Taipan Investor Financial

Taipan Covers the Investment World in Stocks, Options, Forex, Commodities

Today is Monday, January 05th, 2009

About the Author

Taipan is a retired commodity broker, forex trader and portfolio manager who enjoys following the forex, stock, and commodities markets and drawing upon his 40 years or so of trading experience to post articles to a series of blogs. While Taipan is not always right with his forecasts he usually offers some interesting insights into markets. Actually if he weren't so modest he would tell you that in the big strategic picture he is almost always right. Taipan is very distrustful of statements made by stock brokers, stock analysis, so called forex experts, and in general talking heads. The investor who thinks that the playing field is level and that he can depend upon MSNBC and CNN for inside trading information has got to be at least a little nuts. If you want to trade well you had better develop your own style and your own sources of reliable information. This blog will attempt to provide market trading information that will be helpful. However, always keep in mind that any decisions made to trade using this information are your sole responsibility. Taipan has been around long enough to know that the markets can make a fool out of anyone so never blindly follow what someone else suggests. To trade well you have to think well and the thoughts need to be your own.

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Acts of Desperation Calm Financial Markets

March 24th, 2008 • Related • Filed Under

Last weeks acts of desperation calm financial markets but for how long?

The Federal Reserve Bank under Ben Bernanke has been hyperactive over the past few weeks. To some financial analysts the Fed’s acts were justified and will help to restore liquidity to the markets. To others the acts look like acts of desperation that have calmed the markets for now but for how long. In fact as investors begin to realize just how close the US system was to a complete meltdown even greater fear and panic may develop.

I tend to side with those who think that having the government become the dumping ground for billions of dollars of toxic waste CDO’s and other near worthless paper is a very bad idea.

I guess it is the moral hazard issue that concerns me. The reward of reckless behavior on the part of the investment banks, commercial banks, and big brokerage firms, by offering huge bailout loans will only in the end make matters worse.

While most analysis now feel that the worse is over these three bears feel that the bad times are just getting started. I tend to agree with them. The size of the derivative market monster is so huge I doubt if anyone really has a grasp on what will likely come next.

Instead of getting all of the horrible “investments” out in the open and dealing with the issue in a transparent manner the Fed will be exchanging good collateral for nearly worthless highly illiquid subprime mortgage paper, CDO’s, derivatives of all sorts, and who knows what else. In my opinion, this will only prolong the issue and in the long run make financial conditions in the US and around the world worse then they have to be.

By allowing the Fed to be used as a dumping ground risk is transfer to the government and to the taxpayer. In time, as the amount of these exchanges of good paper for bad increase to huge amounts the good paper of the Fed will become bad as well. The risk of hyperinflation is quite real.

And that would be a disaster that the US would spend many years in the darkness trying to recover from.

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