Political Noise in the Financial Markets

Don’t Get Caught Up In Financial Market Politics
　
http://www.brasschecktv.com/page/671.html

This investment expert claims that the financial markets are not as liquid as they have been. He says machines run the markets today, not buyers and sellers. From the video that you just saw, we have several things to keep in prospective;

1) With any asset, only people can place a price on it.

2) Computers or any other machines cannot place a price on assets.

3) Liquidity is the ability to convert investments and other assets into cash.

4) Velocity of Money Circulation is the rate at which money circulates throughout an economy during a particular period, usually a year.

My dog does not value anything except food, seeing me, and taking a walk around the neighborhood. She does not care about what goes on in the news. She has no opinion on Obama, the state budget impasse, or Mayor Reed leaving office. Everyone that I know places a value on things that goes on and everything that they have or what their neighbors have.

Computers place less value on things than my dog. At least my dog will place a value on food, me, or a walk around the block. If people like me stop programming and running programs on computers, these machines would just be another piece of junk in the corner of a room. People program computers to give things value and that value is measured by the programs placed in it by people.

Velocity of Money Circulation is the rate at which money circulates throughout an economy during a particular period, usually a year. Liquidity is the ability to convert investments and other assets into cash. If 10 of my friends placed a value on a book and sold it to each other over a period of 10 minutes, that book would be very liquid in that room and demand a high velocity. But what if I had been trying to sell the book over the past 40 years and in the forty-first year, I found a buyer? This book would not be very liquid and the velocity of money circulating around that book would be very low. Cars usually have a high velocity of money circulating around it. Missiles usually have a low velocity of money circulation around it.

I said all this to say that stocks on the New York Stock Exchange are more liquid than most Corporate Bonds. However bonds sold on the New York Bond Exchange are more liquid than stocks sold on the "Pink Sheets." Most Stocks and Bonds sold on exchanges are more liquid than Real Estate. Know how you want to use your money in the future. Learn how to place future value on things, not project present day value for future sale. For example, the people who bought copying machine stocks in the early 1970s lost money in relation to inflation thinking that in 2008 these stocks would be worth 100 times their value. In this case timing was everything.
So what this man is talking about in this video means nothing to the average investor or speculator.

The moral of the story is listen to what everyone says but know how to determine what is political noise and what you can use in the financial arena. This may sound trivial but knowing this fact could save investors and speculators a lot of time and money in the long run.