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Global Financial Crisis

  • #1
  • First Post: Oct 10, 2008 2:37pm Oct 10, 2008 2:37pm
We are at an epoch in history, where our financial system is in crisis. As traders we need to understand the impact of a global recession and bear market in stocks, because the volatility is becoming extreme, and trusted correlations are breaking down.

I invite those who wish to openly discuss the credit crisis and deflationary crash in all asset markets, and how these changes will likely impact trading currencies, commodities, and equities. We need more than fleeting news stories put out by commercial people selling subscriptions, that disappear after a few days at most. History is in the making, and adapting to change along with risk management are critical for economic survival.

There are opportunities in a crisis, but there is also danger. Many in the forum are trying to pick bottoms, which is not wise. Some have not come to "the point of recognition" in the current trends to benefit from market direction, they hope the bottom is in for houses or stocks, and a return to the way things were. We are all trying to figure out how to benefit from these markets.
  • #2
  • Oct 10, 2008 2:54pm Oct 10, 2008 2:54pm
Whenever I get tired of hearing the business talking heads
blathering away on BNN (Business News Network), I turn to
the Communists at the WSWS to sound the alarm:

Quote
Since the passage of the $700 billion government bailout of the banks
last Friday, the Dow has lost nearly 1,200 points. The downward spiral
has not been stemmed by further emergency measures taken by the
government, including a doubling and redoubling of Federal Reserve
emergency loan facilities to the banks, bringing the total to $900 billion,
and the Fed’s unprecedented announcement Tuesday that it would
begin buying up short-term commercial debt for all types of businesses.

As the New York Times put it on Tuesday: “When the White House
brought out its $700 billion rescue plan two weeks ago, its sheer size
was meant to soothe the global financial system, restoring trust and
confidence. Three days after the plan was approved, it looks like a pebble
tossed into a churning sea.”

Bloomberg.com noted that US stock indexes are heading for their
biggest annual decline since 1937.

Speaking of the markets’ dismissal of the coordinated interest rate
cuts on Wednesday, Marc Chandler, global head of currency strategy
at Brown Brothers Harriman, said, “Officials didn’t even have time to
pat themselves on the back before the market said, ‘So what?
This doesn’t address the problem.’” He continued, “Every time
officials do something that doesn’t work, it breeds even greater
anxiety.”

source: http://wsws.org/articles/2008/oct2008/rate-o09.shtml

As far as I can tell, the markets have been irrationally overbought
since the 1990s, and they were due for a big fall. But trading will
continue -- Livermore observed that "speculation is as old as
the hills" in his book, Reminiscences of a Stock Operator, and
traders now are just avoiding the "falling knife" of a plummeting
market.
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
  • #3
  • Edited 4:34pm Oct 10, 2008 2:57pm | Edited 4:34pm
First, our central bankers from the G-7 nations are meeting in Washington today to discuss efforts to restore confidence in the global financial crisis. Their hope is to come up with a plan to stop markets from collapse and a chain of bank failures from cascading.

On the table are demands by Europe and Asia for replacing the USD hegemony as reserve currency. A simplification of the issue is to find a neutral system, not one solely controlled by the US Fed, and it is being referred to as Bretton Woods II for now, to relate to the accord negotiated in 1944 to rebuild economies and peg currencies. The UK has some reasonable proposals, but Bernanke is not keen on doing anything that makes common sense, each Nation has its own ideas on how to repair some damage.

The cat was let out of the bag today by Italian Prime Minister Silvio Berlusconi when he said governments may shut markets, only to reverse himself later. (no doubt he was scolded for letting us in on a 'bank holiday' scheme next week. Story here: http://www.forexfactory.com/news.php...5p#post2273892
  • #4
  • Edited 4:35pm Oct 10, 2008 3:44pm | Edited 4:35pm
The goal was to repair a lack of confidence in the banking systems, but G-7 missed the unified target, and let the markets continue collapsing in capitulation. This is the first of several emergency meetings over the weekend and into next week to discuss much needed changes.

Quote
Oct. 10 (Bloomberg) -- Finance ministers and central bankers from the Group of Seven nations signaled reluctance to adopt a coordinated effort to shore up banks, risking a deeper crisis of confidence after this week's crash in global stock markets.

As equities worldwide suffered their worst week since the 1970s, officials gathering in Washington said they were seeking new ways to stem the meltdown. Still, they argued that tailoring efforts to the needs of individual nations was better than a cross-border plan.
....

Unprecedented interest-rate cuts and bank bailouts haven't quelled the panic in markets, putting officials under pressure to pull even more policy levers today or risk exacerbating the financial and economic turmoil. Among options being discussed today: Pumping taxpayer funds into loss-ridden banks and guaranteeing their deposits and lending between them.
The Standard & Poor's 500 Stock Index slid 5.9 percent to 856.66 at 1:37 p.m. in New York, capping off a 27 percent plunge so far this month. The European Dow Jones Stoxx 600 Index has lost 20 percent in that period, and Japan's Nikkei 225 Stock Average has slumped 27 percent since Oct. 1.
....

The U.S.'s Federal Deposit Insurance Corp. said today it has ``significant latitude'' to take further steps to support banks and their depositors using emergency powers. European leaders have already promised to protect savers.
Steinbrueck and Lagarde cautioned against expectations of a common strategy from the G-7. Lagarde said it is possible to ``show unity and coordinated proposals'' without a ``harmonized response.''
If governments fail, central banks may have more work to do after already executing emergency rate cuts this week. New York University professor Nouriel Roubini recommended they slash interest rates by at least 1.5 percentage points to avert a depression.

http://www.bloomberg.com/apps/news?p...IiE&refer=home
  • #5
  • Oct 10, 2008 4:00pm Oct 10, 2008 4:00pm
Having into consideration the Financial Crisis we are experiencing, should a new guy to Forex wait until it passes so it can experience the “normal market” in Demo Trading?
It makes sense to me. What do you guys think?
This may that a long time!
May we be watching a new financial world with new correlations and rules appearing?
  • #6
  • Oct 10, 2008 4:23pm Oct 10, 2008 4:23pm
It doesnt matter really.... we are all in trouble from our current living conditions. Things are changing and we will no longer have the option of having 10 credit cards with 8-15k on each of them. we will be excited when we get a loan approved for 5k!

Let's all face it! We will depend more on cash than on credit! And that will be scary!
M4X............ Hedging My Way To Profits!
  • #7
  • Oct 10, 2008 4:45pm Oct 10, 2008 4:45pm
Quoting PaulofNunes
Having into consideration the Financial Crisis we are experiencing, should a new guy to Forex wait until it passes so it can experience the “normal market” in Demo Trading?
It makes sense to me. What do you guys think?
This may that a long time!
May we be watching a new financial world with new correlations and rules appearing?
Welcome.

It can be debated, on one hand there is volatility, but the trends are clearly down on most markets. So, you can do quite well be shorting some paids, like USD/JPY, or USD.GBP. I am cleaning up shorting the S&P 500 with my style of wave trading.

These markets should not stop you from demo trading, since it is all practice. I recommend you not demo very long, and get into trading real money in a micro account to train yourself how to deal with the emotions when it really counts, but without risking more than lunch money.
http://www.forexfactory.com/news.php...66#post2254128
  • #8
  • Oct 10, 2008 6:25pm Oct 10, 2008 6:25pm
http://www.pimco.com/LeftNav/Viewpoi...ve+Summary.htm
  • #9
  • Oct 10, 2008 9:43pm Oct 10, 2008 9:43pm
I would like to ask a question to the experienced trader in this forum. Why is it that the dollar is getting so strong vs the euro , gbp and yen, yet the world is experiencing this major financial crisis. What are the mechanics of this? Thank you in advance.
  • #10
  • Edited 4:28am Oct 11, 2008 3:46am | Edited 4:28am
This market had been so much based on credits. Many people had borrowed JPY and invested in stocks. As stocks falls, investors are selling and turning back to cash and then pay back the JPY they borrowed.
People who borrowed Yen and invested in Eur, GBP, Aud ( stocks or cash ) sold the related currencies and paid back in Yen.

This period is a chance for Forex traders to learn one of their last important lessons in their profession. Many do not have this chance. If you wish your offspring to continue your business, write all this trading experience down with every ounce of the feelings you saw it live.

Keep on trading, maybe just reduce the lot size.
One learns when one is in the market live.
This will be a lesson you will not get for a long long time.
  • #11
  • Oct 11, 2008 7:35am Oct 11, 2008 7:35am
Quoting PaulofNunes
Having into consideration the Financial Crisis we are experiencing, should a new guy to Forex wait until it passes so it can experience the “normal market” in Demo Trading?
It makes sense to me. What do you guys think?
This may that a long time!
May we be watching a new financial world with new correlations and rules appearing?
forex is volatile period - demo trade until you got it.
  • #12
  • Oct 11, 2008 7:36am Oct 11, 2008 7:36am
Quoting M4X
It doesnt matter really.... we are all in trouble from our current living conditions. Things are changing and we will no longer have the option of having 10 credit cards with 8-15k on each of them. we will be excited when we get a loan approved for 5k!

Let's all face it! We will depend more on cash than on credit! And that will be scary!

cash is king
  • #13
  • Oct 11, 2008 8:04am Oct 11, 2008 8:04am
http://www.cnbc.com/id/27097823


Jim Rogers, of Quantum Fund, sounds the alarm that banks printing more money will in time to come yield an inflationary crisis.
  • #14
  • Oct 11, 2008 1:27pm Oct 11, 2008 1:27pm
Dr Chris Martenson has put together a free video series to summarize difficult economic subjects, and then connects the dots in a remarkable way.

As a trader, it is invaluable to your understanding to consider these well researched videos, especially the ones about exponential growth and Fed Reserve/Dollar. It is too much truth for many newbies that prefer financial pablum from TV pundits.

http://www.chrismartenson.com/crash-course
  • #15
  • Oct 11, 2008 3:08pm Oct 11, 2008 3:08pm
so..now everybody is having "I told u so...moment"....
Bad Bad..time for the world economy...

Sonic
  • #16
  • Oct 11, 2008 11:32pm Oct 11, 2008 11:32pm
Quoting FXoffshore
Dr Chris Martenson has put together a free video series to summarize difficult economic subjects, and then connects the dots in a remarkable way.

As a trader, it is invaluable to your understanding to consider these well researched videos, especially the ones about exponential growth and Fed Reserve/Dollar. It is too much truth for many newbies that prefer financial pablum from TV pundits.

http://www.chrismartenson.com/crash-course
Good stuff, and anyone trading FX as a busines should have a good understanding of this issue.
  • #17
  • Last Post: Oct 12, 2008 12:45am Oct 12, 2008 12:45am
Every time I visit this website I can't function for about a week:

www.jsmineset.com

He has got everything right for the last five years. I wish that were a trend about to reverse.
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