Ablin had expected liquidity, the amount of money to borrow, spend and invest, to break down — but it never did. Instead, it has actually improved.
“I thought was going to go negative about two months ago, but, remarkably, largely on the back of these earnings reports, I suppose, liquidity reversed course. We’re actually square back in the middle of easy money again,” Ablin said.
He views slowing liquidity as an early warning sign of market trouble — giving the example of the indicator going negative four quarters before the 2008 financial crisis erupted.