Media: Expanded Thoughts on Potential Currency Trading Bubble

I gave an interview to My Private Banker the other day.  They wanted to take my discussion of the potential bubble in currency trading a step further. 

Enjoy:

Investing in currencies is all the rage in wealth management. Currency ETFs, ETNs and currency structructured products are springing up like mushrooms. Inspired by the Euro crisis many private investors in the EU have started investing in currency products. Wealth managers and bankers play also a big role as more and more products are pushed on to their clients. But does currency investing make any sense? We talked about this topic to Josh Brown, who is one of the best known global finance bloggers providing daily comments on The Reformed Broker. Josh Brown has been recently a vocal critic of the boom in currency investing.

MyPrivateBanking: Why do you see a bubble in currency trading – comparable to bubbles in stocks or house prices?

Josh Brown: With currencies, we are still at the stage where we’re talking “prospective bubble”, but all the ingredients are there. This isn’t going to be a Price Bubble, it will be an Activity Bubble should the mania take over.

MyPrivateBanking:  What differentiates this bubble from “normal” investment bubbles?

Josh Brown: Normal investment bubbles require a certain backdrop of speculative fervor along with some exogenous encouragement to fan the flames (think innovative mortgages or freely available margin leverage). This one is more akin to the Texas Hold ‘Em craze of the mid-2000’s where all of a sudden all your friends and neighbors were poker sharks out of nowhere.

MyPrivateBanking:  Why do wealth managers increasingly recommend currency products to their clients?

Josh Brown: I think wealth managers are introducing ETFs that are currency-related because of what’s known as “reverse inquiry”. The financial media has done a really terrific job of painting the currency markets as unstable and exciting, this has led to product introductions and marketing which has in turn led to inquiries from the public to their advisors – “How can we get in on this”. The reality is that it’s foolish to “invest” in a currency from an asset management standpoint, unless we’re talking about swinging for the fences with the Iraqi Dinar or something. Currency is not an investment, it is a tool of monetary exchange and hedging activity.

MyPrivateBanking: Should a private client consider such products?

Josh Brown: Anyone looking to trade Forex should not be held back. But they should know that the pros are laughing at them. They should also know that the monster leverage involved all but guarantees a wipeout.

MyPrivateBanking: Are there any good reasons at all to invest in currencies and how should it be done – from a private investor’s point of view?

Josh Brown: Again, currency is not an “investment”. The six major trading pairs are actually fairly stable, there isn’t any money to be made on currency investment, only trading and speculation. And this requires a lot of leverage, which to me cancels out any “benefits” that anyone could cite. I would say no.

MyPrivateBanking: Thanks a lot for your insights, Josh.

Source:

It’s Foolish to Invest in a Currency (My Private Banking)

Read Also:

My Condolences to the Currency Professional (TRB)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. w88 commented on Sep 20

    … [Trackback]

    […] Here you can find 59563 more Info to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  2. Bitcoin Era Review commented on Sep 23

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  3. blazing trader review commented on Sep 27

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  4. bitcoin era commented on Sep 30

    … [Trackback]

    […] Here you can find 20711 additional Info to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  5. immediate edge reviews commented on Oct 01

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  6. Hand raised parrots for sale commented on Oct 09

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  7. 918kiss commented on Oct 24

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  8. DevOps commented on Nov 19

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  9. math homework help commented on Nov 23

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  10. tangerine canada log-in commented on Nov 26

    … [Trackback]

    […] Here you will find 35371 additional Info on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  11. repair service commented on Nov 27

    … [Trackback]

    […] Here you will find 30431 more Information on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  12. buy ruger magazines online commented on Dec 02

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  13. copy Silver Sweetie Bracelet commented on Dec 08

    … [Trackback]

    […] There you will find 13331 more Information to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  14. rbc bank account commented on Dec 20

    … [Trackback]

    […] Read More here on that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]

  15. breitling replica commented on Jan 01

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2010/09/10/media-expanded-thoughts-on-potential-currency-trading-bubble/ […]