Important Economic indicator turning negative - A Must Read Thread for all US Residents & Foriegn Investors

[AsifAmeer]

Let me introduce you to a term called "Money Velocity". Its not something very hard to understand. Here's an Illustration from Wiki

If, for example, in a very small economy, a farmer and a mechanic, with just $50 between them, buy new goods and services from each other in just three transactions over the course of a year

• Farmer spends $50 on tractor repair from mechanic.
• Mechanic buys $40 of corn from farmer.
• Mechanic spends $10 on barn cats from farmer.

then $100 changed hands in the course of a year, even though there is only $50 in this little economy. That $100 level is possible because each dollar was spent on new goods and services an average of twice a year, which is to say that the velocity was .

Theek hai? Samajh aa gaya what Money velocity is? In short, the more the money moves around, the more the business activity resulting in economy improving.

Now lets look at something shocking.



This is the Money Velocity Chart of the US economy since 1957. It recorded its lowest reading in history in the first quarter of 2012.

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Ok.. so you would say "So what! Why should I be concerned!" And here's why you should be


This chart peaked in the second quarter of 2006 indicating the impending financial crisis.

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So what did the Stock market do from 2006-Q2? Here..



It just continued to go up till 2008! The trend turns negative in Spring of 2006 and the Market lags to reflect till the start of 2008 - about 21 month before the market realized.

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Now lets look at the recent developments

Turnning negative in the fall of 2010, about exactly 24 months ago. And now the figures are showing numbers lowest since they started creating keeping record!

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So what has the Stock market done since Q2 of 2010?



Its clearly continuing to trend upward.. But for how long...

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Conclusion: The markets can stay irrational longer than you can stay liquid. But I feel we are getting closer and closer to a major major movement and volatility.

[aftab818]

o bhai kun apna waqt zaya karthay ho or hamara bhi, chahay jo bhi ho jayay Amereeka waalay bomb phor kay economic shift apni taraf karkay jaanthay hain, dekh lena chahay bohut kuch hojayay, yeh zaalim qom loot kar apni economy theek karlaingay.

[arnold_mic]

[QUOTEIf, for example, in a very small economy, a farmer and a mechanic, with just $50 between them, buy new goods and services from each other in just three transactions over the course of a year

• Farmer spends $50 on tractor repair from mechanic.
• Mechanic buys $40 of corn from farmer.
• Mechanic spends $10 on barn cats from farmer.

then $100 changed hands in the course of a year, even though there is only $50 in this little economy. That $100 level is possible because each dollar was spent on new goods and services an average of twice a year, which is to say that the velocity was ..[/QUOTE]

Phelay tu farmer or mechanic say phochoo kay ino nay tax kyon nai dyea?

[A.Ali.T]

o bhai kun apna waqt zaya karthay ho or hamara bhi, chahay jo bhi ho jayay Amereeka waalay bomb phor kay economic shift apni taraf karkay jaanthay hain, dekh lena chahay bohut kuch hojayay, yeh zaalim qom loot kar apni economy theek karlaingay.

I doubt it! The more you try to alter the economic events artificially the more they tend to occur and ususally they occur with with vengence.

What this means is that you can introduce as much new money as you want but you cannot make that money buy goods and services.

[AsifAmeer]

@Adeel @Waseem

Guys, it would be great to have a bit of more control for the originator of the thread to hide/deny posts that are off topic from the thread's topic. I have shared much valuable info here on this forum for readers. I would like to either hide or delete posts on my thread so I can maintain the focus of the thread to its original topic.

Possible?

[Ghzanfar]

Afghanistan, Iran, Iraq, Pakistan.... itni sari wars aisay hi tou nai lari jati.... economic meltdown is certain to happen...

[Khallas]

Agreed that we are getting closer towards a big movement & volatility situation. My expectation is between 2012(Q3/Q4) - 2013 (Q1/Q2).

But I'm not expecting as bad situation as was in 07/08.

[VoteME]

Its not gonna get better that's for sure. How about you trade quickly, buy and sell stuff quickly? Or stay liquid in a Foreign Currency e.g China?

[A.Ali.T]

Its not gonna get better that's for sure. How about you trade quickly, buy and sell stuff quickly? Or stay liquid in a Foreign Currency e.g China?

Chinese economy is dependent on exports to US. US being the economic engine of the world, if US goes down it will take down every economy with it. unfortunately US economy is in worst shape than EU's economy. All the indicators are showing that its time to sell US equities, lets see what happens in August, September and October.

Just a reminder, this is for information only, don't buy or sell based on this post, consult your broker before you trade.

[sadia_gul]

Jo looh yeh samajhtay hein Keh US deewaliya punn kashikar honein wala hay, wo ahmaqoon ki jannat mein rah rahay hein. US ki economy dunya ki sub se bari economy hay, more than 14 trillion $, Japan, more than 5 trillion $, on 3rd, it is Germany 3.5 trillion $, then China ya France hay jo 3 se 2.5 trillion $ k kareeb hein.

US ki economy Japan, Germany, aur China aur France, inn sub ki majmoee economy se bhi bari hay.....Jo yeh samajhta hay keh US financially melt down honein wala hay, wo realitiesse bey khabar hay.

Mein US ki aqalat nahn ker rahi yeh facts hein, aur aik andazay k mutabiq agar China issi raftar se jiss se wo abb ker raha hay, taraqi karta raha tu US ki maojooda economic position ko 2066 mein hasil ker sakay ga....

[modern.fakir]

Actually I would like to second that and infact all should be given an opportunity to control posts by the thread originator....It just wont be fair to have it given to one person and not others. Although i do support Asif ...he does come up with financial information and it can get annoying if one has to side step.

@Adeel @Waseem

Guys, it would be great to have a bit of more control for the originator of the thread to hide/deny posts that are off topic from the thread's topic. I have shared much valuable info here on this forum for readers. I would like to either hide or delete posts on my thread so I can maintain the focus of the thread to its original topic.

Possible?[/QUOTE]

[shassan655]

There are few concerns I have..First of all I agree to your graphical explanation that indeed we are going towards the Economic meltdown, but at the same token I would say as long as U.S. dollar is the primary currency for buying/selling around the world I doubt complete doom would be possible.
Secondly, point on China. Chinese would pour in Billions into US so it doesn't crash. Because US is Chinese biggest customer and if US goes down then Chinese are not far behind.

For now that's the few I wrote...Regards

[fight4right]

That is part of the game , one's loss is profit for another.

By the way is indicator say usa ka ecomonists ko to khatra ho skta hay , future markets kay spectators ko nahin , wo is liye keh
traders sari equity ek position par thori lagtey hain , stop loss is always there in mind or usually hard stop

thats why i hate to trade fundamentals because you never know when their effect will ponder in market

[AsifAmeer]

How come? coz the way I see it is that they simply delayed the havoc by bailing out AIG, Bear, Citi.. These banks still have all these SIVs which arent reflected on their balance sheets.

The turd is all there.. just 5 years old now and more smelly. Debt was not liquidated in 08~09. Debt is still there on the system and has only compounded since.

Goldman traders r busy putting together "doomsday put trades"

Agreed that we are getting closer towards a big movement & volatility situation. My expectation is between 2012(Q3/Q4) - 2013 (Q1/Q2).

But I'm not expecting as bad situation as was in 07/08.

[jawad_jd]

@Adeel @Waseem

Guys, it would be great to have a bit of more control for the originator of the thread to hide/deny posts that are off topic from the thread's topic. I have shared much valuable info here on this forum for readers. I would like to either hide or delete posts on my thread so I can maintain the focus of the thread to its original topic.

Possible?

Hi Mr. Asif Ameer ... My understanding is that American economy is being destroyed by their banks, big private corporations and arms industry ... Because it seems like only these three sectors are earning huge profits ... Rest of the economy is sinking ... American stock market is showing unrealistic activity ... This activity resumed after American Government gave a huge bail out ... I think that in 2014 or 2015 this bubble will bust and create a melt down similar to 2008 but it will be much worse and will be much more intense ... I think that all the money injected into American economy ends up in banks because majority of American population is in debt of banks ... A major part of foreign spending goes to arms industry ... Domestic business is captured by big private corporations ... Thats why all the money is being accumulated in these three sectors ... Money flow in major part of the society is decreasing because of this reason ...

I think America is fighting all these wars to save it's economy ... With these wars America is fueling up it's arms sector which is earning a huge profit ... Secondly I heard an economist saying that due to American Army might the dollar is maintaining it's value ... As soon as America looses it's military power, the dollar will collapse instantaneously ...

Am I right ??? I am trying to study world economy ... Please correct me if I am wrong, this will help me to get a better understanding ...

[AsifAmeer]

Here's the issue. US economy is bigger than Japan's and Germany's. True. But its more leveraged too. Plus US economy DEPENDS on foreign investment capital. Yup! US has NO savings! It relies on global savings. US economy's GDP is measured in dollars, a currency that it prints itself. Its like you measuring your height with your home built scale and then saying you are the tallest person alive.

You remember the whole argument about "Decoupling"? And how China and the other BRIC countries would pull the world out of the recession.. Yaad hai? Kiya huwa? BRIC is starting to look like a CRIB. Problem lies in the Global Monetary free-floating currency Standard which uses DOLLAR AS A RESERVE CURRENCY. You cannot lift the bucket you are standing in! The dollar holds everyone back! Read my article on this to get a better understanding
http://blogs.thenews.com.pk/blogs/20...%80%99-dollar/


In no way do I mean that the US will go bankrupt or anything. Na na.. lekin there is going to be a huge market correction. It has to happen. Debt has to be liquidated for demand to make a comeback.

About China surpassing US. That cannot happen in a million years if China continues to recycle its hard-earned savings back in the US treasuries. A million years...

Jo looh yeh samajhtay hein Keh US deewaliya punn kashikar honein wala hay, wo ahmaqoon ki jannat mein rah rahay hein. US ki economy dunya ki sub se bari economy hay, more than 14 trillion $, Japan, more than 5 trillion $, on 3rd, it is Germany 3.5 trillion $, then China ya France hay jo 3 se 2.5 trillion $ k kareeb hein.

US ki economy Japan, Germany, aur China aur France, inn sub ki majmoee economy se bhi bari hay.....Jo yeh samajhta hay keh US financially melt down honein wala hay, wo realitiesse bey khabar hay.

Mein US ki aqalat nahn ker rahi yeh facts hein, aur aik andazay k mutabiq agar China issi raftar se jiss se wo abb ker raha hay, taraqi karta raha tu US ki maojooda economic position ko 2066 mein hasil ker sakay ga....

[AsifAmeer]

China has been doing that for the last 15 years now. 15 years! Sooner or later China will have to stop!

Lekin I do not think dollar will crash. I think dollar will appreciate! Even against gold... in the short run. Its the Equities and especially the debt markets that will be taking a major hit...

There are few concerns I have..First of all I agree to your graphical explanation that indeed we are going towards the Economic meltdown, but at the same token I would say as long as U.S. dollar is the primary currency for buying/selling around the world I doubt complete doom would be possible.
Secondly, point on China. Chinese would pour in Billions into US so it doesn't crash. Because US is Chinese biggest customer and if US goes down then Chinese are not far behind.

For now that's the few I wrote...Regards

[A.Ali.T]

Jo looh yeh samajhtay hein Keh US deewaliya punn kashikar honein wala hay, wo ahmaqoon ki jannat mein rah rahay hein. US ki economy dunya ki sub se bari economy hay, more than 14 trillion $, Japan, more than 5 trillion $, on 3rd, it is Germany 3.5 trillion $, then China ya France hay jo 3 se 2.5 trillion $ k kareeb hein.

US ki economy Japan, Germany, aur China aur France, inn sub ki majmoee economy se bhi bari hay.....Jo yeh samajhta hay keh US financially melt down honein wala hay, wo realitiesse bey khabar hay.

Mein US ki aqalat nahn ker rahi yeh facts hein, aur aik andazay k mutabiq agar China issi raftar se jiss se wo abb ker raha hay, taraqi karta raha tu US ki maojooda economic position ko 2066 mein hasil ker sakay ga....

There are several diversing opinions about state of US economy, some people say that its all doom and gloom whereas some paint a very rosy picture, the reality, however, is somewhere in between.

There is no doubt that US economy has major issues to deal with, the top on the list for me is derivatives. I don't know if you are old enough to remember Barings Bank, it was over two hundred years old bank, even the Queen of England had her account there. The head derivatives trader made an unauthorized unhedged speculative trade of $1.3 billion only in Singapore. His unhedged losses escalated rapidly which eventually led to the bankruptcy of barings Bank. Similarly, LTCM (Long Term Capital Management), managed by couple Nobel prize winners in economics, a hedge fund dealing in derivatives, averaging annualized gains of around 40%. With the onset of east Asian financial crisis they lost $460 million initially, this was made worse by the exit of Solomon Brothers from arbitrage bussines. these losses were further accentuated by Russinan financial crisis. The fund finally eneded up losing $4.6 billion in just four months. It was bailed out by Federal Reserve and eventually liquidated.

There was a news couple of hours ago that JP Morgan lost $4 billion to $6billion in their flawed derivatives portfolio. JP Morgan's derivative position is in trillions.

Right now JP Morgan is in worse position than LTCM or Barings Bank back in 1990s.

The reason I don't disagree with Asif Ameer is because I know a little bit about financial markets, btw I don't live in fools paradise.

[zrajput]

@Adeel @Waseem

Guys, it would be great to have a bit of more control for the originator of the thread to hide/deny posts that are off topic from the thread's topic. I have shared much valuable info here on this forum for readers. I would like to either hide or delete posts on my thread so I can maintain the focus of the thread to its original topic.

Possible?

Anokha Ladla khilan ko mange chand.

[hans]

Bhai Asif, do you remember Sugarcane desi machine.... from one side you pump in fresh sugarcane and the operator kind of repeat the process again and again.. till the time every drop of sugarcane juice is taken out.

Same here .... Tell me one thing .. in all this process, some one is getting rich.. name me that Company.

Even at the height of WW1 and WW2 there were institution that made money on human misery. I bet my sweet Rs 5/- some one some where is making Billion of $$$ in this whole affair.

How come? coz the way I see it is that they simply delayed the havoc by bailing out AIG, Bear, Citi.. These banks still have all these SIVs which arent reflected on their balance sheets.

The turd is all there.. just 5 years old now and more smelly. Debt was not liquidated in 08~09. Debt is still there on the system and has only compounded since.

Goldman traders r busy putting together "doomsday put trades"