Threat of Hyperinflation – Marc Faber of Gloom Boom & Doom Report (Bloomberg Video)

Have a look at the rather interesting and insightful video below. Marc Faber of Gloom Boom & Doom Report talks about the threat of hyperinflation.

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How Currencies are Pegged (Fixed Foreign Exchange Rates)

This is a continuation of my initial entry to address questions posed by Fariehaz in an earlier article on FOREX trading.

As usual, I’ll keep it simple. I won’t get into too much details.

First of all, currency peg means fixing the exchange rate of one currency against the other (contrast with floating exchange rates). For example, the Malaysian Ringgit (MYR) was pegged with the US Dollars (USD) at 3.800, after the Asian financial crisis.

So, how is a currency pegged?

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What Determines Foreign Exchange (Currency) Rates

Fariehaz, in my original entry on FOREX trading, asked me a couple of questions. They were:

1. What determines Foreign Exchange rates.
2. How currencies are pegged.

In this entry, I will address the 1st question. I will keep it as simple as possible. Only basic explanations will be provided. No in depth explanations will be done in this entry.

There are number of factors that contribute to changes in Forex rates. Below are some of them.

1. Interest rate movements

A rational investor will often look for the best place, in terms of returns, to park their money. If interest rates were high and outlook for the stock market is grim for example, then currency might be the better option (more attractive). Then, currency becomes more expensive due to the high demand..

Also, if you look at two countries. For example, the United States of America and Australia. Australia, at the present moment, has a higher interest rate than the US of A. Thus it makes more sense to park money here in Australia than in the US, thus earning a higher interest. Again, this will drive US Dollars down and push the Aussie Dollars up. This is what you call as… CARRY TRADE.

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Back to Basics: Alternative Investment Asset Classes

A couple of days ago, we had a look at the 4 general investment asset classes.

Today, I shall list out a few others of what I’d like to call as the Alternative Investment Asset Classes.

They are:

Venture Capital

Venture capital is the act of investing in new businesses. The field of venture capital can be very lucrative, providing above average returns, due to the high-risk nature of it. However, the risk of going bust is also quite high.

Basically, what happens is that you, as an investor, provides money to startup firms/companies with long-term growth potential.

Examples: Investing in a new Nasi Lemak business, investing in Nadlique’s Blog 😛

Private Equity

A private equity is basically a syndicate (not the bad kind of course) where funds are raised and used to develop new products or technology, expand working capital, make acquisitions and takeovers, or to build up a company’s balance sheet.

You need to have a heck load of money to be involved in private equity, thus it is usually not available to the average individual investor.

Art

There are many things that can be categorised as arts such as paintings, sculptures, and printmaking. These are usually long-term investments whereby capital gains are most likely to be produced.

Examples: Picasso paintings, Van Gogh paintings, Nadlique’s paintings here and here (anybody interested in buying my paintings? Hehe).

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Market Wizards by Jack D. Schwager

Title: Market Wizards
Author: Jack D. Schwager
ISBN: 13 978-0-88-730610-5
Number of pages: approximately 500 pages

For those aspiring traders, just-starting-out traders, or professionals, this publication is an absolute must! If you have not read this book yet, then hold the thought of assigning the TRADER credentials by your name. Yup folks, the book is that amazing. Not to mention important.

The book compiles a number of interviews between the author, Jack Schwager with various traders.

Here are a few traders that you’ll be reading about:

  • Michael Marcus, who turned $30,000 into $80 million
  • Paul Tudor Jones, whose funds have registered triple-digit gains five years straight
  • Ed Seykota who realized an amazing 250,000 percent return on his accounts over sixteen years
  • and lots more..

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