Our firm has been pointing out the escalating capital risk of low and declining volume in capital markets since 2009. This is not the way an organic bull market is supposed to move. A declining pool of legitimate buyers warns of danger to investment capital. There are several good reasons for low participation rates which include:
- An investing public who has been repeatedly harmed since the secular bear began in 2000, continues to steadily withdraw month after month what’s left of their savings, firing the legion of inept advisers and managers who keep offering their clients return-free risk for a fee.
- Insufficient controls and transparency on profit-desperate exchanges, have led to a casino-world where skimming machines drive 70 to 80% of trading volumes in split-second phony transactions. This activity has increasingly led legitimate investors to move to the sidelines.
- Central bank-goosed asset markets that are decoupled from economic reality, present unattractive investment prospects to those who have capital to loose and the training and discipline to assess return probabilities. “Smart cash” continues to pile on the sidelines waiting for rational risks worth taking. Where there is nothing good to do, patient capital is prepared to wait for more rationale prices while the desperate, naive and reckless continue to “play” on ever-thinning ice.
Scarlet Fu displays the declining volume across multiple markets which has been falling since 2010. Here is a direct link..