Stockmarket Crash 2008 & How to Make Money From It.
Jan 26th, 2009 by Lou Harty
Stockmarket Crash 2008 & How to Make Money From It.
1. The stock market crash of 2008 was caused by bad credit lending practices which had become directly tied into the stock market and the derivatives market. New financial vehicles had been created by the banking industry going back to about 1995 in an attempt to allow just about every adult in the U.S. to be able to get a mortgage. This practice was followed in due time by every developed nation’s banks.
2. At first, it seemed like a new golden opportunity had been made by derivatives markets based on these vessels. Unfortunately, the real story was quite different, as some economists and investment professionals warned of for years. The real story was that there had been created a staggering, historic $592 trillion “ghost fortune”.
3. The financial vessels in question were sub-prime CDOs (Collateralized Debt Obligations). The important point is “sub-prime”, indicating these were drawing their value from people whose ability to pay back their loan principal with interest was dubious. As one might imagine, common sense should have dictated that this was a bad move. But common sense was not being used to start with, since mortgages were being given to people who normally would never have qualified–and originally all at the behest of the U.S. federal government. Investors lost $30 trillion globally and many large banks failed.
4. As you might be guessing, a huge amount of these CDOs are once again backed by sub-prime debt. As to those who trade in these shaky vessels (mainly institutionalized investors), if their credit rating goes down they must put up more money to cover their margins. The bank, money market fund, hedge fund, etc then has to sell some of its investments to come up with the margin. But if they are holding CDOs, they often cannot sell them because due to their faulty nature few other investors really want them. So, they then must sell their good investments such as stocks. This removes huge amounts of capital from the world stock markets.
5. This stock market crisis is not quite done playing out yet, either, for another faulty financial sub-prime derivative has also been heavily used. These are called a CDS, or Credit Default Swap. The biggest problem with these securities is–they technically should not be considered securities. They are really insurance contracts between two parties; one of the parties insures the other with the hope that if a certain financial firm or corporation goes under they’ll get paid. Yet, these have been permitted by the U.S. Treasury to be traded on the global financial markets as if they are not insurance contracts, but are merely “swaps” (as they are permitted to be called). Unlike with regulated insurance, there are no reserves requirements.
6. Another $20-$30 trillion of losses is anticipated to be added to the $30 trillion already lost. And all of this has given derivatives a bad name.
7. But not all derivatives are bad, and in fact most of them are good. And these days, one of the very best, most solid derivatives is the E-mini. If you take the time to get a real financial education and learn real trading strategies where you don’t deal in any “sub-prime” rubbish, there is no reason why you can’t use E-minis to make a fortune in trading–an authentic fortune, not a ghost.
8. E-minis are characterized by: low margins; high liquidity; all-electronic, no-middle-man trading; nearly 24 hour a day availability; and the backing of good quality stocks that are traded in “baskets” together within an index like the S&P 500 or the Dow Jones. They will continue to thrive above and beyond the current, continuing crisis. If you learn about them, you can do the same.
Watch This YouTube Video on Trading Eminis Presented By The Author here: http://au.youtube.com/watch?v=Op8migP7JYw
For A Free DVD & Ebook on How To make A fortune From A StockMarket Crash, Please Visit here: http://www.Luxury4Life.com/dvd.asp
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