Lets take a couple and call them Mr and Mrs Brown. Like many thousands of others who had very little saved up, they could not fail to notice two things: money was simple to borrow, and houses went up in value by leaps and bounds. No way were they going to get left out of such an opportunity!
Before long, they found their house, easily obtained credit, and instantly saw their purchase gaining sizable value. They never felt so rich and their ego gained altitude. A new car was a must and a cocktail of new adventures was on the horizon, especially since the price of houses was rising more and more and there was no trouble in raising extra cash against the equity of their new property.
Thousands of couples like the Smiths were becoming the proud new property investors, thus driving the market up and up.
It was obvious that a dangerously high proportion of borrowers were given loans well beyond their means to repay. As a result, numerous mortgage lenders collapsed when the inevitable crash came. Such huge numbers of these subprime mortgages were set up, that it caused havoc and many banks were placed into difficulties when this class of borrower failed to make payments. Furthermore, lots of mortgages were sold on to various investors and hedge funds, making their life miserable to say the least.
Money gets hard to borrow when the banks have empty coffers. Desperate sellers start lowering their prices, but mostly this will not work because the real problem is not the price, but the inability of getting a loan which stops a sale. Naturally this type of situation can only make things worse. Negative equity sets in, bringing further complications.
It is sad to lose a house, but repossessions are on the increase. While it may help the letting market since people cannot live with mum and dad forever, it is not a permanent answer.
When banks have a shortage of money it is not only home buyers who suffer, but all types of businesses from large companies to small traders are hit. Automatically, this in turn sets problems for thousands of private individuals, who cannot keep up their mortgage payments as well as other obligations.
It seems that the old way of making sure a borrower is worthy of a loan, must be strictly observed. It may not please some, but in the long run it will restore sanity to both the borrower and the lender. Unless the two have a happy deal, there will always be a problem.
Being a Calculated Risk Speculator or Just a Gambler
He or she, who is known to gamble on horses, or dogs, or other sporting events etc., is often branded a persona non grata in certain circles.
However, if a person speculates on buying and selling securities, foreign currency, or property, their classification would point to a persona grata.
Both cases are of course a form of gambling dressed in different clothing. In both cases, there is a possibility of risk loss or the possibility of bigger gain. The need to arrive at an opinion without having positive evidence to back it up is equally there. So is the problem that complete facts are hardly ever disclosed, to enable the finding of a certainty.
In spite of these hurdles, in the case of property and foreign currency buying or selling, the chances of getting it right are better as opposed to finding the outcome of a horse or a dog race, or a football game. Getting involved is also less of a worry, because even if you get it wrong, you still have that house or that other currency you bought. The result is over only when you say, since these investments can eventually regain value, and actually show a profit. Backing losers in racing and other forms of gambling can mean that for the serious or occasional gambler, the money is dead and buried.
Of course, some gamblers attach a lot of importance to the thrill effect of their bets. There is no doubt that betting on sport events, cards, or many casino games can be thrilling, but so is the constant movement of the value of currencies. That wheel goes round and round nonstop, but you can get on and off whenever you like. There are many foreign currency exchange companies ready to let you operate, offering very good rates.
Never think of a bookmaker as an enemy whom you have to beat, your selection may be the one he also wants to win. Also, remember your foreign currency exchange office as a friend that makes it possible for you to play at good currency rates. You are putting your wits against a market that has no financial interest in your winnings or losses.
A realtor has equally no interest to see you lose any money. On the contrary, he likes you to be happy with the purchase of your property. Even if the prices should go against you, he knows that in due course things will change.
A speculator in the foreign currency game increases the chances of success by keeping in touch with as much relevant data as possible, which means that there is never a dull moment. The same applies to a property speculator. By having to constantly study the market and world affairs, the person becomes necessarily rather well read and interesting to talk to. Amongst other things, that gambler is a persona grata.
These days, more and more gamblers turn to the forex game. It keeps them amused as well as thrilled. Instead of a horse or a tennis star etc., they are the actual performer. There is little doubt that the well prepared person has the chance to prevail.
The currency market is not a geared slot machine. It has inexhaustible money to hand out if you get things right, and does not care if you keep winning, should you be clever enough.
Some were saving for it, and for them life is not quite as harsh as it could otherwise be. Some would not save, some could not save. Most felt certain the rainy day would certainly never come, but there is no such thing as a certainty. Ask any bookmaker.
Many felt that saving was not worth it because inflation can eat into the savings, so why not spend and have a good time, and in fact borrowing rather than saving became the thing to do. Since easy loans were popping up everywhere, people were lured into borrowing, helped by the property price rises since collateral grew like mushrooms after rain.
It was that line of reasoning that helped to precipitate the inevitable financial fiasco which we are in now.
Being careful with money and saving whenever there is an opportunity has always been a winning formula. While sometimes it may not look all that tasty, it is infinitely better to have something saved than nothing, and definitely better than being in the minus.
It is too late to try and be clever now, what is needed is to find a way how to crawl out of the difficulties.
Since you cannot save money by spending it unwisely, one must try and focus on purchasing the essentials in the most prudent way.
Buying right, does not necessarily mean having to tighten the belt to extremes.
The easier areas of controlling the outflow of cash tend to be in the cost of food, gasoline, heating, clothing and normal day to day expenses. It is those areas that one can concentrate on.
When thinking about feeding ourselves, let us note one thing. During the war, when food was rationed and many items were impossible to buy anyway, it was ascertained that the health of the population was actually in better shape. It was necessary to cut down on sugar, coffee, tea, eggs, butter, cheese, among a host of other items. Little did the population realize at the time how beneficial it actually was for their health.
If it was beneficial then, it is beneficial now, and certainly it will save money by buying less of those items.
Home made soup and home made bread can be really tasty and good for you. It is easy to make, and once getting into the habit you will be pleased. Making sandwiches at home rather than buying them outside can also make your money go further.
There are many books which show the way how to make all sorts of dishes which can replace the expensive ready made meals that some people seem to buy almost every day, in order to save time.
It is also prudent to visit the supermarkets at a time when certain food prices are considerably lowered in order to sell them before the sell by time runs out. This is usually in the evenings.
Using less petrol in your car can be achieved by getting into the habit of not driving too fast. Keeping a steady speed without having to slow down from high speeds and changing gears too often can save a decent amount over a period of time. Keeping the right tyre pressure is also a fuel saving factor.
When it comes to heating bills, draught can be costly. Correcting the problem is cheap and effective. Also, a proper insulation of the premises is vital and saves cash in the long run. Change the type of electric bulbs by fitting the low electric consumption ones. They really do a great job helping to save a lot of money, especially with the winter coming.
When buying clothes, a cheap buy does not always mean getting the best value.
If you are using the phone a lot, especially a mobile, look for the best offers. There is a large choice available and you may be missing out on something which is better for your particular needs.
Getting into the routine of saving money, is getting close to something called wisdom.
It is well known, that sharks must keep swimming or they sink. In a similar way, lots of businesses, not least the banks, share that kind of problem.
For the latter if circumstances arise that can cause interruption to normal activity, life support machinery is required pronto.
Banks need new depositors whose cash will help to pay out existing clients who, like it or not, need to take some of their cash out at times. Since the money from previous depositors Tom, Dick, and Harry is out earning interest, the funds have to come from somewhere to keep the show on the road.
Of course if Tom, Dick and Harry happen to be financially strapped for some horrible reason like a credit crunch, and start missing out on regular payments, headaches of major dimensions will flare up. That is the time to get going and get bailed out by the central bank, who will invariably fork out because after all, who wants to create waves more than is necessary and start a run?
Getting money out of Peter to pay Paul is not really the thing to do, but then, there is an art in doing the wrong thing correctly.
Naturally, it is a bit more complicated than that, and we do need the banks, albeit they need us. Banks play a major role in making business possible, and for deals to take place. It is unthinkable to manage without them. However, it is not pleasant to know, that we have to pray for their good health, which we could ruin without wanting to, and actually help to sink them as well as ourselves at the same time.
The lack of liquidity is of course the main culprit. The wheels of the liquidity providers have to be turning smoothly for them, so that they in turn, can function. Anything going wrong brings fear of safety, and can trigger an avalanche of failures. It does not matter how many safety nets there may be in place, to avoid trouble is hard.
Like the sharks which have to keep swimming or else they sink, one too has to keep active come what may, to keep afloat. It means determination at all levels to do without certain things, raise output as best as possible even if under difficult conditions, and stay cool. Such combination always produces winning results.
It takes only a little to upset the boat, but by the same ruling, a little extra effort can see it sail through to safety.
Remember that song Ya Gotta Have Heart? If you sing it every now and then, it works wonders!
Calculating the Probability and Possibility of Success of an Investment
The probability of a specific outcome and presumption that the outcome result is measured in terms of the odds is fine providing the odds are the true odds.
The odds are numbers designed to show, what the speculator will receive for his outlay when betting on a certain event. It does not matter whether the event is a horse race, or price fluctuation on the foreign exchange currency market.
To be guided by odds formulated by bookmakers is to be guided by their necessity to balance their books because of the public weight of money invested for a particular result to happen. This is their key to the measurement of the odds.
To presume that odds formulated this way is a pointer to a winner is a delusion. Only true odds can do that.
So what are the true odds as opposed to just odds created by the market/bookmaker?
Supposing there is a horse running in a race which is called Father Xmas, and because it is Xmas time, a lot of people will back it, liking the name. Their money will create a demand, and the odds will shorten. These are not true odds representing the winning chance of the horse. These odds are market oriented odds which do not represent the actual capability of the selection.
So what are the true odds needed in your corner to point to achieving a good result?
It is the process of weighing up what will not happen rather than what will. Finding out the real form of the selection based on a series of past performances under various conditions and a host of other data will direct us in the right direction. It means engaging serious attention to any minute point and having the ability to go by that.
Applying this to foreign currency, means that one cannot be constantly under the spell of how the market behaves, but must take the numerous circumstances into account to form an overall picture.
There are times when governments support their currency which might appreciate as a result, but often only for a very short time. That sort of thing does not necessarily signal to buy that currency, and does not represent true odds. However, a temporary following of a trend can often be productive, and spotting it early can mean getting true odds in your favour.
Realizing that certain currencies tend to behave differently at holiday times is most important. Currencies even tend to behave differently at certain times of the day. Learning to spot this is helpful, and is a plus.
The days when certain important data is being released are imperative to bear in mind.
Also are the days, when important people are due to make a speech.
Negative news about the currency you wish to beat can be positive news for the currency you are holding.
Looking for the negative points about the currency you are opposing can be sometimes more productive than looking for the good points about the currency you are holding.
Ideal conditions are when the positive data lifts your currency, and the negative data drags down the other currency at the same time. Now, you are set to fasten your safety belt with great pleasure. That is also the time, when the foreign currency exchange game is like any other game, only more so.
I have often maintained that bookmakers seek to have the odds in their favour, and I do not know of any poor bookies. It is prudent to always follow their example.
The foreign currency market is very strong and full of players. There is never a shortage of money to take out for the well informed, and there is a bottomless black hole for the reckless punters to throw their money into, especially the ones with certain systems.
I used to know a fellow who rarely wrote letters home to his folks, but did send brief telegrams saying system going wellplease send more money.
Remember, that one of the odds in your favour is to deal with the foreign currency exchange companies who are cheaper than the high street banks. You can bet on that.
Take luck and bad luck as two possibilities to be a recipient of. Call them A or B. The outcome of tossing a coin tails or heads brings two possibilities, again A or B.
Now, if you bet only once heads or tails, you have an even money chance of winning. This means that you have an even money chance of being lucky providing you win and walk away and play no more. You also have an even money chance of losing providing you walk away and play no more.
If you won you were lucky and if you lost you were unlucky. You took a chance and won, or you took a chance and lost.
There is luck, and then there is making the right or wrong decision not by chance but by reasoning. If making a decision by taking a chance and you win, than it is luck. If making a decision on the basis of working things out and you win, it is not luck but the consequence of making the right judgement. If you lose it is not bad luck, the cause is due to making a bad judgement.
People tend to mix luck arrived at by chance, with causing the right or wrong decision
based on their judgement. Often, many people work things out incorrectly and thus get an unwanted result, and automatically think themselves as being unlucky. Until they study more what they are into, they will keep on being unlucky.
Take a case where a man loses a five pound note and another man finds it. Here, the finder is plain lucky. The person who lost the five pound note was careless, not plain unlucky.
Being prepared for eventual good or bad developments may result in a loss or gain situation. More often than not, preparation and foresight determine the extent of luck or bad luck.
When professional gamblers or bookmakers lose at the races it is due to information or calculations nor being as good as they expected and not because of bad luck. When the ordinary punters win, it is due to luck based on purely taking a chance.
Well read, and well experienced foreign exchange operators are less likely to be unlucky than haphazard players.
A pilot has to fly lots of miles before he knows all the eventualities. A car driver, albeit he or she passes the driving test, cannot possibly know all the likely unexpected situations that can arise and often do arise, unless they have completed thousands and thousands of miles under all sorts of conditions.
Using the services of a good realtor, stockbroker, builder, accountant etc. may sound to some as not too important and many think they can do it on their own. Like the ordinary punter at the races, their success will be mainly based on luck. However, it is prudent to remember, that there is always a limit with luck. To get more mileage out of luck, the best way is to take precautions to avoid bad luck. Getting professional
advice and increasing your knowledge about whatever you are working on, is the best way forward.
When we read certain statements or listen to comments on various things, we tend to accept them as the truth, albeit that not everybody believes in everything they read in the papers or believes everything some politician might say anywhere in the world.
For instance, there are many items of news coming through about the state of the economy as well as the financial positions of large companies and banks. It would be nice to know if things are not so good, bad, horrible, or desperate.
To get an answer to that, it would be necessary to believe someone, somewhere. Of course, one would have to accept that what one reads and hears is in fact the whole truth.
One could argue that even the law does not require the truth, just the appearance of it. After all, is it not reality, that most cases are settled on what is acceptable to both parties?
With that in mind, one could come to the conclusion that we are often being presented with an appearance of truth, and depending on the brilliance of the performance of the presenter, we swallow it hook, line, and sinker.
The appearance of truth as opposed to the real truth cannot be fairly quickly ascertained like the difference between a real diamond and a fake.
The answer lies in the ability to read in- between the lines. Such ability is something which one is not born with. It comes with a great deal of experience.
The one person you should be able to believe is yourself. If you formulate your own opinion based on knowledge you ascertain is correct, you are doing all that is possible to achieve the best result.
Your opinion may well be arrived at by having studied the problem in question at great length, as well as taking advice from several professional experts. Whatever way you eventually arrive to a conclusion, it will not be on the strength of reading various reports which may be put out in calming way. The sooner you work on mastering the art of reading in-between the lines, the sooner you may be on the track of more accurate versions.
The main concern is getting things right in the field of finance. Whether it is shares, foreign exchange, buying a house here or abroad, etc. it is not only the best deal that counts but also the best time it is prudent to do it There are instances where it is possible to miss the boat due to lack of information and not acting quickly enough to take advantage of favourable situations, or to prevent suffering losses by being able to envisage possible problems well in time.
Staying well informed at the cost of little time and money, can make a huge difference. Seeing things with bewildered eyes is always a formula for disaster.