| March 10, 2010
A lot of people say that online trading is similar to online gambling, but just how true is this comparison?
There are, certainly, elements of online trading that are similar to online gambling - the exposure to risk, the fact that retail investors without a clear system will lose in the long run, even the excitement.
However the combination of technical anaylsis of price movements and fundamental analysis of company or market performance bring in a much deeper dataset to analyze, and if an online trader is building up a portfolio of investments as a long term strategy, then this is quite different from gambling.
Recovery - and Debt
The economic data seems to show pretty conclusively that the green shoots of recovery are real.
But what problems have we stored up for ourselves? Governments, and in particular western governments, have borrowed vast amounts of money to pay for bailouts and stimulus packages. This mountain of debt is growing. The IMF estimates that public debt as a percentage of GDP for OECD will rise from 78% in 2007 to 114% in 2014 - just as the greying population puts even more strain on budgets.
Personal Finance
Are the bright shoots of recovery real, or is it a plant growing out of the side of the cliff as we plummet by?
We have decided to be optimistic (for a change), and will assume that a recovery is starting already in Asia, and will take hold in the US and Europe by the end of the year.
So is it time to look at your personal finances again?
You have probably increased your savings and want to reduce your debt. Looking at mortgage refinancing is one way to reduce your monthly mortgage payments, while a new credit card deal could help you to reduce the interest rate on any outstanding debt.
Most investors have had a terrible year, but the markets have been on a tear since March, and there are still a lot of comparative bargains out there. It might be time to start tentatively thinking about investing again.
But now that we understand the issues, a bit of insurance might be sensible, since the worst can happen as we have seen.
Recession
A recession is a period of decline in a national economy over a period of time, usually two quarters of a financial year. When a recession continues for a longer period of time and is of a more severe nature, it is termed as an economic depression. However, the defining line between recession and depression is not always clearly marked.
Contagion
Contagion is the cross-border spread of financial shocks. Such international spillover means that economic or financial troubles that originate in one nation can affect others.
Repo Rate
Repo rate Repo rate, is short for repurchase rate, and is also known as the official bank rate.
Liquidity Trap
A liquidity trap occurs when the demand for money is so huge people don't want to hold anything but money.
Henry Paulson
Henry "Hank" Paulson, Jr., is the United States Treasury Secretary.
The Fed
The Federal Reserve System is the central bank of the US.
Credit crunch
A credit crunch (or credit crisis) is an economic condition in which loans and credits for investment are suddenly unavailable.
Bailout
A bailout is a rescue from financial trouble. Bailouts are normally enacted by governments to provide financial aid to ailing firms, regional, city or local governments. US and European governments have enacted large bailouts as a response to the credit crunch.
Lehman Brothers
Lehman Brothers Holdings Inc. was an international financial services firm headquartered in New York City. It went into bankruptcy in September 2008 as a result of the credit crunch.
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