Stock Market Liquidity
There are not many times when one can predict the market, but there may be some reason to estimate the finish of 2005. The 4th quarter usually does well but in recent years that has not been the case. There may be reason for optimism this year.
As stated before the relationship between tax revenue and liquidity can be eerie. The relevant comparison is year over change. September of 2005 was a barn burner in that way, up 20% over September 2004. The IRS fiscal year ends September 30. The year end was up 10% over the previous year. The pace of collections slowed in October, including the late filings, but was up 7%.
The logic to the relationship of taxes collected with liquidity centers on earnings and cash flow. More earnings, more cash flow and more money needing a productive parking place, thus greater liquidity in the market. The other side of the supply and demand equation is of course available equities. Insider selling, new issues and IPOs provide greater supply while buy-backs and buyouts or closings reduce supply. All things being equal, however supply can be ignored and the pressure on price correlates with available funds as reflected in greater government tax revenue.
Gross Domestic Product, GDP rose to 12.2 trillion while national debt rose 8.8% to 7.33 trillion. I think the GDP growth was 4.3%, a healthy number. The point to all this is holiday shopping and the yearend rally. Have you bought your i-pod yet and do you hold Apple and Google to the end of year? I guess I will.
A similar liquidity reference can be calculated for individual stocks by multiplying the average daily volume by 20 and then dividing by the float. The remainder as a percentage of monthly turnovers is called the turnover rate or TRO. Intel and Yahoo are usually around 17% while the hot ones run in the 80s. The float is hard to find but it is usually on Yahoo Finance, although temporarily absent due to an information discrepancy at Yahoo. They assure me the problem will be fixed soon if not already.
Happy holidays, anyone.
As stated before the relationship between tax revenue and liquidity can be eerie. The relevant comparison is year over change. September of 2005 was a barn burner in that way, up 20% over September 2004. The IRS fiscal year ends September 30. The year end was up 10% over the previous year. The pace of collections slowed in October, including the late filings, but was up 7%.
The logic to the relationship of taxes collected with liquidity centers on earnings and cash flow. More earnings, more cash flow and more money needing a productive parking place, thus greater liquidity in the market. The other side of the supply and demand equation is of course available equities. Insider selling, new issues and IPOs provide greater supply while buy-backs and buyouts or closings reduce supply. All things being equal, however supply can be ignored and the pressure on price correlates with available funds as reflected in greater government tax revenue.
Gross Domestic Product, GDP rose to 12.2 trillion while national debt rose 8.8% to 7.33 trillion. I think the GDP growth was 4.3%, a healthy number. The point to all this is holiday shopping and the yearend rally. Have you bought your i-pod yet and do you hold Apple and Google to the end of year? I guess I will.
A similar liquidity reference can be calculated for individual stocks by multiplying the average daily volume by 20 and then dividing by the float. The remainder as a percentage of monthly turnovers is called the turnover rate or TRO. Intel and Yahoo are usually around 17% while the hot ones run in the 80s. The float is hard to find but it is usually on Yahoo Finance, although temporarily absent due to an information discrepancy at Yahoo. They assure me the problem will be fixed soon if not already.
Happy holidays, anyone.
posted by Clancy Hughes | 12/02/2005 05:12:00 PM
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