The markets down 30% in one day, sport being basically cancelled and whole countries locked down. It is certainly a volatile time.
It may seem opportunistic of me to write an article on how the current situation illustrates our point, but I am currently in a hotel and unlikely to pop down to the bar unless absolutely necessary!
If you don’t have ample liquidity, and it’s not durable, in times of stress, as you’re looking for liquidity, you’re forced to sell assets at declining prices, which then eats into your capital position, so it becomes this very, very negative cycle. There’s no question that liquidity is sacrosanct.
The quote above from Ruth Porat strikes me as pertinant in this situation. We will inevitably see people panic selling stocks and liquidating positions in loans and other assets because they believe that being in cash is the best place to be right now. The issue is that for the average person, whose time horizons are long term, this is a temporary situation. It is those with a short term horizon that will be losing sleep right now. Those who are liquid will be picking up assets for massive discounts.. Google was at $1,126 today, 2 weeks ago it was $1,526……
..and what about private debt?
This is where a liquidity engine like ASMX is crucial to the economy, in my opinion. It is OK for the big banks, traders and funds to be buying and selling with each other and making liquidity deals on the side, getting more cheap money from the central banks or selling vast portfolios on the bond or stock markets. Yes, it is important that they manage the financial system well, but what about those people with loan exposure or assets that they can’t sell, or access temporary liquidity for?
As Ruth says above, those people start selling off assets to create liquidity for themselves and their families, and those assets can only be sold if sommeone is interested in buying. Those buyers know that they are in a good position to bid cheap and that is how nergative equity and other nightmare scenarios happen.
What the average person needs is liquidity in their assets, or the ability to create liquidty from assets from a wide range of potential buyers and in a fractional amount. If you want liquidity from your house, you remorgage it right, rather than sell the whole thing?
We are proud to have created a market such as ASMX, where £1 of illiquid assets can be traded as efficiently as £1,000,000 can for the big boys.
We are creating a market where all assets can be fractionalised, traded and liquidity created quickly and simply. For now it will be in loans, but we aim to expand the liquidity function to a number of assets in order toallow anyone with an asset to create liquidity in that asset when they need it.
As I write it is 13/03/2020 and we realise that we are in the thick of the crisis but it will get worse before it gets better. We are doing everything we can to get ASMX launched and out there as we agree with Ruth that liquidty is sacrosanct.