zero velocity investing

rono

Howdy,

The nut is that the velocity of money right now is, and has been right about zero.

http://en.wikipedia.org/wiki/Velocity_of_money

Note the quote from Samuelson that you can force money into the system but you can't make it circulate.

The Fed and Treasury have pumped how many trillion dollars into the system and how's credit availability? The Fed, in maintaining these insanely low interest rates are creating the perfect Price Control scenario they talked about in Econ 101 - Supply/Demand curves. Impose price controls and supply disappears - ipso facto. It happend with Nixon and price controls on gasoline for those of you old enough to remember . . . all of a sudden, everyone is out of gas. A couple of years back, it happend with bullion, when the paper price was driven down via market action to a point where it belied the street price of physical metal. Bingo, all of sudden there was limited supplies, increased premiums and delayed delivery. Today this is happening with credit and the artificially low interest rates. What banker in his/her right mind will write a 30 year at 3.75% NFW. Pay them 5-6% and there will be a lot of money available. The paper price of money is being kept lower than the street price by the FED. Ergo, limited supply of credit.

The Pres new program is won't change this.

Also, by way of un . . . or intended consequences, by keeping rates so low, stocks become the investment vehicle of choice for those able, but savers, retirees, and BTW pension funds, are getting exterminated. Talking today on the tube about pension funds in RI using ~8% returns and not hardly coming close, but by using 7% instead, increase their unfunded liabilities from $6B to $9B - and at this rates, they're in deeper trouble. [sorry if my numbers are off a little, but it's the impact of low rates that matters].

Oh, and sure, the bankers will tell you that they're worried about europe. Oh, and the regulators are too tight with their requirements. Oh, and they owe to their shareholders to build up their reserves. Rubbish.

Now, that being a given, at least to me. Where is one to best invest?

You've got to like blue chip dividend paying companies, dividend growth funds, equity income, etc. How about corporate paper? Sure, if you can get a decent yield. I really hate gov't stuff of any sort here at home. I'm not really keen on int'l gov't paper right now either. Stocks that yield could be a double winner so long as the Fed keeps filling the punch bowl - and it looks like they will. This would lead you into the G&I field.

For my basis, I'm still using NCV and JTD (thx Mark) as my lead dogs, but am shopping. I'm keeping all my pm stuff and PRPFX and my natural resource stuff. Lots of cash though and . . .

What say you folks? Where to invest in a zero velocity world?

peace,

rono

scott

Recently increased my position in London investment trust RIT Capital Partners (investing with the Rothschilds). Also remain in a number of commodity plays (both equity and direct commodity), Asian conglomerate Jardine Matheson, a good deal of alternative/flexible funds and some small-to-mid positions in more standard stock funds.

[Deleted User]

Hi rono, Skeeter here ... Good to see you posting and I enjoyed the reading this early am. I see what you are talking about within my own life span and remember the Nixon days well. Nixon put in mandated price controls to try and contain inflation. This time around it is being done through the fed and the effect is the same. Scaricty of goods will be the results. They simply do not want you to hold onto the dollar ... keep it moving ... and, guess what? It's not as you pointed out. One of the things I have done to get a return on my cash ... A hypo here with the numbers but ... actual results. Lets say, I hold 10k in cash at 0% interest. Now, I take 25% of my cash and put it to work in special opportunity plays within the market and I earn 20% with this parlay amount ... Then, the result is a 5% yield on the total package. And, this is exactly what I have been doing to make a return on my cash within my portfolio. In this way, cash has not been a drag on the yield on my portfolio because I have made it a productive asset. In tracking my portfolio returns for an extended period of time I have been able to produce an annualized total return of 16% ... Now, for this year I just went green during the last couple of days.

Please keep posting ... it's nice when you read and learn that others are thinking outside the traditional box ... and, the govt thinks they are putting one over on us ... but, in reality ... it's mearly a snow job and one that will quickly melt ... if they are not carefull.
Woops ... Time for another fix ...

Best regards,
Skeeter

[Deleted User]

Looking for a play ... Try this one ... It is linked below:

http://www.investmentpostcards.com/2011/10/25/commodities-oversold-for-now-dollar-holds-the-key/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+wordpress/VYxj+(Investment+Postcards+from+Cape+Town)

Good Investng,
Skeeter

bee

Hi rono and all,

Here's a nice audio that seems to speak to each of the comments here:

http://www.tristar.us/audio/10212011.mp3

johnN

hey rono...the MASTER!
just dumb question - NCV and JTD/prpfx are your 'play' money right? what about your retirement account, is it mostly in US-treasury/bonds/cash?
what is your BEST cash vehicle
thanks for any commentary...good to hear from you again

Flack

rono,

We need a good stock market crisis - one that will take the markets
down 50% or more.

All of this talk of fiscal and economic reform is just that – talk.
We need a damn good growling bear-market plunge - I mean the kind that rips
the market a new one - to get some serious action from this government.

Washington doesn’t grasp the immensity of the global financial threat.
The current administration inherited a bad economic situation.
And they’ve made it worse.
People are hurting while the stock market thinks that it enjoys
some sort of immunity from these concerns.

We’ve had a Eurozone wakeup call but we’re either too proud or too stupid
to act responsibly and immediately.

I want to see a market crash. I want to see panic.
I want our elected officials get off their asses.
And until they do, I want to be short the market.

scott

Reply to @Flack: If I may ask - are you net short, only short, etc?

Flack

Scott,

Sorry, I don't know how to respond to your cryptic question.

scott

Reply to @Flack: You said, "I want to be short the market."

I was curious if you're purely just short, or are short as a hedge against long holdings or...? Just curious to what degree you are short.

Flack

In my LT portfolio, I'm only in BND since the first week in August.
In my trading portfolio, also at the same time, I went short SPY for two and a half weeks.
When I covered the short position, I bought XLU.
Now I'm short with SDS as a hedge against the long postion in XLU.

A week or so ago I mentioned in a post that it appeared to me that the 1260 area
could be a resistance level. Yesterday the S&P reached 1256.55.
I was a little off.

I think the market could use an enema... first a dip below 1200, then a retest of
the 50-day SMA. That would get my full attention.

I hope you're doing well,
Flack