Liquidity Crunch considerations.....

jmski52

I'm not suggesting that there will be a major liquidity crunch or pretending to know that there will be one. With all of the massive QE that's been going on for years, it's counterintuitive to even think that a serious liquidity crunch could occur.

I have two questions that I'd like to consider:

1) What do you think the odds are that a liquidity crunch *worse* than in 2008 will actually occur?

2) What effects would such an occurrence have, and what countermeasures do you think would be effective on a personal scale?

rawteam1

??? Oxymoron ??? ...
Odds r 87.55%, let's say 7 to 1...
Place ur bets..

Illogical question bigtime...
Anyways obviously if a crunch then cash is king...
Therefore cash is king, stack cash, on paper - buy puts, sell calls...

jmski52

Insurance is cheaper when the odds are lower.

rawteam1

Insurance is free if u stack cash...

rawteam1

That's bs... Don't agree with me... Lol...

RedTiger

Like French Generals planning for a replay of World War I with their Maginot Line, investors looking for a replay of 2008 are likely going to be outflanked. Markets like that won't happen like that again until the next generation. My opinion is that a bigger financial crunch than 2008 isn't likely until about 2028 (1987 to 2008 was 21 years, 21 more years gets us to 2029). Many on this forum will be dead before 2028, of course in the long run we are all dead. As for the odds of a bigger crash than 2008 happening in the next two years, I'd say 0.1% or 1-in-1000. Want to bet on long shots? Go to the horse track and bet a trifecta or pick-six, or perhaps bet on the Cubs winning the baseball World Series, or some horrible NFL team to win the Super Bowl. The odds would be better than betting on another full on financial crash in the next two years, and a winning bet would mean a world where those winnings might be enjoyed.

As always, I'll repeat the "big one" likely won't be a financial video game, ala 2008. It will likely be preceded by terrible events, one or more of the big four. Again, the big four are the loss of a major war (think World War III with 20% of the U.S. population dead), major famine or major plague (think 5% of the U.S. population dead in a year from starvation or illness), or revolution and civil war and the fall of the U.S. government and the U.S. dollar and all U.S. bonds going to near zero value. In each case, playing financial video games to maximize net worth will tend to be the least of a person's worries. Plan for every day emergencies such as a hurricane or earthquake or fire or flood. Have some insurance, but don't bet on the "sky is falling" type of scenarios. When the sky actually does fall, death will claim a large share, and finances will tend to be the least of a family's worries.

derryb

2008 was not the result of a big four event, the next crisis doesn't require a big four event. It only requires the same prerequistes of the last financial crisis: unregulated Wall St./Washington greed being fed by massive leveraging. I believe we not only still have those, but in much larger quantities. The system is as fragile, if not more, than it was then.

gsa1fan

Maybe I see things different but have we really fixed 2008? Seems we have propped things up and still kicking the can down road.

cohodk

2008 seemed pretty scary at the time, but in retrospective it is increasingly becoming much a do about nothing. Not saying it wasn't a big deal, but 6 years later most of the population has forgotten about it, much like how we forget about 9/11.

Events are going to have to be more than a year in duration to have a lasting impact, such as the Great Depression or WW2.

OperationButter

<< <i>2008 seemed pretty scary at the time, but in retrospective it is increasingly becoming much a do about nothing. Not saying it wasn't a big deal, but 6 years later most of the population has forgotten about it, much like how we forget about 9/11.

Events are going to have to be more than a year in duration to have a lasting impact, such as the Great Depression or WW2. >>



Pretty much why there are market cycles. People are morons and forget what caused these cycles in the first place.

derryb

<< <i>2008 seemed pretty scary at the time, but in retrospective it is increasingly becoming much a do about nothing. Not saying it wasn't a big deal, but 6 years later most of the population has forgotten about it, much like how we forget about 9/11.

Events are going to have to be more than a year in duration to have a lasting impact, such as the Great Depression or WW2. >>


Fear was the FED's worst fear. Preventing a run on the banks was top priority in all of their decisions. Creating perception that everything was and is contained was and is job one.

Unknown

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gsa1fan

When and how are we going to pay the piper for all the "created" money by the Fed.?

cohodk

<< <i>When and how are we going to pay the piper for all the "created" money by the Fed.? >>



Time heals all wounds.

rawteam1

<< <i>When and how are we going to pay the piper for all the "created" money by the Fed.? >>


whose "we"?... lol

derryb

<< <i>

<< <i>When and how are we going to pay the piper for all the "created" money by the Fed.? >>


whose "we"?... lol >>


Those whose income and expenses take the form of dollars.

Unknown

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bidask

When chit happens try to get on the right side of the trade.

rawteam1

Ahhhh yessss... The proverbial "when"..... Let's add "if".... And then "in ones lifetime"...
Classic Wimpy...

mhammerman

Best way to avoid a liquidity crunch is to already be pretty liquid before it crunches, as in have some cash American money tucked away someplace other than in a bank that can go dark just when you really need it...a crunch is not a get ready, get set, go kind of thing.

bidask

<< <i>Ahhhh yessss... The proverbial "when"..... Let's add "if".... And then "in ones lifetime"...
Classic Wimpy... >>

What did you do with your money in the late 08'-early 09' crunch?

rawteam1

Bought 1 oz ah silva at 40-50% premiums...

bidask

<< <i>Bought 1 oz ah silva at 40-50% premiums... >>

how come a premium ?

rawteam1

<< <i>

<< <i>Bought 1 oz ah silva at 40-50% premiums... >>

how come a premium ? >>


Whatever was available at whatever price, didn't matter...
The opportunity presented itself...

yellowkid

<< <i>Like French Generals planning for a replay of World War I with their Maginot Line, investors looking for a replay of 2008 are likely going to be outflanked. Markets like that won't happen like that again until the next generation. My opinion is that a bigger financial crunch than 2008 isn't likely until about 2028 (1987 to 2008 was 21 years, 21 more years gets us to 2029). Many on this forum will be dead before 2028, of course in the long run we are all dead. As for the odds of a bigger crash than 2008 happening in the next two years, I'd say 0.1% or 1-in-1000. Want to bet on long shots? Go to the horse track and bet a trifecta or pick-six, or perhaps bet on the Cubs winning the baseball World Series, or some horrible NFL team to win the Super Bowl. The odds would be better than betting on another full on financial crash in the next two years, and a winning bet would mean a world where those winnings might be enjoyed.

As always, I'll repeat the "big one" likely won't be a financial video game, ala 2008. It will likely be preceded by terrible events, one or more of the big four. Again, the big four are the loss of a major war (think World War III with 20% of the U.S. population dead), major famine or major plague (think 5% of the U.S. population dead in a year from starvation or illness), or revolution and civil war and the fall of the U.S. government and the U.S. dollar and all U.S. bonds going to near zero value. In each case, playing financial video games to maximize net worth will tend to be the least of a person's worries. Plan for every day emergencies such as a hurricane or earthquake or fire or flood. Have some insurance, but don't bet on the "sky is falling" type of scenarios. When the sky actually does fall, death will claim a large share, and finances will tend to be the least of a family's worries. >>



2028? If it comes as quick as the last 14 years did you better be ready. I hope to still be wandering the beach in the winter and playing my guitar on the porch in the summer. I would love to be in cash but my money would be gone before then.

derryb

About the only thing that can outpace the FED's printing press is a blowup with the derivative situation. Other than that liquidity should never become a problem again, at least while there is still paper and ink.

Baley

We sometimes hear about "the derivative situation" and how many TRILLS and QUADS are "out there" and scary.

So, are all those contracts going to settle at once? Is the music going to stop and everyone going to want to "deliver" or "take delivery" of the underlying security all at once?

or does a "liquidity crunch" only trap those who are leveraged or otherwise vulnerable,

and maybe those with diversified portfolios, no margin debt, and adequate cash reserves will do just fine, if they just ride out the volatility, like they did in the previous event?

And maybe be better off for it, for those with the intestinal fortitude to buy low some assets that are on sale due to the "liquidity crunch" of others?

derryb

CFR: Why Central Banks Should Give Money Directly to the People

Hope they have my correct address.