As the saying goes, “Everything is for sale, you just have to come up with the right amount to make the purchase” and if you think about it you’ll realise that this is actually true. I’m not just talking about those scenarios where sentiment and desire seem to defy economic logic and trump real market value here. I’m talking about sales which go on without the majority of us even knowing about them. Debt is a very big seller in the world right now, yet it all happens within the darker corners of what’s otherwise plain view as most people choose to turn a blind eye to it going on.
Debt is being sold all day, every day and its trade never stops for single second. For as long as the world is turning, debt is being bought and sold somewhere around the world if not everywhere, you just don’t know it’s going on.
The basic forms of debt are rather straight-forward in their makeup and can take the shape of something like getting financed by the bank to buy your car, for which you’d make weekly or monthly repayments with added interest of course, so something like your mortgage or bond you have on your house which will take a much longer period of up to 20-30 years to pay off.
More sophisticated forms of trading debt are where the real money is made due to one of the most powerful tools of the financial sector; leverage. If a company offering financial services has been given the green light by the Financial Conduct Authority to operate within many different sub-sectors of the financial sector, they in effect hold the true power of leverage and gearing in their hands to generate insane amount of money, mostly through the business of trading debt.
Why do you think an insurance company is seemingly never satisfied with just doing insurance? They’d much rather offer financial services which span the entire insurance sector and given half the chance they’d expand into other financial services such as housing a resident banking branch or even brokerage for services such as offering the public a CFDs and stocks trading platform. In the case of offering a trading platform, licensed brokers are themselves traders and make use of leverage to make huge profits while charging traders a service fee for each trade or perhaps levying a spread fee instead of a fixed per-trade fee.
What’s ultimately at play here is debt because financial services companies can list the credit they hold on their books as assets, assets which can then be repackaged and sold or used as collateral to fund expansion operations or further investments.
Nothing sells like debt and when you earn interest on the money you have in a savings account (although it must be said that this is very little interest you earn) you are indirectly participating in the trading of debt. The money which you keep in the bank is being loaned out to other clients and some of the interest they pay on that loan is filtered down to you, but you’re really just getting scraps because banks have the authority to use leverage to loan out more money than what they physically have in reserve.
Whenever some investors or businesspeople who’ve been active in other spheres of business finally head on over to the financial sector, they often wonder just why they didn’t make the transition earlier. Because of the way in which our financial sector is set up and operates, often making insane amounts of profits is as easy as getting the right finance leads, which are known to be of high quality since financial services have become a very important if not critical part of our everyday lives.
So, the message for you today is that you should perhaps take the time to think about what exactly you’re spending your money on. You can either buy or sell debt and if you do it cleverly, you can enjoy some big financial rewards.