Title: Investing is Like Riding a Bike
Article: What do walking, riding a bike, and investing in real estate have in common? All of them follow the general rule that doing something new for the first time can be quite challenging. Once you overcome those first time challenges with walking and riding a bike, your muscle memory takes over and you will not forget how to use your new skills. Unfortunately, the challenges with real estate can not be so easily memorized. Economics, market cycles, trends, just to name a few factors, all change on a continuous basis. This means that first time investors as well as seasoned investors have challenges that they must face. The good news is that challenges can be overcome, and once the challenges are managed, there is great reward for your efforts.
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The recent implosion of the global equity markets – from Hong Kong to New York – engendered yet another round of the semipternal debate: should central banks contemplate abrupt adjustments in the prices of assets – such as stocks or real estate – as they do changes in the consumer price indices? Are asset bubbles indeed inflationary and their bursting deflationary?

Central bankers counter that it is hard to tell a bubble until it bursts and that market intervention bring about that which it is intended to prevent. There is insufficient historical data, they reprimand errant scholars who insist otherwise. This is disingenuous. Ponzi and pyramid schemes have been a fixture of Western civilization at least since the middle Renaissance.
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To better understand the current real estate bubble, we need to examine how the real estate market works, not only in the United States, but in other countries around the world. Since 2005, real estate bubbles have existed in the United States, and also in Great Britain, Australia, New Zealand, Ireland, South Africa, Israel, Greece, Russia, and China, to just name a few. In 2005, the Economist Magazine stated that “the world wide rise in house prices is the biggest bubble in history”.

A real estate bubble exists when property values increase rapidly and reach levels that are unsustainable, given the economic conditions that exist at the time. Unfortunately, the fact that a real estate bubble even exists is not identifiable until the market correction begins. Property values rise, and when the market begins dropping, the bubble “bursts”. Unlike a stock market crash following a bubble, a real estate crash and recovery is a slower process because it is not as liquid as the stock market.
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Oil prices today are determined by many factors. As a commodity, oil is of course priced by market forces: supply versus demand. However, oil is subject to several distorting factors which can lead to vast swings in price.

Oil requires a lot of processing to turn it into a useful form. Crude oil is a complex soup of different molecules, and must pass through a refining process to split it out into kerosene, gasoline, diesel and other products. Anything which affects refining capacity (such as a hurricane striking the concentration of refineries around the coast of the Gulf of Mexico) tends to drive up the price of oil, even though the crude oil itself may be coming out of the ground as quickly as ever.
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The study of how currency rates or exchange rates are determined is studied in economics. It is studied in the stand of economics called macroeconomics. There are two different types of exchange rates a country can enforce and they are fixed or floated.

Fixed exchange rates are where the Reserve Bank or related body sells and buys foreign currency, using their home currency (If it was the US Reserve Bank, they will buy and sell currency using USD). By buying and selling foreign currency the reserve bank can determine the exchange rates. But if the Reserve Bank runs out of foreign exchange they stop buying, they will have to sell foreign exchange to build up their foreign exchange reserves so they can start selling currency again. Read the rest of this entry »

You have finally achieved financial freedom and may have achieved your version of success. You are living your dreams and pursuing your passions. You are a millionaire. The good news is that you have achieved a financial status that many people do not have the drive or ability to achieve. The bad news is that once you achieve this status, there are many people that will try to take advantage of your financial situation to their benefit and to your detriment. Keep in mind that not every investment opportunity that is presented to you will be bad, but you do need to be extra cautious of over zealous opportunists that have not fully researched or fully disclosed the ramifications of the investment opportunity.
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