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Thursday, September 30, 2010

Forex Market

You have probably heard the term Forex before. It refers to the global foreign exchange market or currency market. It is the largest financial market on the planet and its daily turnover is close to $4 Trillion and it keeps growing. The Forex market is not only the largest financial market, but at the same time the most liquid market. Those two factors alone are reason enough for any portfolio to be invested in the Forex market. It offers a great resources to complement any trading style and portfolio management strategy.

The number one purpose of a portfolio is to generate returns, short-term as well as long-term. Those returns need to be consistent returns in order to be able to depend on the portfolio. The idea, especially for small retail investors, to purchase equities especially through participation in mutual funds is ludicrous. The Forex market offers a great, if not the greatest opportunity, for investors of any size.

Here are some facts and figures about the Forex market

1. Daily turnover close to $4 Trillion and growing
2. High liquidity
3. Operates around the clock except for weekends
4. Low margin requirements
5. High leverage potential
6. Very competitive
7. Global center for foreign exchange is in London, about one-third of all transaction are accounted for there

Keep in mind that the Forex market is a speculative market, and the same degree of risk applies as with any other market. Risk is simply the lack of knowledge and in order to enjoy the countless opportunities presented in the Forex market you need to understand the market. The conditions of the Forex market comes close to perfect competition, but since perfection does not exist there is a minor drawback often temporary. Central banks may interfere with exchange rates due to the stupidity of politicians and policy makers.

Those market manipulation moves have a strong ultra-short term effect. Exchange rates will be manipulated, but effects can diminish as fast as they arose and often provide great opportunities as well. 

Photo Credit: The picture in the top left corner was created by renjith krishnan and downloaded for free use at freedigitalphotos.net.

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Picture Credit: The picture in the top left corner was created by jscreationzs and downloaded for free use at freedigitalfotos.net

Wednesday, September 29, 2010

About

The Last Bear is, despite the suggestion of its name, an unbiased provider of true financial as well as economic news. The Last Bear takes various financial and economic news in order to dissect them which enables The Last Bear to get you the news behind the news. This sets The Last Bear apart from your financial entertainment channels which are filled with biased unprofessional reporters who lack any knowledge about the topics they cover.

When financial and economic news hit the wires, they are almost guaranteed to have a bullish twist to them for one simple reason: 90% of market participants, in an attack of media induced stupidity, require a bull market or an increase in the price of the underlying equity in order to be the proud owner of a portfolio which produces profits. The sad but true story is that, again with the help of unprofessional professionals, most if not all those gains are eaten away by inflation as well as currency deterioration. 

There has been a decade long disconnect with what the media wants the news to be and what they really are. The most recent example is the financial crisis which unfolded in 2007, although it has been over 30 years in the making, and which continues to keep the global economy in a downward spiral.

The Last Bear is a rare outpost for those few individuals who care about the news behind the news and who are fed up with biased bullish coverage about every report that is released. Information passes fast and the same rules apply here. Once you read it it is already too late to act on it, but do not worry. The Last Bear will also provide forward looking analysis based on facts which may or may not help you.

Don't get it wrong, there is a time for bullish bears and bearish bulls. It all depends on reality. Sounds very simple, but to the majority it is a rather hard fact to grasp. Reality is something the majority attempts to avoid at all costs which explains not only the problems faced by individuals, financial as well as general, but also the reason for the increase in appetite for socialism.


By the way, a new avenue which will be covered by The Last Bear are developments in the Forex market, which is the biggest financial market with the highest liquidity and daily turnover of close to $4 Trillion. Do not dismiss the Forex market as part of your overall strategy unless you are as dumb as a mutual fund mismanager, but even some of those unprofessional professionals have started to embrace the Forex market although, as expected, with little or no success.


Do you run your own portfolio?


Great! That is much better than to rape your portfolio with the lack of sophistication offered by a mutual fund mismanager and you should yield much higher returns.  


FYI: A Simple Portfolio


A mix of index futures, most preferably the S&P 500 for the U.S., the FTSE 100 for the U.K. and the DAX 30 or CAC 40 for the EU, and some currency pairs plus 20% cash is enough for a successfully balanced portfolio. Stay away from over-diversification and keep it simple. Another thing to avoid is fundamental analysis as it is a waste of time and indicates nothing. Stick to technical analysis unless you want to run your own mutual fund and always find yourself three steps behind the curve.


Picture via wikipedia.