Re: <nettime> Flash: Currency Speculators Own Planet

[Francis Hwang <sera@fhwang.net>]

>          Most of the market traders know nothing of Lula and little about
>Brazil; he just seems to match their Identikit stereotype of a left-wing
>extremist, so they flee screaming.  Even those who do their research
>cannot afford to act on their superior knowledge of the situation, because
>they know that the majority of their colleagues will react differently,
>and a successful trader is one who guesses which way the herd will run and
>gets there first.

This is interesting. In traditional open markets theory, this kind of 
thing should be automatically corrected, because mass delusion 
represents an opportunity to be exploited. If everybody thinks the 
Brazilian real should be devalued, but you know the fundamentals of 
the real are strong, you should buy, and keep buying as the value 
goes down. You know that one day things will turn around.

But perhaps that's not happening. Why not? Maybe it's because traders 
don't ever hold positions long term -- the word for that is 
"investor", not "trader". Maybe there are positive feedback loops set 
off by a massive devaluation that are impossible to overcome. I don't 
know a lot about currency trading, so this is all just speculative on 
my part.

One more thing: Why is the currency market effectively controlled by 
Americans? Where are the Germans, and the Japanese? Do they have 
currency traders who would possibly their own independent, 
countervailing opinions about da Silva and the real?

F.
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