Sunday 29 November 2009

Carry on

I caught something on CNN this week. Something about "carry trades". My understanding of this was that people are borrowing money in the US, at a very low interest rate (like 0.5 %) and then putting that cash into a foreign currency, like the Rand, here in South Africa, where you can earn around 10% on your money. I think that was the gist of it.

Sounds like some folk have spotted an international arbitrage opportunity. Borrow in US $ because the interests in America are low, and earn in another country where the rates are much higher.

This does some like some form of trading. But in the virtual sense. Currency trading is a virtual transaction in my view. When you go door-to-door and sell your wares that sounds like a more physical act. But I will touch on that later.

The currency trading scenario is of course volatile because the exchange rate can swing at any moment. It could also of course turn in favour of these so-called financial managers or "money men" or it could go horribly wrong and well, then, you know, everyone just gets a bailout.

So, what's the difference between currency trading or going to a casino. Because, the truth is, no one really knows what will happen. It is all gambling! Going to a casino is considered gambling and the other one is considered to be the domain of intelligent, financially savvy individuals who are smart and sophisticated. You know, cerebral folk, who know more than the rest of us ... what a bunch of crap! They are all full of shit is what they are.

Every year I read in the Sunday Times the annual round up for the 12 months gone by and there is always that colourful result from that one the journalist whose kid threw darts at the dartboard and outperformed most of the financial analysts' predictions. Yup, it is one big gamble, and if luck is on your side, well, then giddyup!

The thing about this financial trading is that it is all virtual. No real work is being done. Well, not from my limited perspective. I find it hard to compare a currency trader with someone else who does an honest and inspired hard day's work.

I guess if a currency trade goes south you declare yourself bankrupt and you start again. Try telling a casino you can't pay them - yeah, right! So, the real gamblers will continue to trade virtually and will look down on us with their pretentious and arrogant ways. If I want to gamble I will call a spade and spade and head on over to a real casino.

Posted by Ronnie Apteker