By the end of this chapter, you should
Understand why knowledge of the flow of funds is important to determining stock market valuation
Understand why liquidity plays an important role in potential stock market valuation
Be familiar with measurements of market liquidity
Understand the relationship between Federal Reserve policy and the cost of funds
Thus far, we have covered four of the five necessary ingredients for making a reasonable assessment of the markets’ future direction. We have looked at the primary trend, as defined in the Dow Theory; at sentiment, to see how different types of investors are thinking and acting; at market indicators, as confirmation of or divergence from the trend; at seasonality; ...