I'm going to talk to you guys about the velocity
of money.
Specifically how it is slowing down which
means that some troubles may be ahead for
the stock market.
Check it out.
The velocity of money is an indicator of how
many times a single dollar is spent or used
as it cycles through the economy.
So for example, if the farmer needs to go
out for dinner one night, he goes to the restaurant
owner's establishment... the restaurant owner
takes some of that money and hires a contractor
to fix up the apartment, or the restaurant...
and then that contractor eventually has to
go to the doctor... it all adds up to how
much velocity that money has.
In our example, I kind of lost track there,
but it would be about a velocity of four.
Now this chart shows the velocity of money
over time.
The dark areas are times where we were in
a period of recession.
And you can see here that in 2007, 2008, velocity
of money hit an all-time high of about I think
it was about 10.7, each dollar was used 10.7
times as it cycled through the economy.
And you can see here that since then we have
been in a dramatic drop off, our velocity
of money is the lowest it has been in many,
many decades.
It is at about, it is actually at about 5.8
right now, so each dollar is being used about
half as frequently as money used to be used
in 2007 and 2008.
This is why all the money printing and quantitative
easing isn't doing anything.
You can double, triple, quadruple the amount
of money out there but if no one is actually
using it then it is not going to affect the
velocity, and that's why there won't be any
inflation, in that it won't actually help
the economy.
Now as this velocity of money declines, it
represents a couple of things.
One, it shows that people are holding on to
their money longer periods of time, for example
if they are a little bit worried about the
economy, and the other is that there will
be less taxation revenues for the governments
and municipalities.
The less people use money, the less it incurs
taxes which need to be paid.
Velocity of money is just another one of many
indicators we are watching which is leading
us to believe that we are in for a significant
stock market correction or a recession.
Given the recent highs in the stock market
lately, it wouldn't surprise us if the next
move for the stock market was higher, because
there is a lot of momentum there, and there's
a huge flight to safety moving away from Europe
and Asia with all the negative interest rates
that are out there.
However, we do expect that with this decrease
in the velocity of money, that we are going
to experience a pretty significant downturn
in the stock market, and we are positioning
ourselves for that accordingly.
What I always say is that the wrong way to
play this would be to get scared, or to walk
away from the stock market completely.
More opportunities are being set up right
now than we've seen in a long time.
There's plenty of money to be made, and in
fact, more millionaires were made during the
Great Depression than at any other time in
the course of history.
So the ways that we are taking advantage of
the potential for a stock market correction
is to position ourselves ahead of time to
benefit from that, and you can see how we're
doing so far with some of the stocks we've
picked recently.
Such as Goldfield, we picked it at $1.23,
and it's done pretty well.
HTM we selected at 46 cents, about this range
here, and it's done very well lately.
And Avino, we picked this one at a dollar,
and it's at over $3 a share now, in very short
time frame.
These are some of the stock types which are
going to do very well, and we keep finding
stocks all like this that are going to do
good, not just in spite of a recession or
economic breakdown, but because of one.
So, I hope that helpful, you guys are awesome,
please let me know if you have any comments
or questions, and as always click subscribe
on the channel so you can follow along with
us as we come up with new videos, just like
this one, designed to make you profit from
trading penny stocks.
