Saturday, July 2, 2005 1:24 PM
When the real estate market crashes; and it no longer appears to be a debate if it will crash, but when, how deep, and how much this will affect the worlds economy. For those lucky enough to sell out before total panic, where will they invest? We all know the reason for the sudden housing boom, is because investors panicked after a tech-bubble collapse in the stock market. So they got burned on stocks, and when they get burned on real estate, where will they invest? Put the money in government bonds, yielding 4% with no potential for capital growth?
While I do agree that the forex industry as a whole is maturing, there is an endless potential in trading and the forex business in general. Most people, even those in the forex business themselves, do not really understand how the forex market itself works. First of all, it is impossible that the ‘forex’ market crashes. It can become extremely volatile, more or less liquid, and single currencies can crash, but the market itself cannot crash. If it does, it would signal a new stone age for mankind. Trucks would not move, power would not be generated, and we would be living in Hollywood movies like The Postman or Waterworld . In times of crisis, the forex market may be the only one open. It is decentralized, and if business is going to function at all, even on a basic level, that money needs to keep flowing. In fact, all other markets are derivatives of the forex markets (when you sell oil, or stocks, you get US dollars in return – so stocks are actually US dollar based)
Now you may see wild events such as major funds going under, banks and brokerages having huge losses because they cannot adapt to an ever changing marketplace, but the market itself must keep flowing if the world is to trade. There are few barriers to entry; while having interbank access and full market depth (seeing all orders) and other advantages are kept secret by those at the top, virtually anyone in their garage can start trading, or start a forex business, with little capital. And it is virtually unregulated. Because it is a ‘cash’ market, technically it does not fall under the jurisdiction of the NFA, although the NFA and CFTC are primarily responsible for regulation, if you are trading spot forex, and not options, you are not trading futures. Secondly, the US cannot regulate the forex market without imposing its regulations on virtually all countries in the world, because as Wall Street and the establishment seek to regulate the market, companies will relocate to other countries (not necessarily tax-haven islands, I’m talking serious countries).
While you may be thinking about gains and losses, consider that over time, losers will be shaken out of the market, and proven forex traders, systems, software, and strategies, will become more and more successful. When boomers take their capital out of the real estate market, the forex market is the only viable alternative, given the current global market environment.
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