If you’ve heard of the gigantic debt default which the government of Dubai (an Arab Emirate on the Persian Gulf) announced then you’re probably aware that all the talk of the financial crisis being over is just a load of crock. The real-estate bubbles that has burst in the developed countries such as the US and Britain is now seeming to be on the verge of popping elsewhere in the world, at less developed nation.
In the case of Dubai, this has been months in the making even though it has just come into the public eye last week. Super high real-estate prices, a flamboyant and extravagant economy which relies heavily on foreign investments and exorbitant debts to function. It was only a matter of time until the financial crisis hit the small but (formerly) rich Emirate.
Can this happen elsewhere as well?
I believe that it can and I also believe that it will. Dubai was a symbol of prosperity and development in the Arab world. Some of the most complicated and impressive feats of engineering and constructions were thought of and executed there. It became a hub of foreign investments, including several well known celebrities who have houses there (only they’re worth much less today). All I’m saying that if this can happen in Dubai, it can certainly happen in any other emirate or country in the world.
What should you look for: a country with high real-estate prices (before the crisis) which have now plunged, a country which has a very high debt in relation to it’s GNP. There are a number of candidates that I can think of such as Greece and several countries in Eastern Europe.
What has this to do with Forex?
I’m not in the habit of making specific advices but I would steer clear of any of the exotic pairs and stick to the majors only for the time being. As it’s impossible to know which country will topple next, you need to be in the most fluid currency pairs that you can find.
In addition, if you’re investing in things other than Forex, realize that there is still grave risks in the global markets these days. Be aware of that when you create your portfolio.
Other than that, there are opportunities in Forex these days. You just need to find them.
P.S. In this turbulent time, risk control is the most important skill a Forex trader needs to have. Here is a short but powerful technique that you should know about: Risk Reduction Report
