How to Understand 2013: Think 'M'

If like us you believe in the power and efficacy of Liquidity, then you should think about how liquidity moves? We maintain that it flows in a regular pattern that roughly traces out an M-shape over a decade long cycle. Liquidity leads by around year, but troughs are associated with banking crises and peaks with asset booms. The 'v' of the 'M' is typically shallow, giving approximately two asset booms per banking crisis. Banking crises occurred in 1966, 1974, 1982, 1990, 1998, 2007-08. The next is slated for sometime around 2016/17. Near enough to register, but too distant to worry about. Before then the next Liquidity peak is likely to be 2014, with 2013 a likely year (or should be) of rising liquidity. The last Liquidity peak was in 2010, and the recent 'v' lasted on cue from mid-2011 to late-2012, with liquidity drifting around its mid-levels. Thus, if we and our more prescient assistant history are correct, 2013 should see the monetary spigots open; yield curves steepen, paper currencies weaken, commodities jump and risk asset prices rise. This is our roadmap for 2013.