Grant Williams: The Rising Danger Of A Bidless Market

Grant Williams, veteran portfolio and strategy advisor, as well as proprietor of the economic blog Things That Make You Go Hmmm returns to the podcast this week to discuss his great concern about the liquidity risk underlying financial markets long-addicted to central bank rescue stimulus.

Through life, behavior is reinforced by consequences. And since 2008, everything possible has been done to avoid the consequences.
So it’s no great surprise to me to that investors are back here again so soon, because what should have happened in '08-09 was not allowed to run its course. Given the speed with which trillions of dollars of printed money brought things back to where they were before, people did not really feel the consequences. At the time people lost jobs and that’s real -- that problem is still working itself out -- but in the markets, investors were basically back-stopped by governments and central banks and so they did not feel those consequences. It's like the kid falling out of the tree and getting caught: well, he's going to climb the tree again. If he had fallen out and broken his leg, he'd think twice about doing it again.
And so a band-aid was put over the first problem without really addressing the cause of it: too much debt in the world. So what have we done? We've gone and added another $60-70 trillion dollars of debt onto the amount that caused the problems in 2008. Everything that has been done has been intended to stave off an outbreak of reality. Unfortunately, history is replete with examples that there's really not much you can do to stop natural, cyclical forces. You may be able to suspend them for a time -- which is what they've done -- but ultimately, they end up expressing themselves in ways and places that are far more dangerous than they were to begin with.
Look, we've got a bunch of people now who are essentially paid to believe central banks. Guys who invest assets, whether it be in mutual funds or pension funds. They've been forced into equity markets these days because they've been willing to accept capital gain as a substitute for income in the bond markets for the last few years. That's coming to an end. We've reached negative rates now. You can argue that we could go further negative, but realistically the upside for rates is unlimited, whereas the downside has a limit on it. They've nearly reached that lower limit and so capital managers have been forced to move into the equity market where there's some semblance of a return.
The danger to me has become one of liquidity. In a rising market, I will always find you an offer. If you want to buy shares in a rising market, there are always some for sale. I don't know what the price may be, maybe it's a little bit higher as people get greedy, but there's always stuff for sale. What people have forgotten since 2008 -- which was such a sharp wakeup call -- is: in really full markets, there are sometimes no bids. Every flash crash that we've seen in the last five or six years has been a preview of what's going to happen when confidence goes, because people will move to the exits. Everything that's been done -- again we come back to these rules that put in place to deflect the last crisis: Dodd-Frank, Basel III, banks being forced not to mark-to-market anymore -- we will see all the unintended consequences of these actions come out when people want to hit a bid and there's not a bid there. It could get ugly.
This is not a time for panic, but it is absolutely a time for a great deal of caution. You need to understand A) Why you're still invested in markets and B) What your plan is to get out of them if you suffer a shock. Because if a shock comes and we get a move down like we did in January/February, and it's one that coincides with a whole-scale or widespread loss of confidence in central banks, they're not going to be able to turn this thing around. People need to have a plan at that point.

Click the play button below to listen to Chris' interview with Grant Williams (58m:38s). And after listening to the podcast, be sure to watch Grant's new video Crazy which does an excellent job laying out the unsustainable state of the "long rescue" the world's central banks have been engineers.

This is a companion discussion topic for the original entry at

The alternative headline to this podcast is:  The danger of a rising bidless market.
I truly love interviewing Grant.  He's always fully versed in everything current, knows his history better than most (by far) and weaves it all together into a compelling narrative.

One of the giants of our day, IMO.

Just wanted to say that was a great interview, made me think

A brilliant interview, and yes, Real Vision is fantastic, especially interviews from people you never heard of like Albert Edwards or Mark Hart.
Also, I really resonate with the end of the interview. It is pretty clear that all this cannot end well, but if one mentions this to people, to intelligent people, they just don't want to go there: ''it is too negative, there is a man behind the curtain, they know what they are doing.''  It can be just laziness, but also it must be something deeply at the back of our psyche, like children who hope that their parents will not allow something bad happen to them. Fascinating.

…but Meleania would get better ratings than you two on a live television broadcast.
Regarding your closing segment on, gulp, war.  It seems to me that people, globally, are first, worried and second, willing to shoot at other people as a perceived way to find a solution to their fear.

I am having difficulty seeing a happy outcome to current events, at least in the short run.

Just had a chance to read the whole thing.  Very interesting.  Reasonable and very smart people are worried.

  • The role of physically held gold.
  • The risk of war.

Grant is very calm in his delivery, yet his facts and thinking are very thought provoking.  I'd love to hear him more often.

We all agree that this thing is going to end badly. The only question is when? I guess it's better to out too early and miss a few up days than to get caught in a bidless market. Anyone thinking of lightening up their equity exposure?

I'd personally would give that a big yeah.  But you already have a very self sufficient homestead and are awesomely prepared to care for yourself and family.

You, Robie, Woodsman and a couple of others (whose names are not coming to mind…) are well positioned to raise crops and live in the 19th century, should things go way south.

 Yeah, and I think there is a lot more people coming around to that way of thinking that say: “Well look, I am getting negative rates in the bank and we are fast approaching the part where the banks are literally going to send you a bill owing you money.” At that point we have seen the move to ban cash as people try to take their money out of the banking system and just keep cash in their own homes. We have seen the countermoves that are being made. We have seen the narrative around how it is only drug dealers and money launderers that use large denomination notes. We have seen all that. I mean, you can see the moves on this chessboard several stages ahead, and they all lead to a tightening of the ability to own your own assets; and so, once these things happen it is too late.
Again, another great interview with someone who has, obviously, put some thought into our current state of economic malaise. Considering the ever increasing fees being, subtly, tacked on to every financial and monetary transaction that occurs, perhaps people will begin to look at enabling personal transfers of assets without brokers or agents and rely on legal options to facilitate these transfers(i.e., young folks to older folks, parents to children, between similar interest groups or individuals, cooperative asset and land holdings, etc.) . While these come with their own set of problems and challenges, they do offer options that, currently, have not been readily explored.

When I think back to the interview PP had with Rana Foroohar, is it any wonder we find ourselves in this predicament :

So we've got a financial sector now that creates only 4% of the jobs in this country but takes 25% of all corporate profits. That's a lot of economic oxygen that's being taken out of the room. What are the consequences for this? Well, one of the consequences is slower growth. Why is growth slowing? Well, in part because the whole model of banking has changed. The killer stat in my book is that there's a lot of deep academic research to show that only 15% of all the money sloshing around in American financial institutions ends up invested in Main Street business.
So, where do you want to put your money. Since I can't take it with me, where should I be leaving it when I become compost. Return on investment isn't just nominal.

As Chris has often said,better a year early than a day late.I am not advising,but as the market continues to rally fund managers go underweight equities for the first time in 4 years.Cash has been sidelined as well.As Grant has warned,the minor flash crashes are dress rehearsals looking into the future.Believe him.
a insprational speech by our dutch 'representative' Timmermans -glad is is from the south (Maastricht).

a special way of arguing. 

Hi Cr,
Frans sure had a lot of praise for Juncker. Do these clowns still think that they can conjure a political solution to our energy problems? He said 'listen to the voters' lots of times. Does he not understand how broke they are? I'm guessing not.

And what does that political solution look like? So far it seems that they can't come up with one so instead they ask Mr. Central Banker (in Europe's case Draghi) to print more money and then cross their fingers. In summary, that was 6 minutes of shouting and no substance. But there was lots of applause, which is nice

All the best,


F u c * this guy.   


Thats all all I have to say.


Regarding the European Parliament -
It cannot propose any laws, nor can it rescind any laws.  It can only vote up or down on actions proposed by the EU bureaucrats.  It has roughly the same power as the Duma in the old Soviet Union.  "Gosh, Stalin, we really like that law you proposed."

But only Farage will stand up and say "this job has no meaning - but boy they're paying us a lot of money to do it."

If they had real power - do you imagine Farage would have made it there?

I just saw him live at the Sprott conference in Vancouver. I asked him to autograph mu IPad, but didn't have a sharpie; he joked that he'd be concerned that it would be worth less if he did. Awesome guy. Subscribe to if you want him regularly, well worth $10 an issue or whatever…

I suggest that you buy Junk silver if you live in the US…as the war on cash gets more intense these coins are legal tender and probably will go up 100x in fiat terms. New bills will all have an RFID thread through the inn a couple of years anyway so that bill can be tracked from cradle to grave; all the people who want to be paid under the table will be outed. What good is an ounce or even 1/10 ounce of gold when all you want is a loaf of bread or pack of Marlboros (which will be individually a sort of currency as well)…?