It’s possible to read too much into things. Consider it a flaw in our nature. But when we are told the “Worst of market sell-off might be over but hold on tight”, we can’t help but wonder about the hedged language. After all, if Goldman sees recent price action as prompted by a “giant global margin call”, surely the sell-off is an opportunity? Apparently not, as the GS note in question suggested that the flows they have seen were not consistent with “a ton of selling”. Is this diagnostically useful, and if so, in what way? If forced to offer an opinion (and we are), we would agree with GS that volumes have certainly not been indicative of capitulation. In fact, recent volatility might be better thought of as evidence of preternaturally low levels of liquidity. That in itself begs the question of why liquidity is so poor. August doldrums, or evidence of a Potemkin market?
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