Nobody will knock on your door and let you know that liquidity is about to diminish!

It is important to consider that markets are frequently – but not always – a discounting mechanism. Asset markets could discount some tighter monetary conditions significantly ahead of time. And by declining, they could actually exacerbate the speed at which liquidity contracts – as was the case in May/June of last year, and especially for the Middle Eastern stock markets, which peaked out in late 2005 or early 2006 and correctly dropped by more than 50% in anticipation of less favorable liquidity conditions in the region

So, if I am right in forecasting tighter liquidity conditions, I suppose that the asset markets and economic sectors which benefited the most from expanding liquidity will be the ones that suffer the most once liquidity expands at a lower rate or even if it contracts.


For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2006

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative


For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2006

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative