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Jim Puplava thinks a liquidity crisis is on the horizon. I agree, adding that the problem is global...
Please pay attention to Jim Puplava at Financial Sense. He says a Liquidity Crisis Looming.
Index - Funds - US - Stock - Funds
In total, index funds represent $7 trillion of U.S. stock funds that have no active manager. All buying and selling are done automatically. Active management has gone out of fashion, Puplava noted, and as this sea change occurs, the market's ability to price companies diminishes.
Ownership of stocks in the S&P 500 is concentrated with three companies; Vanguard, BlackRock, and State Street. They represent about 88 percent of the S&P 500, and if we include Schwab and Fidelity, over 90 percent of the S&P 500 is basically now in the hands of five companies.
Investing - Puplava - Crux - Problem - Funds
“It's really mindless investing,” Puplava said. “The crux of the problem is that mutual funds own more bonds that seldom trade than ever before, but they're still promising to pay out investors within seven days of redemption, a promise they may not be able to fulfill in the next downturn or crisis.”
The problem is global.
Central - Bank - Actions - Bonds - Example
Central bank actions explain most of what you need to know. Italian bonds provide a good example.
Despite the recent, massive selloff in Italian bonds, 10-year Italian bonds still trade at roughly the same yield...
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