Money: Supply and Demand of Securities

10年后的股票价格更多的是由7、8、9年后的股票供给情况决定的。到我写这本书时为止，还没有人掌握了预测长期股价变化的资本市场技术。总的来说，股市更倾向于上涨而非下跌。除了这种笼统的预测外，没有人能就12—24个月以后的股市情形做出精准的预测。换句话说，需求的变化在短期内影响很大，而供给的变化在长期内影响更大。有时候你能看出别人看不到的需求变化，但你也只能做出12—24个月以内的预测。更长时间的预测，你就拿不准了。从长期来看，需求会多次从低点反弹到高点，但是，如果存在增加或减少新供给的条件，供给可能会持续增加或减少。

从我们收集到的223家上市公司的数据来看，如果这些公司不快速发行新股的话，它们很快就会缺乏现金。表8.5列示了资金消耗最严重的25家公司。在短短一个季度的时间里，这类公司的总市值便由1300亿美元增加到了3120亿美元以上，市值的增加不是因为股价上涨导致的，而是因为这些公司发行新股导致的，而且没有人注意到这一点。市场上充斥着不盈利的公司的股票。随着IPO市场趋于恶化，几乎所有这些公司都在12个月后消失了。而那时，行业泡沫才刚开始破裂。 现金短缺的科技公司仍然IPO和发行次级股，这导致了市场上股票供给过多。

Market Liquidity Analysis

Monitoring Total Investable Capital in U.S.

1. The Amount of Total Investable Capital

1.1 Sources of Investable Capital

The money available for investment in U.S. financial markets stems from several primary sources:

• Institutional Investors
  • Pension Funds
  • Mutual Funds
  • Insurance Companies
  • Hedge Funds
  • Private Equity and Venture Capital Firms
• Retail Investors
  • Individual Investment Accounts (Brokerage, Retirement, Savings)
• Sovereign Wealth Funds (SWFs)
  • Foreign Governments and Central Banks
• Corporate Investors
  • Corporate Treasuries and Investment Divisions

1.2 Allocation of Total Investable Capital

1.2.1 Cash and Cash Equivalents

A significant amount of money is held in liquid assets such as money market funds, Treasury bills, and cash equivalents.

Total Cash and Cash Equivalents =

• M2 Money Supply
• + Institutional Money Market Funds
• + Corporate Cash Equivalents (including T-bills)
• + T-bills held by Institutional Investors
• + T-bills held by Retail Investors
• + Government Cash Holdings
• + Foreign Holdings of U.S. T-bills and other short-term securities

1.2.2 Public Equities Market

The U.S. stock market is the largest in the world by market capitalization, with the combined market cap of U.S. companies listed on stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq exceeding $46 trillion as of 2023.

• Market Capitalization: $46 trillion (approx.)
• Institutional Ownership: Institutional investors hold around 80% of the total U.S. stock market, primarily through pension funds, mutual funds, and hedge funds.
• Retail Ownership: Retail investors account for approximately 20%, with significant participation through retirement accounts like 401(k)s and IRAs.

1.2.3 Private Equities Market

The private equity (PE) market in the U.S. is one of the largest and most influential segments of the alternative investment space. Private equity firms raise capital from institutional investors and high-net-worth individuals (HNWIs) to invest in privately held companies or to take public companies private. These investments typically aim to restructure, grow, and ultimately exit the company, either through a sale, an Initial Public Offering (IPO), or another exit strategy.

Private equity is a major driver of capital allocation across many sectors of the U.S. economy, particularly in technology, healthcare, manufacturing, consumer goods, and financial services. The PE market plays a critical role in corporate growth, job creation, and innovation, making it a significant force in U.S. capital markets.

As of 2023, the U.S. private equity market is one of the largest in the world, managing approximately $8 trillion in assets. This amount reflects the total Assets Under Management (AUM) held by U.S.-based private equity firms, including capital raised for buyouts, growth equity, venture capital, and distressed assets.

Key Metrics:

• Capital Raised: U.S. private equity firms raised over $300 billion in 2022 alone across various funds, including buyout funds, growth equity funds, and sector-specific funds (e.g., healthcare, tech).
• Deals Volume: In 2022, U.S. private equity firms completed more than 8,000 deals, valued at nearly $1.2 trillion.
• Global Leadership: The U.S. represents about 60% of the global private equity market, making it the largest hub for private equity activity worldwide.

1.2.4 Fixed-Income Market (Bonds)

The U.S. bond market includes Treasury securities, corporate bonds, municipal bonds, and the securitization market, which represent significant avenues for investment.

• Total Bond Market Size: The total value of the U.S. bond market is estimated to be around $53 trillion as of 2023.
• U.S. Treasury Securities: $25-30 trillion
• Corporate Bonds: $10-12 trillion
• Municipal Bonds: $4 trillion
• Mortgage-Backed Securities: $9 trillion
• Institutional Investors: Insurance companies and pension funds are major holders of fixed-income securities, alongside foreign investors, particularly central banks.

1.2.5 Private Debt Market

The private debt market involves lending by non-bank institutions, including private equity firms, specialized debt funds, and institutional investors. These loans are not typically available in the public markets and often cater to borrowers who may not have access to traditional bank loans or prefer more flexible financing terms.

Characteristics of Private Debt:

• Lenders: Non-bank lenders, such as private equity firms, hedge funds, family offices, and specialized private debt funds.
• Borrowers: Companies that may not meet traditional bank lending standards, such as mid-market firms, companies undergoing restructuring, or leveraged buyouts (LBOs) by private equity firms.
• Types of Private Debt:
  • Direct Lending: Loans provided directly to companies without an intermediary like a bank. Common in leveraged buyouts (LBOs) and growth financing.
  • Mezzanine Financing: A hybrid of debt and equity financing, often used in situations where the borrower needs additional capital but doesn’t want to dilute ownership.
  • Distressed Debt: Debt purchased at a discount from companies in or near bankruptcy, with the aim of restructuring the business.
  • Unitranche Loans: A hybrid loan structure combining senior and subordinated debt into a single package, simplifying the borrowing process.
• Flexibility: Private debt tends to be more flexible in terms of loan covenants and structures, making it attractive to borrowers who need tailored financing solutions.

Key Metrics in Private Debt:

• Assets Under Management (AUM): The global private debt market, including the U.S., has grown significantly, with around $1.5 trillion in assets under management as of 2023.
• Sectors: Private debt is often used to finance mid-market companies, leveraged buyouts (LBOs), real estate transactions, and companies needing capital for growth.

Typical Investors:

• Institutional investors such as pension funds, insurance companies, and sovereign wealth funds often invest in private debt for its relatively higher yields compared to public debt markets.
• Private equity firms also use private debt to finance leveraged buyouts and acquisitions.

1.2.6 Bank Lending

Bank lending involves loans provided by regulated financial institutions (commercial banks, savings institutions, and credit unions) that are available to both individuals and companies. These loans are part of the traditional credit system and are heavily regulated by financial authorities.

Characteristics of Bank Lending:

• Lenders: Commercial banks, credit unions, savings institutions.
• Borrowers: A broad range of borrowers, including individuals (for mortgages, personal loans, and credit lines) and companies (for business loans, lines of credit, and trade finance).
• Types of Bank Loans:
  • Commercial Loans: Traditional loans provided to businesses for working capital, capital expenditures, or expansion.
  • Revolving Credit Lines: Lines of credit that allow companies to borrow up to a certain limit, with interest charged only on the amount used.
  • Term Loans: Loans with a fixed repayment schedule, usually secured by assets.
  • Syndicated Loans: Larger loans issued by a group of banks for corporations or governments, typically used for large-scale projects or acquisitions.
• Regulation: Bank lending is subject to stringent regulatory oversight from entities such as the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency (OCC), ensuring capital requirements, risk management, and compliance.
• Standardization: Bank loans tend to have more standardized terms, tighter covenants, and lower yields due to regulatory constraints.

Key Metrics in Bank Lending:

• Total Loans Outstanding: As of 2023, the total loans and leases held by U.S. commercial banks exceeded $10 trillion, including loans for both individual and corporate borrowers.
• Risk Profile: Bank loans generally offer more secure lending (due to the higher regulation and asset backing), but they can be more rigid in terms of loan terms and covenants.

Typical Borrowers:

• Larger corporations with solid credit ratings or individuals looking for mortgages and personal loans.
• Mid-sized and smaller companies that qualify for traditional financing or have strong creditworthiness.

1.2.7 Real Estate Market

Real estate is another significant part of the U.S. investment landscape, with both institutional and individual investors playing a role in this sector.

• Residential Real Estate Value: The value of U.S. residential real estate exceeds $40 trillion, though not all of this is available for investment.
• Commercial Real Estate: The commercial real estate market is valued at over $20 trillion, with institutional investors such as real estate investment trusts (REITs), pension funds, and insurance companies playing a major role.

1.2.8 Real Assets Market

Real assets, including infrastructure and natural resources (such as timber, mining, and agriculture), represent another significant area of investment, particularly for institutional investors seeking inflation protection and diversification.

Why It Should Be Included:

• Infrastructure Investments: Large institutional investors, including pension funds and sovereign wealth funds, allocate significant capital to infrastructure projects like transportation, energy, and telecommunications. These investments are critical for economic growth and long-term capital allocation.
• Natural Resources: Investments in timberland, farmland, and mining can provide stable, long-term returns and are often used as inflation hedges.
• ESG and Sustainability: Infrastructure and natural resources are increasingly linked to environmental, social, and governance (ESG) investments, as investors seek sustainable and socially responsible assets.

Data to Track:

• Total Assets Under Management (AUM): The AUM in real assets globally is estimated at over $2 trillion, with significant investments in U.S. infrastructure.
• Sustainability Trends: Track investments in renewable energy infrastructure (e.g., solar, wind) as part of the broader shift toward sustainable investing.

Key Sources:

• Preqin and PitchBook for real assets and infrastructure investment data.
• U.S. Department of Energy for data on renewable energy and infrastructure investments.

1.2.9 Commodities Market

Commodities represent a significant portion of the overall financial markets and are a key asset class for institutional investors, hedge funds, retail investors, and even sovereign wealth funds. Commodities are also critical for inflation hedging, portfolio diversification, and in some cases, they serve as a reflection of broader economic activity. Including the commodities market in the report would provide a more comprehensive view of the total investable capital in U.S. markets.

How Commodities Fit Into the Monitoring System:

• Institutional Participation: Many institutional investors, such as pension funds, hedge funds, and endowments, allocate a portion of their portfolios to commodities like oil, gold, and agricultural products to hedge against inflation and diversify risk.
• Hedge Funds: Commodities are frequently used by hedge funds for speculative purposes or as part of complex trading strategies involving futures and options.
• Retail Investors: Increasingly, retail investors are gaining exposure to commodities through ETFs that track indices based on the prices of commodities like crude oil, gold, silver, and agricultural goods.
• Market Volatility and Liquidity: Commodity markets can experience significant price volatility due to factors like geopolitical risks, supply chain disruptions, and changes in global demand. This volatility can create opportunities for capital flows into commodities, especially in times of market uncertainty.

The commodities market includes various raw materials, such as precious metals (gold, silver), energy (oil, natural gas), agricultural products (wheat, corn), and industrial metals (copper, aluminum). Commodities offer diversification benefits and are commonly used as a hedge against inflation and currency risk.

• Total Market Value: The total size of the commodities market is difficult to quantify precisely due to its global nature, but U.S. commodities trading (primarily through futures contracts) accounts for trillions of dollars annually.
• Energy Commodities: Oil and natural gas are among the largest traded commodities. The NYMEX crude oil futures market alone is worth several trillion dollars in annual trading volume.
• Precious Metals: Gold, silver, and other precious metals are key components of commodity portfolios. As of 2023, the global market capitalization of gold is estimated to be around $12 trillion, with a significant portion of that held by institutional investors for diversification.
• Agricultural Commodities: Grains, livestock, and other agricultural products are critical for both hedging and speculative investments. The Chicago Board of Trade (CBOT) plays a significant role in global agricultural futures trading.
• Hedge Fund and Institutional Participation: Commodities are a key part of commodity-trading advisors (CTAs), hedge funds, and institutional portfolios. Many funds allocate a portion of their capital to commodities to hedge against inflation and currency devaluation.
• ETFs and Retail Investor Access: Retail investors access commodities through ETFs, with the SPDR Gold Shares ETF being one of the largest, with assets under management exceeding $50 billion. Additionally, ETFs like USO (United States Oil Fund) offer retail investors exposure to energy commodities.

Impact on Future Investment Flows:

• Commodities as an Inflation Hedge: Commodities, particularly gold and energy products, are expected to see increased investment flows as inflation concerns persist.
• Volatility and Global Demand: Energy commodities like oil and natural gas are impacted by geopolitical factors and supply chain disruptions, making them an attractive yet volatile asset class.
• ESG and Sustainable Commodities: As investors focus on sustainability, there is increasing interest in renewable energy commodities (e.g., lithium, cobalt) tied to the clean energy transition.

1.2.10 Forex Market

The Forex market is the largest and most liquid financial market globally, with daily trading volumes exceeding $7.5 trillion as of 2023. Although it is primarily a trading market rather than an investment market in the traditional sense, it plays a critical role in determining capital flows, currency risk, and market liquidity. Foreign exchange rates also directly impact international investors and companies that engage in cross-border trade or investments, making it an essential component of the overall financial landscape. The Forex market is highly liquid and operates 24/7, enabling both speculative trading and hedging against currency risk.

• Daily Trading Volume: The global Forex market trades over $7.5 trillion daily as of 2023, making it the largest financial market by transaction volume.
• U.S. Dollar Dominance: The U.S. dollar is involved in about 88% of all Forex transactions, making it the most traded currency in the world. This dominance reinforces the U.S. as a major player in global capital flows.
• Currency Pairs: Popular currency pairs involving the U.S. dollar include EUR/USD, USD/JPY, GBP/USD, and USD/CHF, with significant trading volumes driven by institutional and speculative investors.
• Participants:
• Institutional Investors: Large financial institutions, central banks, hedge funds, and multinational corporations are key players in the Forex market, using currency trades for speculation, hedging, and international investments.
• Retail Investors: Retail investors participate in the Forex market through online brokers and electronic trading platforms, though their share of overall market volume is small.
• Role in Capital Flows:
• Currency Risk and Hedging: Institutional investors and corporations often use the Forex market to hedge against currency fluctuations when investing in foreign assets or conducting cross-border business.
• Global Trade and Investment: Changes in exchange rates influence the attractiveness of investing in a country’s assets. A weaker U.S. dollar can make U.S. assets more attractive to foreign investors, while a stronger dollar can deter foreign investment by increasing the cost of U.S. assets in other currencies.
• Central Bank Involvement: Central banks, including the U.S. Federal Reserve, European Central Bank (ECB), and Bank of Japan, frequently intervene in the Forex market to manage monetary policy, stabilize currencies, and influence capital flows.

Key Insights from the Forex Market:

1. Currency Fluctuations and Capital Flows: A strong or weak U.S. dollar can have significant impacts on capital flows into or out of U.S. financial markets. For instance, a weak dollar often encourages foreign investment in U.S. equities and bonds because it makes U.S. assets cheaper for foreign investors. Conversely, a strong dollar can lead to capital outflows from U.S. assets as they become more expensive in other currencies.
2. Hedging and Risk Management: Many institutional investors and multinational corporations use Forex trading to hedge against currency risk, especially when holding foreign assets or operating in multiple countries. By monitoring Forex activity, the system can detect shifts in hedging strategies that may impact capital availability or liquidity.
3. Currency Markets as Leading Indicators: Movements in currency markets can serve as leading indicators of global economic trends. For example, a sudden depreciation of the U.S. dollar might reflect changes in investor sentiment, central bank policies, or trade balances, which could have downstream effects on U.S. capital markets.

Impact on Future Investment Flows:

• Currency Hedging and Cross-Border Investments: As global investors and corporations continue to engage in cross-border investments, Forex trading will remain a key mechanism for managing currency risk and optimizing returns.
• Geopolitical and Economic Influences: Geopolitical events, monetary policy changes, and macroeconomic trends will continue to drive currency fluctuations, influencing capital flows into U.S. markets. Central bank interventions in currency markets can also have ripple effects on the availability of capital.
• Digital Currencies and Central Bank Digital Currencies (CBDCs): The rise of cryptocurrencies and the potential introduction of central bank digital currencies (CBDCs) could impact the structure and volume of Forex trading in the future, altering capital flows and currency markets.

1.2.11 Cryptocurrencies and Digital Assets

Although still a relatively small portion of the overall investment market, cryptocurrencies and other digital assets have gained prominence in recent years.

• Cryptocurrency Market Cap: As of 2023, the total market capitalization of cryptocurrencies is approximately $1 trillion, with Bitcoin and Ethereum accounting for the majority of this value.
• Institutional Participation: An increasing number of institutional investors are allocating a small percentage of their portfolios to digital assets.

1.2.12 Derivatives Market

The derivatives market is one of the largest financial markets in the world, with trillions of dollars in notional value traded daily. Derivatives include futures, options, and swaps, and they are used for hedging, speculation, and managing financial risks. The derivatives market indirectly affects capital availability in the underlying asset classes (stocks, bonds, commodities, etc.).

Why It Should Be Included:

• Risk Management: Derivatives allow investors to hedge against price fluctuations in assets like equities, bonds, commodities, and currencies. The use of derivatives can influence liquidity and risk appetite in other markets.
• Leverage: Derivatives allow for leveraged positions, meaning investors can gain exposure to large positions with relatively small capital outlays. This amplifies the impact of market movements on capital flows.
• Systemic Risk: Large-scale derivatives exposures, particularly in interest rate swaps or credit default swaps (CDS), can pose systemic risks to the financial system, as was seen during the 2008 financial crisis.

Data to Track:

• Total Notional Value of Derivatives: The Bank for International Settlements (BIS) estimates the global derivatives market's notional value at over $600 trillion.
• Futures and Options: Track the volumes of key derivatives traded on exchanges like the Chicago Mercantile Exchange (CME).
• OTC Derivatives: Over-the-counter (OTC) derivatives, such as interest rate swaps, are widely used by institutions to manage risk. The notional value of the OTC market alone is in the hundreds of trillions.

Key Sources:

• CME Group for futures and options data.
• Bank for International Settlements (BIS) for global derivatives market data.
• CFTC Commitment of Traders Report for speculative and hedging positions in derivatives markets.

2. The drivers that impact the amount of money

2.1 Central Bank Policies

Central banks play a crucial role in influencing liquidity through monetary policies. Lower interest rates and quantitative easing programs usually increase market liquidity by making borrowing cheaper and encouraging investment. Conversely, higher interest rates and tightening policies can reduce liquidity.

2.2 Government Fiscal Policies

Government spending and fiscal policies can also impact market liquidity. For instance, increased government spending or tax cuts can boost liquidity by putting more money into the economy.

2.3 Foreign Investment Levels

Foreign investment entering a country's markets can significantly affect market liquidity. Sudden increases or decreases in foreign investment flows can have a pronounced impact.

When accessing this data, it's important to consider the type of foreign investment being measured. Foreign investment can be broadly categorized into foreign direct investment (FDI), where foreign entities establish or control business operations in another country, and foreign portfolio investment, where investors purchase stocks, bonds, or other financial assets in a foreign country without gaining a controlling interest in these entities. The impact and implications of these two types of investments can be quite different. Additionally, the reliability and timeliness of the data can vary depending on the source, so it's advisable to consult multiple sources for a comprehensive view.

2.4 Corporate Financial Health

The financial health of companies, including cash reserves and profit levels, can indicate the level of internal funding available for investment. Healthy corporate balance sheets generally suggest more internal funds are available for investment.

2.5 Market Sentiment and Confidence

Investor sentiment and confidence can drive market participation. Higher confidence can lead to increased investment activity, thereby increasing liquidity.

2.6 Global Economic Conditions

lobal economic trends, such as growth rates, trade balances, and currency exchange rates, can influence the flow of investment capital between countries and markets.

2.7 Market Structure and Regulations

The structure of financial markets and the regulatory environment can affect liquidity. For example, regulations that encourage transparency and protect investor rights can increase market participation.

3. The indicators that reveal the market liquidity

3.1 Investment Flows Data

This includes tracking the flow of funds into different types of investments, such as stocks, bonds, mutual funds, and ETFs. Data on fund inflows and outflows can provide insights into investor confidence and market liquidity.

3.2 Bank Lending Trends

The willingness and ability of banks to lend money impact market liquidity. Higher lending rates suggest more money is available for investment. Economic reports and banking sector analyses can provide information on current lending trends.

3.3 Savings and Investment Rates

The overall savings rate in an economy can influence how much capital is available for investment. Higher savings rates often lead to increased investment in financial markets.