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Currency Trading Is Place to Make Your Fortune: Matthew Lynn
2010-02-16 00:00:00.0 GMT
Commentary by Matthew Lynn
Feb. 16 (Bloomberg) -- This columnist is usually reluctant
to respond to requests for career advice that occasionally find
their way into my e-mail box.
Yet from time to time, there is a move so obvious for
anyone finishing college or university this year, or
contemplating their next step up the career ladder, that it is
worth pointing out.
And right now it is this:
Forget hedge funds, walk away from private equity and tell
the derivatives boys they can dump their baffling mathematical
formulas in the dustbin under the desk.
Instead, become a currency trader. They are set to become
the new kings of the financial markets.
The sovereign-debt crisis, the demise of the dollar and the
creation of new reserve currencies all mean that the great
financial reputations and fortunes will be made in foreign
exchange in the coming few years.
In any decade, one sector of the financial markets is
usually dominant. There is one corner of the financial universe
where so much new stuff is happening, and it is of such
importance to the rest of the world, that it is far easier for a
young, ambitious person to make their mark than anywhere else.
In the 1980s, it was mergers-and-acquisitions deals.
In the 1990s, it was the venture capitalist who backed
technology companies, and the bankers who arranged initial
public offerings for dot-com companies on the stock market.
New Masters
In the 2000s, it was hedge funds, along with the
derivatives traders that supplied them with products.
But in the 2010s, it will be currency trading.
There are already plenty of signs that the foreign-exchange
markets are hotter than a sunny day on Venus.
Deutsche Bank AG reported last month that its currency-
trading platform for retail investors had a 40 percent increase
in customer numbers in 2009. Ordinary investors clearly see
exchange trading as an area of the market they want to be in.
In London, which is the global currency-trading hub, strong
growth is also evident. According to a Bank of England study,
daily trading volumes rose 13 percent to $1.43 trillion in
October compared with April last year. In the U.S., foreign-
exchange trading volumes rose 28 percent to $675 billion a day
in the six months ended in October, according to a Federal
Reserve-affiliated study. Those are impressive numbers. The
volume of London trading isn't quite back to pre-credit crunch
levels, but it is getting close.
Debt Crisis
There are several good reasons for expecting currency
trading to be the focus for financial markets this decade.
First, the sovereign-debt crisis. Governments took on huge
debt to combat the financial meltdown. That didn't really fix
the problem. It just shifted it from one place to another. Now
there are doubts about whether nations can service their
obligations. The only way the markets can discipline
governments, or pass a verdict on their performance, is via the
currency markets. However the crisis eventually works out, it is
the foreign-exchange markets that will be in the driver's seat.
Second, the dollar is in long-term decline. Regardless of
how well the U.S. recovers, the rise of new economies such as
China, Brazil and India means America won't be the dominant
force in the world that it once was. The result? The dollar's
special status is coming to an end. That may be a good thing
after some intense volatility as the world adjusts. Again, it is
currency traders who will be in control of that transition.
Store of Value
Third, the advent of new reserve currencies. With the
dollar on the way down, the world will need something as a
reliable store of value. There are plenty of candidates: It
might be gold, an International Monetary Fund-sponsored basket
of currencies, or a new world currency. Who knows, it could be
something nobody has thought of yet. Ultimately it will be
foreign-exchange traders who decide what works and what doesn't.
You can add into the mix some low-probability, yet high-
impact, events. Perhaps Germany will get fed up bailing out
Greece and Portugal and leave the euro. Maybe the Chinese will
decide to make the yuan the world's dominant currency. Neither
scenario is especially likely, but they would create shockwaves
through the markets for years.
There are usually two conditions for one sector of the
financial markets to be dominant: There must be lots of
innovation, and lots of volatility.
Right now, currency trading ticks both boxes.
That's why if you work in the markets, figuring out clever
ways of swapping euros into yen, and dollars into pounds would
be the best thing you could do. It will be the fastest way to
make your fortune.
(Matthew Lynn is a Bloomberg News columnist. The opinions
expressed are his own.)
Click on "Send Comment" in the sidebar display to send a
letter to the editor.
For Related News and Information:
Top currency stories: TOP FRX <GO>
To read more columns by Matthew Lynn: NI LYNN <GO>
More commentaries: OPED <GO>
--Editors: David Henry, David Clarke.
To contact the writer of this column:
Matthew Lynn in London at +44-20-330-7171 or
matthewlynn@bloomberg.net
To contact the editor responsible for this column:
James Greiff at +1-212-617-5801 or jgreiff@bloomberg.net
+------------------------------------------------------------------------------+
Currency Trading Is Place to Make Your Fortune: Matthew Lynn
2010-02-16 00:00:00.0 GMT
Commentary by Matthew Lynn
Feb. 16 (Bloomberg) -- This columnist is usually reluctant
to respond to requests for career advice that occasionally find
their way into my e-mail box.
Yet from time to time, there is a move so obvious for
anyone finishing college or university this year, or
contemplating their next step up the career ladder, that it is
worth pointing out.
And right now it is this:
Forget hedge funds, walk away from private equity and tell
the derivatives boys they can dump their baffling mathematical
formulas in the dustbin under the desk.
Instead, become a currency trader. They are set to become
the new kings of the financial markets.
The sovereign-debt crisis, the demise of the dollar and the
creation of new reserve currencies all mean that the great
financial reputations and fortunes will be made in foreign
exchange in the coming few years.
In any decade, one sector of the financial markets is
usually dominant. There is one corner of the financial universe
where so much new stuff is happening, and it is of such
importance to the rest of the world, that it is far easier for a
young, ambitious person to make their mark than anywhere else.
In the 1980s, it was mergers-and-acquisitions deals.
In the 1990s, it was the venture capitalist who backed
technology companies, and the bankers who arranged initial
public offerings for dot-com companies on the stock market.
New Masters
In the 2000s, it was hedge funds, along with the
derivatives traders that supplied them with products.
But in the 2010s, it will be currency trading.
There are already plenty of signs that the foreign-exchange
markets are hotter than a sunny day on Venus.
Deutsche Bank AG reported last month that its currency-
trading platform for retail investors had a 40 percent increase
in customer numbers in 2009. Ordinary investors clearly see
exchange trading as an area of the market they want to be in.
In London, which is the global currency-trading hub, strong
growth is also evident. According to a Bank of England study,
daily trading volumes rose 13 percent to $1.43 trillion in
October compared with April last year. In the U.S., foreign-
exchange trading volumes rose 28 percent to $675 billion a day
in the six months ended in October, according to a Federal
Reserve-affiliated study. Those are impressive numbers. The
volume of London trading isn't quite back to pre-credit crunch
levels, but it is getting close.
Debt Crisis
There are several good reasons for expecting currency
trading to be the focus for financial markets this decade.
First, the sovereign-debt crisis. Governments took on huge
debt to combat the financial meltdown. That didn't really fix
the problem. It just shifted it from one place to another. Now
there are doubts about whether nations can service their
obligations. The only way the markets can discipline
governments, or pass a verdict on their performance, is via the
currency markets. However the crisis eventually works out, it is
the foreign-exchange markets that will be in the driver's seat.
Second, the dollar is in long-term decline. Regardless of
how well the U.S. recovers, the rise of new economies such as
China, Brazil and India means America won't be the dominant
force in the world that it once was. The result? The dollar's
special status is coming to an end. That may be a good thing
after some intense volatility as the world adjusts. Again, it is
currency traders who will be in control of that transition.
Store of Value
Third, the advent of new reserve currencies. With the
dollar on the way down, the world will need something as a
reliable store of value. There are plenty of candidates: It
might be gold, an International Monetary Fund-sponsored basket
of currencies, or a new world currency. Who knows, it could be
something nobody has thought of yet. Ultimately it will be
foreign-exchange traders who decide what works and what doesn't.
You can add into the mix some low-probability, yet high-
impact, events. Perhaps Germany will get fed up bailing out
Greece and Portugal and leave the euro. Maybe the Chinese will
decide to make the yuan the world's dominant currency. Neither
scenario is especially likely, but they would create shockwaves
through the markets for years.
There are usually two conditions for one sector of the
financial markets to be dominant: There must be lots of
innovation, and lots of volatility.
Right now, currency trading ticks both boxes.
That's why if you work in the markets, figuring out clever
ways of swapping euros into yen, and dollars into pounds would
be the best thing you could do. It will be the fastest way to
make your fortune.
(Matthew Lynn is a Bloomberg News columnist. The opinions
expressed are his own.)
Click on "Send Comment" in the sidebar display to send a
letter to the editor.
For Related News and Information:
Top currency stories: TOP FRX <GO>
To read more columns by Matthew Lynn: NI LYNN <GO>
More commentaries: OPED <GO>
--Editors: David Henry, David Clarke.
To contact the writer of this column:
Matthew Lynn in London at +44-20-330-7171 or
matthewlynn@bloomberg.net
To contact the editor responsible for this column:
James Greiff at +1-212-617-5801 or jgreiff@bloomberg.net
"rise of new economies such as China" - much of that rise happend on the tabulations of the central planning authority, not in economic reality: There will be much more hardship soon with a looming Chinese collapse bigger than the Soviet Union's.
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