The recent and ongoing crisis in the financial markets has probably confirmed to many, that trading and investing in these markets is probably no better or safer than gambling.
As a currency trader I can confirm that whilst there are similarities between playing poker and trading certain markets, the blame for this particular crisis lies firmly at the door of the banks, with the market makers taking full advantage of the situation.
Reckless lending to the sub prime end of the market (that is to people with a poor credit record) as well as to over leveraged hedge funds and private equity companies, could not be sustained once interest rates started to rise. In addition it isn’t just a question of bad debt that the banks are suffering from, more importantly, it’s what has been done with this debt which is causing so many problems. By parcelling up the debts and converting them into tradable assets, the risks have been so compounded that no one knows who is now holding the original debts, nor the extent of the debt. As Warren Buffet once said:” It’s only when the tide goes out that you see who has been swimming naked”!!!