Who will be the buyers?
It's easy to forget that American financial markets are dominated by institutional investors, not by individuals. Institutional investors do not "panic" but, these days, institutional investors are puking assets for a variety of reasons: hedge funds to cover redemptions and to reduce their leverage, banks to reduce their leverage (what fraction of a trillion $ of assets, for example, does just Goldman alone need to dump to reduce their leverage?), and so forth. Sovereign wealth funds are, I am told, concerned about an Obama impact on American business growth and profits.
Of course, retail investors like me do get scared and begin puking our equities, for example, but this doesn't drive American markets. (Asian markets consist of a higher % of retail investors than do Western markets.)
So my question is this: Who will be the buyers of all these assets? What institutions are flush with the cash to run around buying up all of these presumably well-priced or bargain-priced assets? At some point, I suppose pension funds and insurance companies will do so, but do they have the loose cash to support the markets?
Well, I am assured that there is tons of cash out there, waiting for the right moment to commit. Nobody wants to jump in early, and few want to be the first to do it. Keeping their powder dry.
Additionally, a friend of mine in the financial business told me that the markets are the least of the problem. "Markets go up and they go down - that's normal and that's the deal," he said. "The real problem is the potential depth and duration of the global recession we are looking at, and the markets only reflect that. This will not be a normal, ordinary recession, and the politics could worsen it just as they did in the Depression. The markets are telling us that we have been spoiled, and that the candy is going away for a while. Six months or 5 years? I don't have a clue anymore."
"All I know for sure is that people in distressed assets will make money over the long haul - if they can last long enough."
He concluded "One of my friends is so worried that he is seriously considering selling his Citation and switching over to NetJets." Here's a nice Citation X - the best way to travel. Doesn't the Constitution give me the right to have one of these?
