In this episode I am going to read Newfound’s latest research paper, LIQUIDITY CASCADES: The Coordinated Risk of Uncoordinated Market Participants. This reading will refer to a number of figures within the paper, so I urge you to go to our website, thinknewfound.com, and download the PDF so you get better follow along. This paper is unlike any research we've shared in the past. Within we dive into the circumstantial evidence surrounding the "weird" behavior many investors believe markets are exhibiting. We tackle narratives such as the impact of central bank intervention, the growing scale of passive / indexed investing, and asymmetric liquidity provisioning. Spoiler: Individually, the evidence for these narratives may be nothing more than circumstantial. In conjunction, however, they share pro-cyclical patterns that put pressure upon the same latent risk: liquidity. In the last part of the paper we discuss some ideas for how investors might try to build portfolios that can both seek to exploit these dynamics as well as remain resilient to them. I hope you enjoy.