In my time trading forex, I never really stopped to consider the physicality of it all. We're dealing with real money here. Most of it is paper mind you, but it's physical nonetheless. And it's being exchanged for goods and services. People are collecting it, spending it, or simply wishing for it. In general more people understand and are involved in the stock markets, but honestly the currency markets play a much more vital role in there lives.
Now despite the dollar gloom and doom, we're in luck that our currency is one of many fiat currencies trending to zero. Since the rates change at any time, we're not always winning that race (here's to hoping the dollar comes in last, cheers). We can look to our European friends to find several examples of failed currencies, not only within my lifetime, but also my trading lifetime. The Turkish lira, and the Icelandic krona to name a couple. I remember watching the bid price on kronas blow up live. What a crazy day that was! However, I was not in Iceland at the time, nor invested in the currency. What happened on the ground when the paper became worthless? What did people do?
This past week I got to experience the fragile beginnings of such an event. Visiting Hungary let me see and touch the bills that may one day be worthless or otherwise replaced. Hungary has never quite recovered from the 2008 financial crisis and the pain is getting worse. Having accepted one IMF bailout, they find themselves asking for another.
So what did the country look like? The bars certainly seemed full. The streets still busy and the restaurants still serving food. Yet there were rallies and protests in front of the parliament building, and whispers on the streets. Currency was leaving the country and locals talked of moving money to nearby Austria and other foreign banks. The feeling in the air was a nervous laughter, ripe with anticipation of knowing what must come, while still hoping it wouldn't.
So what does the collapse of the dollar look like? What will history say? I can imagine a similar story when the time comes.
Showing posts with label capitalist. Show all posts
Showing posts with label capitalist. Show all posts
1.20.2012
5.19.2010
The stock market: or how I learned to stop fearing different and love free markets
A quick note: I've avoided writing this column since the start of the blog. This topic will likely bring heat and controversy. I welcome it. In many ways my own position on this simply isn't thought out enough. It requires more debate; some point and counterpoint to see it developed fully. In that spirit, I present to you what is really my rough opinion.
"Why 99% of savers should avoid the stock market
Over the past several decades, the stock market has become an enormously popular vehicle for retirement savings.
I rest my case." -- Jacob, Early Retirement Extreme
I've long held the view the stock market = wealth = retirement vehicle was flawed. I suppose I would be lying if I said I don't experience any pleasure in watching the DOW drop -- I have nothing to gain or lose whether it goes up or down. However, seeing it drop does make me smile a little inside. My hope is that it would alert others to the inherent issues the stock market has. It's a national game of scandal, taxation, and false information.
Many people may be flabbergasted at this view. Myself being a capitalist (or at least attempting to become one :-) ) should love the idea of trading. And I do! I often still dream of a romanticized view of the 1800's; myself a successful goods trader, perhaps a ship merchant. In my later years having acquired wealth perhaps I'm an early investor/venture capitalist funding trips to faraway places and new ideas. Back in the present, I still like the idea. That's why I'm a trader and will likely remain so. However, I don't trade stocks. Too many people, too much power, and too much politics involved to be a free market. Heck -- just look at this news article for last week. NYSE and NASDAQ are reversing trades! You heard me right. Who wants to trade in an environment where trustees, politicians, regulators, and governments will reverse trades or otherwise try and manipulate price? It's this type of news that almost doesn't shock me. After all,
stocks always go up
put X% of each paycheck into stocks, retire a millionaire
Or so I'm told. The examples of this manipulation and lies are prevalent everywhere. From the mutual fund ads claiming 8% returns, to the CFA in the corner office, to the president himself1!
As a capitalist I am drawn to free markets. In a free market, I can pit myself against others; I can analyze; I can use my brain. In my quest to find such a market, I found forex2. It's size and lack of regulation help prevent against long term manipulation -- even at a government level. Right now the Euroland countries are openly crying foul of the fall the euro has taken. It's to no avail. Whatever they desire for the currency, they cannot change it's price over the long term. Just ask George Soros and the Bank of England3.
The quote that I began this article with is perhaps the short answer to the question: Why not invest in the stock market? Because everyone else is! It's a classic mob question. The only ones making money as part of the mob are what I've termed the mob leaders. In his expanded post, Jacob goes on to talk about when stocks might be a good idea. My thoughts coincide with his -- when you can actually invest in a company, receive dividends, and buy and sell in a fair market it can be a good idea. Unfortunately, it's my view that todays market represents no such thing. And as such I cannot recommend to anyone to play the stock market game.
1. Barrack Obama gives his infamous advice to buy stocks
http://www.bloomberg.com/apps/news?pid=20601110&sid=aBndLi5PmOvc
2. If there are other free markets, please enlighten me. I do not wish to say I believe forex to be the only free market -- merely the one I participate in
3. Soros famously shorted the pound in the summer of 1992, recording a huge profit when the Bank of England was forced to abandon it's artificial rate.
http://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp
"Why 99% of savers should avoid the stock market
Over the past several decades, the stock market has become an enormously popular vehicle for retirement savings.
I rest my case." -- Jacob, Early Retirement Extreme
I've long held the view the stock market = wealth = retirement vehicle was flawed. I suppose I would be lying if I said I don't experience any pleasure in watching the DOW drop -- I have nothing to gain or lose whether it goes up or down. However, seeing it drop does make me smile a little inside. My hope is that it would alert others to the inherent issues the stock market has. It's a national game of scandal, taxation, and false information.
Many people may be flabbergasted at this view. Myself being a capitalist (or at least attempting to become one :-) ) should love the idea of trading. And I do! I often still dream of a romanticized view of the 1800's; myself a successful goods trader, perhaps a ship merchant. In my later years having acquired wealth perhaps I'm an early investor/venture capitalist funding trips to faraway places and new ideas. Back in the present, I still like the idea. That's why I'm a trader and will likely remain so. However, I don't trade stocks. Too many people, too much power, and too much politics involved to be a free market. Heck -- just look at this news article for last week. NYSE and NASDAQ are reversing trades! You heard me right. Who wants to trade in an environment where trustees, politicians, regulators, and governments will reverse trades or otherwise try and manipulate price? It's this type of news that almost doesn't shock me. After all,
stocks always go up
put X% of each paycheck into stocks, retire a millionaire
Or so I'm told. The examples of this manipulation and lies are prevalent everywhere. From the mutual fund ads claiming 8% returns, to the CFA in the corner office, to the president himself1!
As a capitalist I am drawn to free markets. In a free market, I can pit myself against others; I can analyze; I can use my brain. In my quest to find such a market, I found forex2. It's size and lack of regulation help prevent against long term manipulation -- even at a government level. Right now the Euroland countries are openly crying foul of the fall the euro has taken. It's to no avail. Whatever they desire for the currency, they cannot change it's price over the long term. Just ask George Soros and the Bank of England3.
The quote that I began this article with is perhaps the short answer to the question: Why not invest in the stock market? Because everyone else is! It's a classic mob question. The only ones making money as part of the mob are what I've termed the mob leaders. In his expanded post, Jacob goes on to talk about when stocks might be a good idea. My thoughts coincide with his -- when you can actually invest in a company, receive dividends, and buy and sell in a fair market it can be a good idea. Unfortunately, it's my view that todays market represents no such thing. And as such I cannot recommend to anyone to play the stock market game.
1. Barrack Obama gives his infamous advice to buy stocks
http://www.bloomberg.com/apps/news?pid=20601110&sid=aBndLi5PmOvc
2. If there are other free markets, please enlighten me. I do not wish to say I believe forex to be the only free market -- merely the one I participate in
3. Soros famously shorted the pound in the summer of 1992, recording a huge profit when the Bank of England was forced to abandon it's artificial rate.
http://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp
2.13.2010
Step 3 - Becoming Capitalist
So, we've cleared our time, and discussed our needs. Now we can begin to spend our time as desired. To meet our needs however, we're going to utilize trading. Times have changed, but the art of the buy and sell hasn't. Trading evokes the most basic of human emotion and thought. It pits one versus everyone with direct and real consequences. Like heros, we cheer and admire those that can seemingly do the impossible.
For our purposes I am not going to use "The Stock Market". I won't be messing with Wall St here. At least directly. I am not so naive as to think one can escape the grasps of the elite corporations and those with money. I won't seek to defeat them at there own game. However, working for change and revealing the evils that lie in this upper echelon of society is a worthwhile, and indeed necessary pursuit.
So, what sort of trading shall I be attempting? One can trade anything -- even in modern day it is possible to make a living buying and selling physical goods 1. I will take the luxury of having virtual markets buying and selling paper; or really exchanging bytes between computer systems 2.
Forex. This fringe market, so liquid, secretive, and largely unregulated is where I shall participate. In many ways, this wild west of trading markets suits the personality of the transition. But the freedom given in such an unregulated market is too wonderful to give up 3.
We will take advantage of this freedom in many ways. For one, the retail investor such as ourselves is now allowed to "play" with the big boys. This was not always the case. Neither was the ability to trade instantly. And perhaps the biggest draw is that anyone can play. With as little as a dollar, you can take a position 4. Despite all the traps and costs lined up against you, it is definitely possible to make money in this market.
1. See "Around the world in 80 trades" book and BBC special as an example of this
2. Many modern exchanges are now simply the transfer and flow of information. Nothing becomes real until it is settled and withdrawn into the "real" world so to speak. In these days of continual rollover, the line between the "real" world and the digital one continues to thin.
3. Don't be naive here. This freedom means those who would take advantage of others, or cheat, etc, etc both can and will. The protections afforded by more regulated markets simply aren't here.
4. This is one of the reasons why Forex is full of brokers catering to the gambling type. Easy access, no upfront costs, and 400:1+ leverage makes it easy to rob from the unsuspecting "investor".
For our purposes I am not going to use "The Stock Market". I won't be messing with Wall St here. At least directly. I am not so naive as to think one can escape the grasps of the elite corporations and those with money. I won't seek to defeat them at there own game. However, working for change and revealing the evils that lie in this upper echelon of society is a worthwhile, and indeed necessary pursuit.
So, what sort of trading shall I be attempting? One can trade anything -- even in modern day it is possible to make a living buying and selling physical goods 1. I will take the luxury of having virtual markets buying and selling paper; or really exchanging bytes between computer systems 2.
Forex. This fringe market, so liquid, secretive, and largely unregulated is where I shall participate. In many ways, this wild west of trading markets suits the personality of the transition. But the freedom given in such an unregulated market is too wonderful to give up 3.
We will take advantage of this freedom in many ways. For one, the retail investor such as ourselves is now allowed to "play" with the big boys. This was not always the case. Neither was the ability to trade instantly. And perhaps the biggest draw is that anyone can play. With as little as a dollar, you can take a position 4. Despite all the traps and costs lined up against you, it is definitely possible to make money in this market.
1. See "Around the world in 80 trades" book and BBC special as an example of this
2. Many modern exchanges are now simply the transfer and flow of information. Nothing becomes real until it is settled and withdrawn into the "real" world so to speak. In these days of continual rollover, the line between the "real" world and the digital one continues to thin.
3. Don't be naive here. This freedom means those who would take advantage of others, or cheat, etc, etc both can and will. The protections afforded by more regulated markets simply aren't here.
4. This is one of the reasons why Forex is full of brokers catering to the gambling type. Easy access, no upfront costs, and 400:1+ leverage makes it easy to rob from the unsuspecting "investor".
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