Some individual investors lost big money on their currency positions after the Swiss National Bank abandoned its ceiling on the franc last week.
That just proves the currency market is no place for the average investor,
says Wall Street Journal columnist Jason Zweig.
"Individual investors hurt by the turmoil lost sight of the most important question they must ask: What is my basic advantage in financial markets dominated by professionals?" he writes.
"The sensible answer is that all individuals can still choose to do what most professionals no longer can: invest for the long run without having to measure their performance moment to moment in a mad race to beat the market."
Then there's the wrong choice.
"If, instead, you use borrowed money to speculate in markets you don’t understand, you have taken your basic advantage and distorted it into a lethal disadvantage."
Trading currencies amounts to speculation, not investment, Zweig says. He equates it with gambling in Las Vegas or on a riverboat.
Meanwhile, Nobel laureate economist Paul Krugman says that the SNB's move carries a policy lesson for other nations.
"What’s important is the demonstration of just how hard it is to fight the deflationary forces that are now afflicting much of the world,"
he writes in The New York Times.
And it's not just Europe and Japan at risk, Krugman explains. "While America has had a pretty good run the past few quarters, it would be foolish to assume that we’re immune."
Many economists believe the Federal Reserve should raise rates soon. "But why?" Krugman asks.
"There’s no sign of accelerating inflation in the actual data, and market indicators of expected inflation are plunging, suggesting that investors see deflationary risk even if the Fed doesn’t."
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