The current crisis is not similar to Japan’s banking crisis, the Great Depression, or the Crash of 1929. There are many fundamental differences, to name a few:

In 1929:

As the financial situation changes daily, sometimes hourly, traders wonder where to go and how we got here. There are many great articles that have been written in the last month outlining facets of the 'crisis', here we will simply mention a few key points EES did not find in these articles. Articles can be read on our blog www.eliteforexblog.com.

Flying Bankers

It is very simple to see where opinions of the current market have their origins: do you have a vested interest in promoting it? Do you have a large equity portfolio, a large share of Goldman Sachs (GS), or other financials, making you a big promoter of the bailout? In other words, those for the bailout have long equity positions they can't sell, and those against are not in the market.

Elite E Services' primary agenda is the development of automated systems, so the regulatory structure of capital markets is really none of our concern, assuming they are functioning. We see however liquidity problems even in the FX markets, the most liquid market in the world.

One way or another, the dollar is going down. Hold on to your shorts because this will be the short of the decade.

Recent interventions in commodity markets, which has been a combination of short selling in the Gold market, and large institutions taking profit in a multi-year bull market in hard commodities such as Oil, has caused a short uptick in the dollar. The fed didn't raise interest rates, and US economic data did not get any better. Nor was there any watershed event or even a clear indication that the US economy is improving.

The conflict in Georgia is greatly affecting the Euro across the board. What does this all mean, and where should investors go?

Forex [FX] is extremely sensitive to politics, because a shift in a domestic political system can be directly connected to a currency's value. For example, the Chinese government announcement that the Yuan would float, albeit a 'soft peg' to the USD, shattered the relationship between a previously pegged Yuan and the USD. Many watching the situation in Georgia are unaware how this impacts them, and how it impacts FX. Also, this war, like many wars, is an information war, and the media spin leaves viewers with a less than accurate picture of reality.

Depression..or Collapse of Industrial System? 

Why is there an underlying assumption that a market collapse and financial meltdown needs to be a bad thing?  Doom and gloom is all the talk, as if the only positive thing is when the markets are going up.  Many believe that increasing markets are ‘healthy’ and declining markets need ‘fixing’. Isn’t the idea of pure market capitalism that the markets determine the prices freely, i.e. what market participants are willing to (and can afford) to pay, not what sellers would like prices to be?  Is it a question of what is vs. what should be?  Every seller would like a higher price, but their dreams about higher prices are only justified by people willing to pay the price. 

US-based investors are faced with a falling dollar. Any US-based investment is decaying due to an inflationary monetary policy and debasing of the currency. That translates into less purchasing power at the store and at the pump.

Many have recently been flocking to the Euro and while this strategy has been successful, Elite E Services feels this will be short lived as Europe has its own problems. It is a difficult environment to make any forecasts in FX or any other market, however we believe there are several safe plays that should be added to any portfolio: Gold and the Swiss Franc.

Last week, traders were gloating over JPMorgan’s (JPM) coup over Bear Stearns (BSC), without taking any consideration for the fallout. If someone offered you $100 for your home, although there was toxic waste in the backyard, would you accept? Of course, not – you would not sell for pennies on the dollar no matter how bad your property looked.