To begin with, we need to be clear by what we mean by liquidity. Each person’s idea of what liquidity is comes with loaded ideas of how it can be used in an investment framework. Our aim in this piece is to clearly define what we mean by liquidity, and why this definition is of most use to investors.
Looking for practical solutions for investors forms the bedrock of Variant Perception. This is why, above all, we are data driven. We base our opinions on a dispassionate evaluation of the data – we have no axe to grind. We look for relationships where the data give us a lead on where we are in the business cycle. We also look for relationships that give us some idea of how risk assets will perform in the future. For these, we use liquidity-based leading indicators.