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The World Series of Money (WSOM)
By Mike Conlon | October 21, 2009
Currency Markets, Vegas-Style!
Let’s face it; the currency market is akin to the ultimate final table in the World Series of Poker. At that table, you have eight people sitting around, all trying to bluff one another. Some have large stacks of chips, while others are short-stacked. Some like to talk a little more than others, while others prefer to let their cards do their talking. Ultimately, there will be one winner.
And that is where the similarities end. For in the currency market, there are many winners and many losers. But depending upon the actions of one player, a lot of money hangs in the balance. Imagine if every time Phil Helmuth blew up, you just lost some of your purchasing power. Also imagine that you had no choice in which player you were backing and that the player you have to back was based solely on where you live or work. And you’re watching in disbelief as the player you are forced to back is making dumb move after dumb move and slowly running out of chips. Sounds frustrating and scary, doesn’t it?
Welcome to the world as we know it.
And be thankful that the currency market exists! Why? Because even though you may be forced to cheer for the worst player in the room, you can still vote as to who you think is doing the best. You do that by buying the currencies of the strong players, and selling currencies of the weak ones. This is essentially known as a carry trade.
And in executing a carry trade, you also get rewarded by receiving the difference between the higher yielding currency (the one you buy) and the lower yielding currency (the one you sell) in the form of interest.
And just who are these players whose prowess or lack thereof affects the lives of so many? Why it’s the finance ministers, Central bank governors, and monetary policy makers of the most commonly-traded world currencies out there!
(Cue Michael Buffer voice) Representing the Euro-zone is Jean-Claude Trichet. From Japan, Hirohisa Fuji. From New Zealand, Allan Bollard. All the way from the outback of Australia, Glenn Stevens. Hailing from Canada, Mark Carney. Representing the UK, “Swervin’” Mervyn King. And last, but certainly not least, from the United States, Helicopter Ben Bernanke!
So how do you know who is winning (besides looking at the cards or the amount of chips)? Well that’s easy. Look for the guy who keeps raising the pot, and stay away from the guy who keeps telling you he has the best hand, yet keeps folding and has to borrow money to stay in the game. Also, be conscious of who is speaking the loudest but doing the least.
What you also may notice, is that there appears to be one empty seat at the table, as if there should be someone else playing in the game. This person holds a lot of chips, and can be seen giving them to one specific player time after time.
So when the WSOM (World Series of Money) rankings come out, can you guess who’s atop the leader-board and who is at the bottom?
1st Place: Glenn Stevens, Australia. Shows his willingness to raise the pot and actually does it.
2nd Place: Alan Bollard, New Zealand. Shows his ability to stay in hands by talking up the pot and may be very close to raising.
3rd Place: Jean-Claude Trichet, Eurozone. Keeps winning hands because others keep folding to him.
4th Place: Mark Carney, Canada. Also winning hands because others keep folding, but his talking down of his cards haven’t fooled anyone yet of his strength.
5th Place: Mervyn King, UK. Not winning many hands, but his erratic play is keeping everyone on their toes.
6th Place: Hirohisa Fuji, Japan. Just folds every hand and loses his blinds.
7th Place (Last): Ben Bernanke, USA. Continued bluffing has fooled no one, and is losing hand after hand and has to keep borrowing chips to stay in the game from the player who is not at the table.
Mystery Player: Zhou Xiachuan, China. Doesn’t sit at the table and therefore isn’t bound by its rules. Keeps lending chips to Bernanke and engages in backseat poker playing. Outcome is uncertain as he has never actually ever played a hand.
So, if you are forced to wager and bet on who the winner might be, you just may want to consult these rankings!
To learn more about the currency markets, be sure to check out our currency trading courses!
To get a real-time practice account, click here.
Tags: account, AUD, bank, carry trade, course, currenc, currencies, currency, currency market, currency trading, dow, EUR, fxedu, interest, invest, Japan, live, lot, lower, Mike Conlon, money, pair, practice, Swiss, time
Topics: What To Look At In The Market |