Uncle Scrooge's Economics

Which type of market comes to your mind when I say that it has the largest turnover in the world? Equity markets, derivatives, bond? Nope. In general, the bond market is the biggest in terms of securities issued. But "the biggest markets on daily turnover basis''  award goes to Forex markets. Forex is an abbreviation for foreign exchange market. On a daily basis, almost $7 trillion worth of turnover takes place, basically net amount of all buys and sells. That's 2 times the size of India's GDP and 3 times the size of Indian derivative market, traded daily.    They are the biggest markets because they provide some of the biggest advantages. Let's go through them, one by one.  1. Flexibility -  Forex exchange markets provide traders with a lot of flexibility . This is because there is no restriction on the amount of money that can be used for trading. Also, there is almost no regulation of the markets. This combined with the fact that the market operates on a 24...

  Imagine a bright Monday morning accompanied by some cool breeze and a delightful breakfast post-golf session, with a computer making decisions on your behalf and earning 40+% every year. Sounds unrealistic, right? Well, this dream pipe has been a reality for some time. Remember these names: Mayron Scholes, Robert Merton, and John Meriwether . I bet you've heard at least one of these names before. If not, then let me make you all familiar with who these three financial polymaths were and the empire they created, which was successful in drilling a giant hole in the American financial system in the late 1990s. The organisation was Long Term Capital Management (LTCM). Starting with Mayron Scholes, a Canadian economist who is famous for his options valuation formula, the Black Scoles formula, for which he received a Noble Prize. He was the principal and limited partner at LTCM L.P. Also, he was a millionaire. The second person on the list is Robert Merton, another millionaire economi...

Value investing can be someone's cup of tea but, contrarian investing requires balls of steel. Contrarian investing is an investment style in which investors purposefully go against prevailing market trends by selling when others are buying and buying when others are selling, based on intuition and supporting data. Berkshire Hathaway Chair and CEO Warren Buffett is famous for his contrarian bets but, the "Father of all contrarian bets" title goes to none other than, Sir John Templeton.  Contrarian investors believe that people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak. So, when people predict a downturn, they have already sold out, and the market can only go up at this point. As the name implies, contrarian investing is an investing strategy that involves going against the grain of investors sentiment. The principle behind contrarian investing can be applied to indivi...