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Where There's ALWAYS a Bull Market...

Wed, Jul 16 2008, 13:40 GMT
by Jack Crooks

Money and Markets

I've been studying economic cycles for more than two decades. Over that time, I've held key positions in brokerage, money management, and research firms and traded everything from equities to futures.

And let me tell you, there's only one place that offers you the opportunity to multiply your wealth whether the stock market is sinking or soaring ... whether real estate is booming or busting ... whether interest rates are flying or falling ... and regardless of what happens to bonds or commodities.

I'm talking about the currency markets, which are so liquid and so huge, they dwarf every stock and bond market on the planet combined!

These are the same markets where super-investor Warren Buffett's Berkshire Hathaway piled up $294 million in a single quarter, and where legendary trader George Soros made $1 billion in a single day.

Now, it might sound like the currency markets are only for the big boys, and for a while that was true. But no longer. More on why in a moment. First, I want to dispel another common misconception ...

The Currency Markets Are Very Easy To Understand!

If you've ever traveled to a foreign country, you've probably participated in foreign exchange. It's simply the act of trading one currency for another.

Let's say you were preparing to travel to Europe. Prior to leaving the U.S., you might decide to make a trip to the local bank and trade in some of your hard-earned dollars for euros.

If one single U.S. dollar was worth 1.20 euros at the time of the exchange, then $1,000 would buy you 1,200 euros. Simple enough, right?

When making this exchange, you wouldn't be thinking about how to profit on the deal. Your main concern would be to make sure you have euros in your pocket in case you need them during your travels.

But what would happen if you needed to go back to Europe a few months later? Would your dollars buy you as many euros?

Probably not. If the value of the dollar continues going down, you could end up with fewer and fewer euros.

But suppose you bought some extra euros, took them home with you and stashed them in your drawer. Even without earning a penny of interest, that money could grow (in dollar value) more quickly and more steadily than many other of your favorite investments.

These fluctuations are what currency trading in the Forex market is all about ... profiting from the price fluctuations between two different currencies. And that brings me to a very important point:

There's Always a Bull Market in Currencies!

What I like most about currency trading — and one of the reasons I specialize in this market — is that there's always a bull market happening.

The reason is simple: Currencies are different from stocks, bonds or commodities in that they let you make money by buying and selling one currency against another.

It's like a see-saw. When one is going down, the other one has to be going up. So there are always currencies going up. There is always a bull market.

Plus, equally important is the fact that currencies move independently from stocks and bonds. They are non-correlated. For the average investor, that means currencies are a great asset class for diversification.

Here are seven more advantages of the currency markets:

• * Currencies trend better, and more often, than other asset markets. That is because traders in the currency markets are led by price action. This trending aspect of currencies in the medium- and long-term creates excellent opportunities for traders and investors.
• * No one can corner the market. Because the world of Forex trading is so large and has so many participants, investors never have to worry about insider trading or plays that could "corner the market."
• * Maximum price efficiency. It is virtually impossible to manipulate the price of a currency over any significant time frame. Whereas investors in the stock market have to worry about insider trading, cooked books and other corporate shenanigans, Forex traders never have to be apprehensive that there will be an Enron-type event in the currency markets.
• * Unsurpassed liquidity. Unlike some thinly traded stocks and other illiquid investments, there is always a buyer and a seller in the currency market — no matter what the currency. So you will never be stuck "holding the bag." In fact, of the $3 trillion traded each day in the currency market, the world's seven major currencies represent 80% of all that trading. That's deep!
• * No across-the-board crash. In contrast to stocks, bonds and commodities, it is impossible for all currencies to be crashing at the same time. Individual currencies can certainly fall and surge against other currencies. But since the depreciation of one currency is automatically linked to the appreciation of another, a crash affecting the entire market simply isn't possible.
• * No forced shut-downs. In contrast to stocks and futures, which can be shut down, temporarily locking in investors who want to sell, the currency market is virtually impossible to shut down. No matter what happens, you can get out or switch to protect your capital. In fact, it was the only major market in the world that wasn't affected after the 9/11 terrorist attacks that closed stock, bond, and commodities markets across the globe.
• * Last bastion of pure capitalism. There is no physical exchange, nor is there any regulatory body that controls the spot currency market. It is a market driven purely by supply and demand. And prices are set in a purely competitive environment, among the major money center banks on every continent around the world.

Moreover, as I mentioned earlier, you no longer have to open big accounts or take huge risks to trade currencies. Reason ...

Two New Revolutionary Vehicles Are Making It Easy for Average Investors to Trade Currencies

Years ago, only the rich or fearless could trade in the world's currency markets. Now that has changed dramatically, with two new revolutionary vehicles:

Revolutionary vehicle #1: Currency exchange-traded funds (ETFs). These recently-launched ETFs now cover ALL of the world's major foreign currencies plus more!

That means you can now join the world currency profit party with investments that are every bit as familiar, as comfortable and as easy to buy and sell as any stock or other ETF!

Trading these currency ETFs gives you the potential to grow your wealth steadily ... without the unlimited risk of margin accounts or futures ... with as little as $100 per investment ... no matter what's happening in any other investment market!

Revolutionary vehicle #2: World Currency Options™ . These options, offered by the Philadelphia Stock Exchange give you the same kind of leverage that investors associate with high-rolling currency trading, but they do so with strictly limited risk. A small investment can control a relatively large amount of currency, but your risk is limited to the price you pay for the options (and any brokerage commissions).

Instead of entering the scary world of "currency pairs," "spreads," and "pips" that are associated with foreign exchange, these currency options are very easy to understand and trade. In fact, they work just like options on indexes ... and they can be bought and sold in your regular brokerage account.

One last point: The timing of these new investments couldn't be better.

After all, in just the last year, the British pound rocketed to a 26-year high and the Canadian dollar reached parity with the greenback for the first time in three decades!

Those are monumental swings, and they're opening up massive profits for investors who understand the latest currency investment vehicles.

So I encourage you to learn as much as you can, as fast as you can. I'll do my best to help you every Saturday right here in Money and Markets.

Published on  Wed, Jul 16 2008, 13:43 GMT