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Central Markets by Robert Lloyd, CFA

The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the  information cannot be guaranteed. All opinions and outlooks are subject to change.

  • Robert Lloyd, CFA

A Sea Of Liquidity

In a sea of liquidity and inflation, some hold their breath and park their money at the Federal Reserve. $1 trillion dollars worth.

I've seen some interesting technical explanations for why this doesn't matter, but I can't help but wonder. $1 trillion is a lot of dough. Maybe:

1. Stocks investments are unattractive.

2. Bond investments are unattractive.

3. The banking system may not provide liquidity in a pinch as in October 2019. Besides, the banks don't want the cash either.

What do you think?

The amazing part about this is the extreme negative real yield these investors are incurring implies 0.45% value erosion per month (at the current 5.4% inflation rate). There is a line of market thinking that for every seller there is a buyer, therefore cash on the sidelines doesn't matter. I think this is naive; on a macro basis the sources and used of cash are much more complex. A discussion for another day, perhaps.

Robert Lloyd, CFA®

Chief Investment Officer

Lloyds Intrepid Wealth Management

Lloyds Intrepid LLC is doing business as Lloyds Intrepid Wealth Management. Lloyds Intrepid LLC offers investment advisory services in the State of Texas where registered and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Lloyds Intrepid LLC and its advisers do not provide legal, tax or accounting advice. Lloyds Intrepid LLC formulates retirement plans, investment strategies, portfolio construction and investment due diligence for clients with signed investment advisory agreements with us. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All opinions and outlooks are subject to change.

© 2021 Lloyds Intrepid LLC

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