想想看就在 “黑色星期一 “之前的几个星期，市场似乎还充满了流动性。
2007年7月，对冲基金Sowood Capital关闭了大门，因为他们突然解除了一个高杠杆的非流动性抵押贷款账目。尽管最终积累了16亿美元的基金损失，但这些投资被标准普尔定性为 “既不罕见也没有过度的风险”。
2008年中期，当伯南克还没有意识到经济衰退并淡化次贷市场的影响时，市场正变得越来越不稳定。2008年3月贝尔斯登/JP摩根救助后的市场稳定是一个短暂的平静表象。8月，当房利美和房地美（Fannie Mae and Freddie Mac）被迫承认其资产价值的恶化时，混乱就爆发了，这两个公司在高度杠杆化的基础上共持有1.2万亿美元的主要是高质量的流动抵押贷款。由于过度的杠杆作用和流动性的侵蚀，他们拼命地筹集资金来支撑他们的资本。这些钱大部分来自政府（纳税人），因为他们被监管机构置于保护状态。
当我们健康的时候，我们很少考虑我们呼吸的空气或喝的水，尽管它们对身体的正常运作有极大的重要性。同样地，投资者和媒体随意地抛出 “流动性 “这个词，但却没有掌握其重要性。
正如我们今天所看到的，宁静的极端情况被视为 “一切正常”。在现实中，它们是未来的警告。 我们提供的例子以及其他许多例子都强调，了解、跟踪和支持流动性的时间恰恰是在它最可用的时候，而其他人都认为它是理所当然的。
The author compares the current situation of asset prices to an aircraft flying at an altitude of 50000 feet. Unfortunately, we were unable to find this article and provide a link. The main idea is that the market valuation is flying at an abnormally high altitude. Although our market aircraft can not maintain such an altitude for a long time, there is no reason to doubt that it will fall from the sky.
Many investors are writing about the current state of extreme stock and bond valuations. Surprisingly, few studies have focused on what keeps valuations at this level. Liquidity is the lift of our asset foam, which deserves careful study to better evaluate the potential flight path of the market.
In the field of investment, liquidity refers to the convenience and cost of buying and selling financial assets.
For example, U.S. Treasury bills are highly liquid. They can change hands in a flash, and usually at the current market price.
Real estate is the other side of liquidity. For example, houses or land may take months or even years to sell. The seller often lowers the asking price and / or negotiates to lower the price to affect sales. Taxes, fees, inspections and lengthy settlement dates further reduce the process.
The term liquidity applies to individual assets, as described above, but can also describe general market conditions.
Imagination of fluidity
“The market is like a big cinema with small doors”. Nassim Taleb
People usually keep coming into the cinema. Some arrived early, while others rushed to find seats at the beginning of the film. When leaving, there is an orderly exit, but it takes longer because everyone leaves at the same time. In market terms, we can describe the normal entry and exit of films as generally liquid.
If a large number of people are eager to leave the cinema, the exit will become disorderly or lack of liquidity. In the financial crisis of 2008, many securities had poor liquidity. Think of it as a crowded theater when a fire breaks out. Not only is it difficult to exit, but only when others are willing to enter can they exit or sell their assets.
Liquidity is the least abundant when you need it most.
When prices rise steadily and predictably over months or years, and the ability to buy or sell investments is transparent and effective, the importance of liquidity is often taken for granted and ignored. The price we observe on the monitor is the price we can sell.
Sometimes liquidity will fade, and the market will quickly become disordered and turbulent. The price we can sell may be very different from what we see on the computer screen. This rapid change in the environment is caused by uncertainty and anxiety, which is associated with increasing volatility. Liquidity is valuable. In this case, it has to pay a high price.
Some people say that banks are always willing to lend money to people who don’t need it, but never willing to lend money to people who need it. The concept of liquidity is very similar; It is always most abundant when you need it the least, but never when you need it the most.
The stronger the liquidity of an asset or portfolio, the easier it is to sell or manage in a liquidity event and avoid financial distress. Therefore, it is worth knowing the liquidity characteristics of the assets we hold during periods of excellent and poor liquidity.
To understand why this is so important, we look below at several terrible periods of illiquidity in history.
From January to August 25, 1987, the Dow Jones Industrial Average (DJIA) rose by 40%. At this high point of sharp rise, the market began to shake slowly. Between the peak in late August and October 16, the Dow Jones Industrial Average fell 18%.
Despite giving up half of the profits in a year, few investors have noticed two seemingly unimportant events. First, Congress is debating legislation to tax specific M & A activities. Second, a new investment management tool, portfolio insurance, is gaining widespread popularity. Investment managers related to mergers and acquisitions and portfolio insurance are adding liquidity to the market and driving up prices, but few people consider how these investors might react when the market goes down.
Concerns about the proposed legislation led to a sell-off in the risk arbitrage sector, which speculated on mergers and acquisitions. In response, portfolio insurance strategies need to be sold. An important source of market liquidity in the previous year, it suddenly needed liquidity.
On October 19, 1987, the Dow Jones Industrial Average fell 25% in the so-called Black Monday. In just 38 calendar days, the market gave up 100% of the previous eight months.
The pitfalls of portfolio insurance are often blamed for record losses, but the real culprit is the sudden loss of liquidity.
Just think about the weeks before “Black Monday”, the market seemed to be full of liquidity.
In July 2007, the hedge fund sowood capital closed the door because they suddenly lifted a highly leveraged illiquid mortgage account. Although $1.6 billion of fund losses were eventually accumulated, these investments were characterized by S & P as “neither rare nor excessive risk”.
On the contrary, sowood’s mistake was to use a lot of leverage to buy assets. The trouble with sowood is that it lacks cash or liquid assets. When the lender asks them to pay a deposit, they do not pay it. Liquidity reserves could have allowed them to provide collateral to avoid selling illiquid assets in an illiquid market.
Although sowood’s problem began in the spring of 2007 when the subprime market began to loosen, there was little sign that they had taken measures to manage liquidity risk. In fact, it is said that sowood increased risk assets and further reduced liquidity in false confidence.
In the end, the demise of the fund occurred in a short five working days, ending with a 53% loss and the fund’s closure. The biggest mistake is not necessarily the investment itself, but the failure to consider the changes in liquidity conditions.
Financial crisis in 2008
In the middle of 2008, when Bernanke did not realize the economic recession and played down the impact of the subprime mortgage market, the market was becoming increasingly unstable. The market stability after the rescue of Bear Stearns / JPMorgan in March 2008 is a temporary calm. The chaos erupted in August when Fannie Mae and Freddie Mac were forced to admit the deterioration of their asset values. The two companies held a total of $1.2 trillion of mainly high-quality liquid mortgages on a highly leveraged basis. Due to excessive leverage and erosion of liquidity, they desperately raise funds to support their capital. Most of this money comes from the government (taxpayers), because they are placed under the protection of regulators.
Other leveraged holders of mortgage-related bonds, such as the world’s largest banks and some international insurance companies, are under similar pressure. From August 2008 to March 2009, with the continuous decline in the value of real estate assets, the threat of default by banks and companies became greater and greater. These events have weakened trust between banks and investors. Liquidity is difficult to find in almost all asset markets.
During the crisis, liquidity loopholes were common, even in the most liquid and least risky assets. In a unique anomaly, the prices of some high-quality assets have fallen more than those of low-quality assets because investors have sold anything with an offer. Uncertainty and loss of liquidity have become so troublesome that many risk asset markets have become structurally closed. The seller has no acceptable bid. Those in trouble have no choice but to actively and indiscriminately sell higher quality assets. Deleveraging and the need to raise cash replaced everything else.
Since the financial crisis, the Federal Reserve and most other central bankers have taken unprecedented measures to keep interest rates at centuries low levels. In addition, they also strengthen their balance sheets through quantitative easing, thereby providing direct and indirect excessive liquidity to the market.
The following figure, provided by Lohman economics, shows the correlation between asset value and central bank assets.
The fed not only provides a lot of liquidity, but also stimulates investors to use margin debt. This process creates more liquidity.
The figure below shows how margin debt is conducive to the rise of the market, but cancellation of margin debt will lead to a sharp decline in the market. The second chart shows that the proportion of margin debt currently used in the economy is the highest in 60 years.
After understanding these three historical examples, investors should ask, what if the liquidity lift that keeps our market aircraft flying high disappears? More directly, what if the Fed reduces liquidity, or worse, suddenly fails to provide liquidity? The outbreak of inflation or the disorderly decline of the dollar are such two airbags that may develop rapidly. Many others are less obvious.
When we are healthy, we seldom consider the air we breathe or the water we drink, although they are of great importance to the normal functioning of the body. Similarly, investors and the media casually throw out the word “liquidity”, but fail to grasp its importance.
As we have seen today, the extreme situation of tranquility is regarded as “everything is normal”. In reality, they are warnings for the future. The examples we provide and many others emphasize that the time to understand, track and support liquidity is precisely when it is most available, and others take it for granted.
We are not predicting that there will be a fire in the cinema of the market, nor are we predicting that our valuation aircraft will suddenly plummet by 30000 feet. However, we remind you that such events are not uncommon. In view of the current environment, it is better to make a plan for such liquidity events.