The Economist

sma3

Anybody subscribe and can read the entire article? I just got this snippet, although the argument is familiar

"The Economist offers an insightful big picture overview this week in What would happen if financial markets crashed?:

Today America’s financial system looks nothing like it did before the crashes of 2001 and 2008, yet lately there have been some familiar signs of froth and fear on Wall Street: wild trading days on no real news, sudden price swings and a queasy feeling among many investors that they have overdosed on techno-optimism. Having soared in 2021, shares on Wall Street had their worst January since 2009, falling by 5.3%. The prices of assets favoured by retail investors, like tech stocks, cryptocurrencies and shares in electric-car makers, have plunged. The once-giddy mood on r/wallstreetbets, a forum for digital day-traders, is now mournful.

It is tempting to think that the January sell-off was exactly what was needed, purging the stock market of its speculative excesses. But America’s new-look financial system is still loaded with risks. Asset prices are high: the last time shares were so pricey relative to long-run profits was before the slumps of 1929 and 2001, and the extra return for owning risky bonds is near its lowest level for a quarter of a century. Many portfolios have loaded up on “long-duration” assets that yield profits only in the distant future. And central banks are raising interest rates to tame inflation."

hank

It’s an interesting snippet. Sorta what my humble non-expert view might be. But one who tends to view worst case scenarios. Off and on there’s been talk of “liquidity problems” in the media. Most recently on Bloomberg’s last Wall Street Week show - and addressed to some length by Blackrock’s Rick Rieder. This liquidity talk always makes me nervous as can cause markets to seize up.

Yes - the long duration assets would be a lot of ARKK holdings. I’ve heard that argument - that rising rates will strangle them. However, they’ve already been choked to death ISTM. So not too sure how much farther down they can go. Wish I were 25 years younger (don’t we all?). Would probably buy some.

@Old_Joe used to subscribe to the Economist. Not sure if he still does. FWIW - most periodicals can be purchased single issue at Amazon and downloaded to most any device having the app. Subscribing to a free trial period and than cancelling is another way to obtain latest issue.

msf

Or one can go to the (virtual) library, read, and even download a copy for personal use.

The gist seems to be that on the one hand, regulations have tamped down risk quite a bit. On the other hand, there's still a lot of leverage in the market. Also, there are choke points - relatively few market makers and just five clearing houses that handle the bulk of the business. So who knows which way things will go?

Courtesy of your friendly neighborhood public library.