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The centerpiece of our own strategy, and outlined in the book, is understanding liquidity flows.
They are the single most important force driving investment markets both up and down. Contracting
liquidity caused the crash in 2008‐2009 and dramatically expanding liquidity since March 2009 has
triggered one of the greatest bull markets in U.S. history. The next bear market will also be driven, at
some point, by a contraction in liquidity flows. However, as long as the great reflation is doing its work,
that day can be postponed. Chuck Prince, if he were to comment today, would probably point out that
the music is playing again. People are back out on the dance floor. But, if the great reflation is as
artificial as we believe, then this is still musical chairs. When the music stops, there won’t be a chair for
everyone, just like the last time.
Tony Boeckh
Date: May 4, 2010

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