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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Henry Volquardsen who wrote (2236)11/11/1999 9:28:00 PM
From: Enigma  Read Replies (2) of 3536
 
Edit (end)

In practice what does this mean do you think? Say a fund is hit with a wave of redemptions - I remember something like that in Canada in mid-May 1970 - does the Fed provide liquidity to the banks who in turn lend the funds money to meet redemptions - thus delaying the sale of stocks to meet the redemptions? In effect the delayed sales of stock pay off the bank loans. This is putting it simply - and I guess there could be waves of redemptions and more and more loans.
In an era where fund managers don't want to miss the boat, and are fully invested - isn't this a disincentive to holding cash, which punishes the prudent manager?

Edit - or does the word go out the day after the crash to buy the hell out of stocks - with the money borrowed from the banks? Or is it a bit of both?
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