Speed of money matters…

Weird things are happening in Japan and Germany. People buying safes and stuffing them with cash taken from bank deposits. A deposit that yields nothing or melts with negative rates is the ultimate saver’s punishment.

So the effect is that there is less liquidity (money that the banks can lend). There is an economic term, called a multiplicator, which is correlated with a reserve rate and speed of money (how fast money changes hands).

Under normal circumstances a reserve rate that banks keep their money in the central bank is a tool to increase liquidity and speed of money. If savers withdraw, new loans cannot be made without liquidity injections from a central bank. Meaning, forget about investment activity, funded by loans.

What it means? Global developed markets, plagued by negative rates might actually be poisoning growth, by decreasing the speed of money, since deposits decrease and can’t be matched with loans, since they became cash in safe!

We’re in for an interesting decade in these markets, when considering demographics too…

I’m staying away from these.

Getting rich, slow. Start of the journey.

After long deliberation, I determined that building a bulk of portfolio passively, is going to be good enough for me. I have a demanding job, and don’t want to keep my head clear enough to be excelling at my intellectually challenging job at uncertain times in my company.

So, today’s order is placed on VOO, which I plan to add over time, monthly, based on savings and surplus if I keep discipline and limit my shopping binges. VOO is an S&P 500 cap-weighted index. Trading costs for me are 0, due to having a bank account at Bank of America and getting 30 free Merrill Lynch trades a month.

 

It is going to be a boring journey of dollar cost averaging. To keep me entertained i have an old AMZN position, which had an amazing run and a recent TSLA position which is there for the long haul.

So today’s order is:

2 VOO @ 200.22

Immigrant techie thoughts on financial matters