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Liquidity In The Stock Market
It is important to recognize the rally both for what it is, a reduction of supply, and what it is not, an increase in demand. Too many commentators are trying to force a demand story of petrodollar money being recycled and Asian foreign exchange reserves being invested as the reason for higher markets. We see it as the largest market in the world, $18 trillion, rallying on reduced supply and no inflows. Those “missing inflows” are now supporting other markets. Understanding this dynamic will better enable investors to see any coming bear market in the future. Waiting for the wrong idea (i.e., petrodollar recycling to stop) can lead to wrong conclusions.