My Forex Online Views: You Don't Paint Over a Broken Wall

Tuesday, May 12, 2009

Monday saw France and Italy come out with industrial production figures that showed a faster and steeper decline than was expected. This data contradicts the banter that the European Central Bank members have been spewing in the news lately that the Eurozone is recovering. If it had been a slight decrease or a slower pace it would not be so alarming for the believers in a quick economic recovery, however the numbers were a shock as it showed that there is a long way to go and that a bottom has not yet been reached in 2 major economies within Europe. Add the fact that 5 banks in Germany are in major trouble and that Eastern Europe is on the brink of financial collapse and you get a picture that is much darker than those charged with managing the Eurozone economy have been painting. Forex Online traders should keep an eye out for this and make their own decisions after reviewing all the facts themselves. IN recent trading, the Euro has been doing well – almost like a safe-haven currency – yet it is my view that the Euro is far from that status and in fact, they are still in big trouble.

Also, one of the largest global banks, HSBC, announced that their earnings for the first quarter were better that for the same period last year. Great news, huh? Not really, they released their data with a comment that basically said that if they had to report everything they reported to achieve those 2008 numbers, they would have ended up with a loss. But, because of changes in the way they report, chiefly the permission to exclude certain investments which are part of the so called “toxic assets” that have plagued banks for so long, they ended up with a good number. So essentially what the bank released yesterday was a watered down version of their earnings showing their good assets and excluding their liabilities. It is all in the numbers, and Forex online traders should pay attention to the banks whose ultimate fate will determine the fate of the overall economy.

Government intervention into private business has had a negative impact on our perceptions – it has left us with a false sense of security and given us a skewed picture of how things really are. Government regulators telling banks to keep certain investments off the books is not productive – and in the end, these investments that are left off the balance sheets for now will come back to bite everyone in the long run should they ultimately fail.

This is a follow-up entry to yesterdays when I ranted about the way the US reported their unemployment numbers and this reaffirms the fact that we are not getting correct information and we are being smoke screened by technicalities that mask the real story. I know I would prefer to hear the truth – if I have a water leak that is damaging my walls I don’t want a fresh coat of paint over the walls just to make it look pretty again, because the source of the problem will eventually come through again and in fact, might create more damage because I have not addressed it. This is the same thing as my leaky wall and the governments of the world’s major economic powers just keep putting paint on it. One day it will burst and no amount of paint will be able to mask the damage.


Sushant May 13, 2009 at 2:09 AM  

Do you know where can i trade USD/INR put options. ?

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