression, Seems like we need Public Banks or Credit unions or Government to do that.

TheReplacement's picture

We don't "need" anyone to do that.  If it really is profitable and the people with money are sane and smart they will invest.  If they are not sane or smart they will invest poorly and lose it.  Others will rise to fill the gap and clear the table, as long as there is profitable purpose and demand for their goods, services, or finances.  The free market is an evolving mechanism by which the species can adapt to whatever challenges come.  The problem is we do not have a free market and we are not sane or smart enough to control the nearly infinite actions and reactions and counteractions from a single narrow point of view.

nuclearsquid's picture

Tylers, can you look into this one?

I take what i read on WND with a huge grain of salt, after getting burned by the birth certificate furor.  But why would they make this up?  Talk about fireworks.

markpower49's picture

I entered Balad in Google News and only got the WND report, with all others saying they were being evacuated, but none said they had actually made it out. Tough to impossible to evacuate jetliners under any sort of fire.

Urban Redneck's picture

AT this point C-130's could have executed an extraction under cover of AC-130s flown from either Europe or South Asia (even if Obozo's gay brass were dumb enough to withdraw all resources from the bathtub.)

SheepDog-One's picture

They've reached total liquidity saturation, where its impossible to print more liquidity than is already spoken for.

TheReplacement's picture

Either a war or the valves that control the flow from the very tippy top down will have to be opened.  Actually, I think there is a good chance we see both.

TheRideNeverEnds's picture

Who cares, just buy everything because the money printing will never end and assets will keep going up forever.  


There is only one way to lose in this market: not being long it.   If you short it you will obviously get blown the fuck out, if you stay away from it and you will lose all the purchasing power of your savings to inflation.  

Handful of Dust's picture

I'm focusing on the underpriced assets....some got beat down so badly there is only one way for them to go at this point.

saveandsound's picture

You might be right.

Everything includes gold, silver, real estate, land, not just stocks.

Stoploss's picture

Just issue more shares to buy back.

Bear's picture

Exhibit 3 looks like waves I surf on the North Shore ... they crash pretty hard

Jason T's picture

This is why Armstrong is the most underrated mind of economics and finance. .. why he's been stating for years US stocks and dollar will be where the global capital flows as global economy and sovereign debt collapses - its the only market in the world that can absorb said flows. 

yogibear's picture

A portion of the  printing  keeps being stuffed into stocks. Non-productive, it just keeps pumping up assets until their in super bubble territory. Eventually the Feds banksters own everything.

Welcome to North Korea as Marc Faber would put it. Assets rise with fewer people being able to afford them as time passes. 

Everything in the hands of a few. The small guy is just able to eek out a subsistence. There are so many empty storefronts now. 

I Write Code's picture

Because the QE money as it pours into the equity market is being put in at fixed prices.

I take this to be a Yellen initiative, it began a year ago probably about the time she was named to succeed Bernanke.

RiverRoad's picture

With volume what it is, good luck with liquidity when the crap hits the fan. 

Handful of Dust's picture

Velocity is almost zilch. As the comment above states, those under the spigot are fabulously rich ... those [95%] at the other end are the meek .... those who will [hopefully] inherit the earth 'cause they ain't getting anything else.

TeethVillage88s's picture

Data updated from Jan 2014

Looks like 1981 was the high, manufacturing plunged 1979.

M1V M1 Velocity of M1 (6.305 Ratio)
M2V M2 Velocity of M2 (1.540 Ratio)
MZMV MZM Velocity of MZM (1.386 Ratio)
MULT M1 M1 Money Multiplier (0.705 Ratio)

RiverRoad's picture

The velocity issue is no accident.  The last thing the Fed wants is money in the hands of the sheeple.  That would, as usual, ruin the party for the 1%.

Pee Wee's picture

Where are the bubbles?

SheepDog-One's picture

Yet plenty of liquidity to pump stawks last minute off the lows to HOD....just vomitus.

Bemused Observer's picture

There's no "liquidity" because there's no money. All the "printing" isn't of actual dollar bills, it is digital zeroes added to digital accounts.
The 'great unwashed' don't have access to any of that money to spend, so it can only go from A to B, and back again. As soon as any of those little folks need it, it freezes solidly in place. That's not liquidity, it is just movement within a certain segment of the economy.
It's not a real game if it's just two players off to the side, tossing the ball back and forth between themselves.

DerdyBulls's picture

Did anyone see the answer to the headline question of this article?

TeethVillage88s's picture

IMHO Federal Contractors got a bunch of it.

For instance GWB got Elected, declared Jihad in 2001, Global War on Terror, in 2002 the entire Federal Budget Exploded. Sure Military Industrial Security Prison Executives & Investors got a bunch of it.

Federal Reserve Bank Dealers had direct Access to ZIRP, and MBS Buy backs, but Ellen Brown seems to point out that you didn't have to be a Bank to get Bail Out Money or Low Interest Rate Loans.

1999 was the ZIRP (Low Interest Rates) for Dot Com Crash, that charged the Stock Market which had been shocked after the Tech Bubble. So some Stock Investors & Financial Managers (Bankers) would have been winners.

2001, 9-11, ZIRP (Low Interest Rates) again Financial Investors & Financial Managers were the winners.

2008 everyone Saw the Housing Declining looking back at Oct 2005 as the High. ZIRP, TARP, TAMF, HAMP, HARP, QE, So TBTF, Financial Investor, Big Players, Congressmen, Stock Market Players would have been winners.


- Sub-Prime Mortgage Foreclosures
- Stock Holders who sold everything when the Market Crashed
- 401K & Pension Holders how either sold or never recovered
- Buyers of Financial Funds that either collapsed or became Zombie Funds, Including Cities, Governments, universities.
- Fixed income people that depend on Savings Interest, CD Interest, Money Market Interest earnings, Interest from US Government Bonds, and anyone who is hurt by Inflation.

PrintemDano's picture

Couldn't help but notice your timeline seemed to freeze in 2008.....Odd....

TeethVillage88s's picture


Thanks for the additional info.

You're a brave American.

Last of the Middle Class's picture

A lot of busy little beavers damming up that flow of liquidity so that it doesn't flow any farther. This is the false premise the fed used thinking it will work it's way into the economy. Not a chance. It will be damned up forever. Greed is constant, especially if you have your own equity margins to cover. Also gotta pay for those 7 for 1 stock splits somehow given everyone has about as much ishit as they can use.

Last of the Middle Class's picture

So basically, the fed says I'll cover your bad debt by printing and you continue the economic recovery party line yada yada yada. What could go wrong.