Wednesday, July 20, 2016

These 2 Reasons Are Why The Economy Is A Mess

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*Fed money is not reaching the people.
*Demographics, the more we read the worse it looks.
*The economy is going nowhere fast and needs these key factors to get resolved.
*Until then we will likely remain bearish on stocks.
We were recently impressed by the Republican Convention's call to bring back Glass-Steagall. It will fix a major problem we were wondering about which is the "velocity of money." (Which we will explain) Velocity of money and demographics are the two main reasons the economy is a mess and can't move forward despite the mounds and mounds of quantitative Fed-self-proclaimed "excess."
Until these two factors get resolved (which we will say when) the economy likely continues to slow which is a major risk to the stock market (NYSEARCA:SPY).
The two factors we see holding back the economy which need a major repair are these:
1) The velocity of money
2) Demographics
Let's go one by one why each is slowing our economy no matter how much money gets thrown at it. We will then offer when and/or how we think they will fix themselves.
Velocity of money
A light bulb went off for us when we heard that Republicans may look to bring back Glass-Steagall. It was repealed in 1999. Let's define what the velocity of money is and then lets look at what it has been doing since 1999. We'll need to say why we think that was directly connected to the breaking of Glass-Steagall.
For all you "crony-capitalism" guys you'll love this.
Velocity Of Money: The amount of times money turns over in the economy. The higher it is the more money is changing hands, gets lent, and generally drives the economy. It is called the multiplier effect of money. One dollar invested creates, so to speak, multiple uses because it changes hands so often that it helps the economy accelerate. The more and faster it goes around the better the economy does.
Let's look at the velocity of money and lets keep in mind the Glass Steagall (no relation to Chaim Siegel) repeal timing.
Here's the velocity of money.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS