Here’s a risk to stocks you’ve likely overlooked

“Michael Milken, the creator of junk bonds, once remarked: ‘Liquidity is an illusion…..It’s always there when you don’t need it, and rarely there when you do’.  The problems with liquidity underscore the distorting effects of central bank intervention in financial markets. Official policies in the aftermath of the financial crisis have forced excessive risk taking in search of returns. Yet regulatory changes have contributed to a reduction in trading liquidity. Over time, investors can become increasingly exposed to ever more risky financial assets that in a crisis would be difficult to trade — triggering a major collapse in prices.”

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