Chapter Four: Investing in the World Markets

In the United States, World Markets is the term used to describe the massive swap of U.S. dollars for various currencies throughout the world. The process is highly leveraged, meaning that more money is placed on the table by investors than is spent. Because the United States is a major creditor of oil, the world market serves as an important and potentially decisive provider of foreign currency based financing. For example, if the price of oil rises above a certain level, then more funds can be raised to finance exploration and development of new oil wells, while traders in the oil market may also attempt to sell their oil stocks in order to realize profits.

World Markets

In order to perform a transaction, investors need to have access to a number of different international currencies. For example, a buyer in Dubai can buy a barrel of oil from a producer in the United States, then transport the oil to Europe where it will then be sold on to a refiner in India who will distribute it to the customer within a single European country. One can imagine the complexity of such a transaction, but many traders and institutions manage to execute this type of trade on a daily basis. This example illustrates the multiple global dimensions of the World Markets.

As we have noted in previous chapters, the World Markets provides numerous opportunities for raising capital. The process is heavily leveraged, meaning that a relatively small change in the price of oil can create a large and quick response on the part of buyers or sellers across the board. While some markets are highly localized, others like Tokyo are considered a global center for the financial markets. The various examples outlined in this book serve as a reminder that even the most seemingly isolated market segments can often provide substantial opportunities for investors looking to apply a new approach to their investment portfolio.