Velocity Drops Precipitously
The mysterious “velocity of money” is just GDP divided by the amount of money, in consistent units. The following is created by looking at GDP and M2 (in real dollars). Velocity takes a dive before (and early during) recessions. Maybe this time will be different.
Equity markets are spooked, volumes are quite high. No actual panic, yet. US main market by 1.4 SD. Others much less. It’s not really clear why: presumably all the reasons why the market should have gone down in the past but didn’t. Yields are up everywhere, except Germany, which is odd. Commodities are down, $CL1 (WTI intermediate near future) fairly spectacularly.
Lots of ‘near $TSLAs’ coming up to take its place: $NKLA and $NIO. $GM doing well, because they’ve cracked battery, hydrogen and self-driving technologies.
I feel that today is going to be a “everything retrace.” It might be a good day to pick up some bargains. $XOM (Exxon Mobil) is now yielding over 9%, with an EV/Sales of 1.0. Compare this to $NFLX, which has a nil yield, and EV/Sales of 10.5. It’s last twelve month’s P/E was about 87. This is factoring in gigantic growth, but I struggle to see where this will come from, without sacrificing revenue, given the sheer number of streaming services now available. But I’ve thought this for a couple of years, and I’ve been consistently wrong, so you’ve been warned. $NFLX seems an absolute bargain compared to $ROKU. The latter is trading at an EV/Sales of 15+. Its share price shot up 5% today (against a falling market), on a favourable report from some investment bank. It doesn’t pay a dividend, or make profits, of course.
Everything (including bonds and oil) taking a dive. Gold just green. All equity markets, everywhere going down. $TSLA down 20%. I imagine a few traders will be getting margin calls after hours.