LIQUIDITY TALK. TOBIAS LEVKOVICH ON GLOBAL LIQUIDITY, ETC.
[Latest Global Dollar Liquidity Measure: +14.4% annual growth rate; latest Endogenous Liquidity Index: +13.1%]

In a Q&A session with Financial Times readers, the Citigroup U.S. equity strategist dismisses the idea of "excess liquidity" as a "poorly described term", adding that "Alan Greenspan once defined liquidity as being a function of confidence" (for a similar view, see Fed Governor Kevin Warsh's March speech). Tobias is bullish on U.S. stocks, but he's no raging bull. His S&P and Dow Jones targets are, respectively: 1,600 and 14,400 by year-end 2007, and 1,725 and 15,500 by mid-2008. Beyond that, he has "some profound concerns about margins for second half 2008, so we are being vigilant on the earnings front". (The U.S. presidential election is also a source of concern).

Meanwhile, Mohamed El-Erian, the president and chief executive of Harvard Management Company, dwells on the Second Best theory in the context of the New Bretton Woods model (see our recent post on that very issue here). Finally, Bill Luby warns: be careful out there!