I love the currency markets!!! Stocks, bonds, commodities...The currency markets fit my personality the best. I find it very interesting how the economics works between the different countries and somewhat understand (and can feel the difference when I go to other countries) why my US Dollar is worth more or less.
I lived in Germany back in 1980. When I first went there, I was getting 4.50 DM (Deutschmarks) for every $1 US Dollar. By the time I left, I was getting only 2.50 DM to the Dollar. The Mark was much stronger than the Dollar and therefore, I was not able to buy as much as I had previously.
Today, I travel to China a lot. The Renminbi (RMB - the Chinese currency is pegged just like it explains in the video) is about 6.22 RMB to the Dollar. When I go there, I buy that 1liter bottle of Pepsi that costs $0.99 here in the US for only about $0.15 there. This is just one example. However, I am acutely aware of the exchange rate.
So, I love currencies. So what?
I considered trading currencies and even looked at the broker FXCM to open an account. You only needed $500 to open an account. But, here was the thing.... As the video stated you get 100:1 leverage. That $500 is like $50,000 using leverage. And that is what attracted many people to the Forex markets.. FXCM is one of the largest Forex brokerages.
But, here is the thing... leverage is a double edged sword.Sure, you put in $500 and can trade with $50,000 in leverage. But, when the trade goes south...you don't lose $500. You lose $50,000. Many, many people who are not financially educated, bought into the "advertising" of the broker so they could make the commissions of not needing much money to open an account. After all, they did not have the money to buy stocks (which requires roughly $2000 or more to open an account) or even open a commodities account (which requires at least $25,000 or more). So where are they getting the money to pay off the $50,000 or more that they lost in the Forex market?
You guessed it... The video said they will lose their houses, care, saving, etc....
Personally, I heeded Warren Buffets advice about derivatives and leverage being a bad thing. 100:1 - no way for me. I did not open an account and just watch from the sidelines.
That is on a personal note.....
But, what about the economics of what is going on with the Swiss Franc? Sure, people lost their money, retirements, etc... but, that is not you. You did not have your money in the markets.
And that does not mean it won't have an effect on you. If you don't learn about economics, money and don't become financially educated, you won't have a clue..... Yet, it is going to effect you and you will be unprepared. No doom and gloom here...just the fact of the matter.
But, even if you don't know anything, just use some common sense. The Swiss Franc...Switzerland...the place where everyone parks their money. Neutral country. Safe secure bank accounts (at least how they are portrayed in the movies). They were pegged to the Euro as all part of one basket currency. Their economy is such that they have to become unpegged or suffer a fate similar to Greece, yet, this is where we consider a safe haven??? What is wrong with this picture? And what will be the repercussions? Brokerages went bankrupt overnight. People lost everything. And this is only the beginning.
Sure, everyone will survive. Life goes on. People will wake up the next day.
But, the next day will not be the same. Just look at Greece today. Just look at Russia 30 years ago when their currency devalued 75% overnight. The rich survived and the poor became even poorer. They still live under a rock today hoping the government will help them. Yeah, and I have a bridge to sell you.....
So, what does this all mean to you?
If you do not become educated and prepare, it will happen here in the US...See you the next day....