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Global markets are jittery as a host of factors contribute to potential market calamity.
US markets in particular face multiple threats:
- US Government is shutdown – when will it reopen? What side effects will it produce?
- Debt ceiling needs to be raised Oct 17th or US Treasury can default.
- US losing credibility, thus putting pressure on US debt markets largely supported by foreign buyers
- Brokers changing rules, Interactive Brokers raised margin levels by 100%
- New taxes and rules being proposed, such as the FX derivatives tax proposed in Germany
- Greece considering confiscation of private assets
It seems that every day, more bad news is released. Yet stock markets are relatively stable. Only yesterday the VIX soared to recent highs. Are traders waiting for the Oct. 17th deadline for raising the debt ceiling, or are markets being propped artificially? Some experts suggest that a new form of high frequency trading mechanisms have been developed and are being implemented by the Fed and large investment banks in markets such as interest rate derivatives. If this is the case, it would make the bubble even worse if it were to pop. Famous trader Julian Robertson believes we are in a bubble:
“we’re in the middle of a kind of bubble market,” and when they “prick the bubble, there will probably be a pretty bad reaction.” With views on The Fed’s easy-money, Twitter, and market frothiness, Robertson is a breath of truthy fresh air that we suspect will not be back on the money-honey’s show anytime soon…
So what are investors to do? Investing has become difficult, even FX Concepts is struggling to outperform, previously the world’s largest FX fund. Certainly training and education cannot hurt, and a more involved hands on approach. DIY investing is not a new concept but should grow as investors lose faith in their managers. Why pay a manager to lose money for you? New models will grow, such as the Global Intel Hub, and investors will ultimately be forced to adapt.
Look at sites like Zero Hedge, which didn’t exist years ago, are now more visited than CNN Money and other mainstream sites. Alternative investing is growing, and the exponential growth of the retail Forex industry is another proof. Forex used to be only traded by large banks, but now it’s possible for anyone to open a Forex trading account.
A paradigm shift in investing and thinking is taking place; the best thing investors can do is learn as much as possible about the markets, the world, how it’s changing, and how this will impact their investments. It doesn’t mean investors should become professional traders, it means that by having more knowledge and understanding they can make more informed decisions. Every investment made by an investor is actually a positive judgement call on that investment; if they are not educated and qualified to make it, it’s like gambling (throwing darts at the board).
Philosophically speaking, if investors were more educated would there be less fraud? Harry_Markopolos proved mathematically that Madoff was a fraud without seeing any actual evidence. He was an institutional investor doing due diligence on behalf of his clients. Isn’t this what all investors should be doing? It may have been difficult in the past but with the internet, information is widely available, and much of it is free.
