Leveraged investing (borrowing to invest)

[Triple B]

Most Derivatives are leveraged so a good place to discuss the subject.
started here so not to fill IG thread.

OK . Max margin on stocks using cfds is usually 20:1
FX is usually 100:1 but can be higher.

Do yo believe all margin/Leveraged investing should be banned ? eg margin loans , options, futures , warrants, FX? You do realize the whole financial system is base on making money from lending money and commissions?
I also imagine you are against short selling?

 

[Triple B]

I am yes because it's feeding a fantasy that is not reality. Right now everything over leveraged/over valued. This includes the Australian sharemarket. The US share market is heavily overleveraged which devalues the currency. Thus, making the rich richer and the poor poorer because of the reduced capacity of purchasing power. Then when reality strikes, a lot of people can't handle it and that euphoria dies, people do strange things to each other and themselves and then end up hurting not only themselves but the people around them.

Those that have a lot loose everything or almost everything and those that have nothing have nothing so you end up screwing everyone over. Thus creating a riot/war etc. That's why the central banks bring out QE which does absolutely nothing other than make things worse.

The thing with these instruments is that they are feeding that fantasy. The problem with feeding too much of the fantasy is that it makes us wanting more but then eventually it never gets enough. Soon it takes more money then it outputs, eventually the thing caves in on itself. I always say that things should come in short bursts and you should grow your money slowly.

This is why this madness needs to end as soon as possible. Otherwise, we could have a world wide catastrophe but I think it's a little too late for that given how high our debt has gone.

OK just to summarize.
No Leverage,
No short selling
Leverage causes overbought /overvalued condition
Leverage pushes USD value down
Grow your wealth slowly no borrowing
Have I summarized that well?

Precisely. Am I not being rational?

...

 

[Triple B]

Is it OK to borrow money for an investment property or to start a business, Perhaps to buy a house to live in -a car?

 

[tech/a]

Of course

 

[Triple B]

Is it ok for governments and corporations to borrow money from investors in the form of bonds?
Is it ok for banks to borrow money from other banks so mortgages can be made?

 

[Triple B]

Is it ok to borrow money to trade stocks, futures , currencies,etc?

 

[Triple B]

If I want to trade Gold Futures contracts (GC 100oz) should I wait until I have $166000 AUD before starting so I am not leveraged.
Or perhaps $16600 AUD for the 10 oz contract.(mini GC)
Or not trade the futures at all if I never intend to take physical delivery of the 100oz of gold?
What if I only have $5000 to trade with . Do I not start and wait till I have saved $50000 to trade stock directly with . Even if holding them for a few hours or days?
Or should we all hold our positions for 10 yaers to grow our wealth slowly?

 

[tech/a]

You can trade using leverage

You need to learn how to use leverage without
Increasing risk.

Someone will show you
If they don’t by the time I get back
I’ll explain

 

[Triple B]

Thanks duck . I understand how leverage works.
These are questions I have posed to further discussion on the subject .
I use leverage of 100x in Fx trading a small account while testing strategies. always using a SL order and max R of 2% of account.
Apparently according to some people leverage is going to cause the next big GFC so all leveraged trading should be banned, along with short selling.
Im off to do a few hours work .

 

[Pixelperfect]

Is it OK to borrow money for an investment property or to start a business, Perhaps to buy a house to live in -a car?

Yeah, here is the problem with drawing money from the future. It leaves nothing for the future generation. It further also devalues the fiat currency rendering it worthless. Oh I wonder what would happen if the US dollar became bankrupt? Oh that's right, it already has but they only are delaying the inevitable. We and other nations could get invaded.

Right now interest rates are capped as are other things to give people the illusion that everything is fine when it's not. The system is starting to show signs of cracking and breaking down.

I am pretty sure we are going to have a world wide war or we will be forced to give up more of a privacy for safety. Australia and the EU is already the testing ground for that.
I guess it could be because the system we are in is designed to fail but we never learn from history so we keep repeating it over and over again. Oh I wonder when this situation has happened before? This honeymoon period? Oh that's right just prior to the great depression and how many people died? Yeah a lot. Then we had a war, disease breakout and more people died. For what? The very same system that is broken from the start.

Why do we keep this crap up?

 

[tech/a]

Yeah, here is the problem with drawing money from the future. It leaves nothing for the future generation. It further also devalues the fiat currency rendering it worthless. Oh I wonder what would happen if the US dollar became bankrupt? Oh that's right, it already has but they only are delaying the inevitable. We and other nations could get invaded.

Right now interest rates are capped as are other things to give people the illusion that everything is fine when it's not. The system is starting to show signs of cracking and breaking down.

I am pretty sure we are going to have a world wide war or we will be forced to give up more of a privacy for safety. Australia and the EU is already the testing ground for that.
I guess it could be because the system we are in is designed to fail but we never learn from history so we keep repeating it over and over again. Oh I wonder when this situation has happened before? This honeymoon period? Oh that's right just prior to the great depression and how many people died? Yeah a lot. Then we had a war, disease breakout and more people died. For what? The very same system that is broken from the start.

The alternative is?

 

[Pixelperfect]

The alternative is?

Slow and steady wins the race but our greed can't help ourselves so we end up hurting others in the long run. Short term pain for long term gain. You really think that by delaying what is happening, is going to miraculously save us? lol. Read up on the great depression and you'll see the uncanny similarities.

 

[tech/a]

Explain slow and steady?

Are you meaning a blanket approach or is the problem
Derivatives?

 

[Pixelperfect]

Explain slow and steady?

Are you meaning a blanket approach or is the problem
Derivatives?

Get rid of derivatives/options/puts/CREDIT etc...They are the instruments that are causing Global Financial crisis in the first place. This whole obsession of centralizing everything and turning the sharemarket into a casino and drawing money from the future is a recipe for disaster.

 

[Pixelperfect]

Also make an honest living. Maybe if people lived honestly, the system would less likely collapse but it's no wonder white collar crime is so rampant in this country and everywhere and why everyone loses their hopes in democracy.

 

[tech/a]

I’m interested in HOW you think these derivatives will
Bring an end to the financial system as we know it.

The 2009 financial crisis was bought about by credit default swaps
Banks imploding into their own self made abyss.

But the derivatives you mention and credit itself???
What part will they play
And what will it cause.
What do you think will be the catalyst and the breakdown
What will we see
What will the signs be —- are there signs already.

Are you implying that this is a problem that is caused by public and business
Leverage/borrowing practices?

 

[Pixelperfect]

I’m interested in HOW you think these derivatives will
Bring an end to the financial system as we know it.

The 2009 financial crisis was bought about by credit default swaps
Banks imploding into their own self made abyss.

But the derivatives you mention and credit itself???
What part will they play
And what will it cause.
What do you think will be the catalyst and the breakdown
What will we see
What will the signs be —- are there signs already.

Are you implying that this is a problem that is caused by public and business
Leverage/borrowing practices?

Let's see, Australia owes over 7 trillion dollars of debt. The US which has a population of over 300 million owes 21 trillion but of course, central banks will come to save the day by printing more money out of thin air, right? . We are so screwed.
http://www.australiandebtclock.com.au

 

[Pixelperfect]

Is it ok for governments and corporations to borrow money from investors in the form of bonds?
Is it ok for banks to borrow money from other banks so mortgages can be made?

It's okay provided you can pay it back in time with the interest, but when has anyone paid back debt on time and fully?

 

[Pixelperfect]

hmm...I wonder which asset class is about to fall by 30% hmm...

 

[tech/a]

While this topic is really interesting you need to present it with a balanced view.

I agree the main issue is Power and Greed.
Starting with Governments and those who are voted into power.
They only gain power with popular policy and popular policy is very costly
Generally its more govt spending and less govt taxing.

Debt to GDP is a metric worth looking at.

Australia isn't on the worst list.
Nor is it on the best list We are at about 45% of GDP.

It is in the best interests of all countries to control world debt.
The sky wont fall just yet.
But it will feel like it has at times.