Today there is a horrific derivatives bubble that threatens to destroy not only the U.S. economy but the entire world financial system as well, but unfortunately the vast majority of people do not understand it. When you say the word "derivatives" to most Americans, they have no idea what you are talking about. In fact, even most members of the U.S. Congress don’t really seem to understand them. But you don’t have to get into all the technicalities to understand the bigger picture.
Basically, derivatives are financial instruments whose value depends upon or is derived from the price of something else. A derivative has no underlying value of its own. It is essentially a side bet. Originally, derivatives were mostly used to hedge risk and to offset the possibility of taking losses. But today it has gone way, way beyond that. Today the world financial system has become a gigantic casino where insanely large bets are made on anything and everything that you can possibly imagine.
The derivatives market is almost entirely unregulated and in recent years it has ballooned to such enormous proportions that it is almost hard to believe. Today, the worldwide derivatives market is approximately 20 times the size of the entire global economy.
Because derivatives are so unregulated, nobody knows for certain exactly what the total value of all the derivatives worldwide is, but low estimates put it around 600 trillion dollars and high estimates put it at around 1.5 quadrillion dollars.
Do you know how large one quadrillion is?
Counting at one dollar per second, it would take 32 million years to count to one quadrillion.…
If you watch any mainstream news program these days, it is almost a certainty that someone will mention the word "recession" before a half hour passes. In fact, it seems like almost everyone is either predicting that we are going into a recession, or they are warning of the need to avoid a recession or they are proclaiming that we are still in a recession. So will the U.S. economy once again be in recession in 2010? When you consider all the signs that are pointing that way, the evidence is compelling. The truth is that there is bad economic news wherever you turn. There is bad news in the housing industry. There is bad news in the financial markets. There is bad news in the banking system. There is bad news coming out of Europe. There are even signs that the bubble in China may be about to burst. Plus, the economic impact of the Gulf of Mexico oil spill could end up being the straw (or the gigantic concrete slab) that really breaks the camel’s back. So there are certainly a lot of pieces of news that "gloom and doom" economists can hang their hats on these days. There is a very dark mood in world financial markets right now, and it seems like almost everyone is waiting for the other shoe to drop. But does all of this really mean that we are looking at the start of another recession before the end of 2010?
The truth is that nobody really knows. Things certainly look very ominous out there. The dark clouds are gathering and the economic winds are starting to blow in a bad direction. The following are 24 pieces of evidence that do seem to indicate that very difficult economic times are imminent….
-U.S. Treasury yields have dropped to stunning new lows. So why are they so low? Well, it is because so many investors are anticipating that we are headed into a deflationary period. In fact, many economists are warning that the fact that Treasury yields are so low is…
"We will have another armed robbery unless we prevent the banks, the banks that are too big to fail. We should say that if you’re too big to fail then you are too big to be. They need more restrictions, such as no derivative trading.” Joe Stiglitz
If a Nobel Prize winner in economics says the obvious, besides a few diligent bloggers, perhaps other economists will obtain ‘air cover’ in speaking about the economic and regulatory absurdity taking place today in the US and the UK. Winning the Nobel is even better than tenure.
Here is avideo of his speech in Brussels, because this Bloomberg article leaves out some of the more ‘pithy’ remarks on the Wall Street bank bonuses, the errors efficient market theory, political and ideological capture, lies (his wording) told by central bankers including Alan Greenspan, unproductive "taxes" by banks on the real economy, ‘criminal’ management of beta, and the social costs of this financial crisis from Joe Stiglitz from the Brussels banking conference.
Stiglitz characterizes the reforms being put forward by the US Congress as completely wrong, and harmful. Watch the video, and compare what Joe Stiglitz is saying with the ponderous mendacity of Larry Summers, and you may better understand why Obama’s policies are doomed to failure.
It does not take much imagine to see how things might be quite different if Joltin’ Joe was the Chief Economic Advisor or Fed Chairman, rather than ‘Last War’ Larry or Zimbabwe Ben.
Oct. 12 (Bloomberg) — Large banks should be banned from trading derivatives including credit default swaps, said Joseph Stiglitz, the Nobel prize-winning economist.
The CDS positions held by the five largest banks posed “significant risk” to the financial system, Stiglitz said at a press conference in Brussels. Big banks should have extra restrictions placed on them, including a ban on derivative trading, because of the risk that they would need government money if they fail, he said in a speech today.
War is Peace, Freedom is Slavery, Ignorance is Strength, and Debt is Recovery
In light of the ever-present and unyieldingly persistent exclamations of ‘an end’ to the recession, a ‘solution’ to the crisis, and a ‘recovery’ of the economy; we must remember that we are being told this by the very same people and institutions which told us, in years past, that there was ‘nothing to worry about,’ that ‘the fundamentals are fine,’ and that there was ‘no danger’ of an economic crisis.
Why do we continue to believe the same people that have, in both statements and choices, been nothing but wrong? Who should we believe and turn to for more accurate information and analysis? Perhaps a useful source would be those at the epicenter of the crisis, in the heart of the shadowy world of central banking, at the global banking regulator, and the “most prestigious financial institution in the world,” which accurately predicted the crisis thus far: The Bank for International Settlements (BIS). This would be a good place to start.
The economic crisis is anything but over, the “solutions” have been akin to putting a band-aid on an amputated arm. The Bank for International Settlements (BIS), the central bank to the world’s central banks, has warned and continues to warn against such misplaced hopes.
What is the Bank for International Settlements (BIS)?
The BIS emerged from the Young Committee set up in 1929, which was created to handle the settlements of German reparations payments outlined in the Versailles Treaty of 1919. The Committee was headed by Owen D. Young, President and CEO of General Electric, co-author of the 1924 Dawes Plan, member of the Board of Trustees of the Rockefeller Foundation and was Deputy Chairman of the Federal Reserve Bank of New York. As the main American delegate to the conference on German reparations, he was also accompanied by J.P. Morgan, Jr. What emerged was the Young Plan for German reparations payments.
The Plan went into effect in 1930, following the stock market crash. Part of the Plan entailed the creation of an international settlement organization, which was formed in 1930, and
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
There is much confusion over what the legal tender law does. I have read articles, written by people who are otherwise knowledgeable about economics, claiming that legal tender forces merchants to accept dollars under threat of imprisonment. Recently, I wrote a short article for Forbes clarifying how legal tender law works in the US.
Legal tender law has nothing to do with merchants. If you want to sell steak dinners in your restaurant for silver, you may legally have at it. Unfortunately, the tax code discourages your would-be customers as I wrote in ...
Steel giant ArcelorMittal (NYSE: MT) has completed the divestment of its 78% stake in European port handling and logistics company ATIC Services S.A. (ATIC) to HES Beheer for €155.4 million (roughly $213 million).
With this transaction, HES Beheer now owns 100% stake in ATIC where it previously held 22% stake. The transaction reflects ArcelorMittal`s strategy of selective deposal of non-core assets.
ArcelorMittal posted a net loss of $0.2 billion or 12 cents per share in first-quarter 2014, narrower than a net loss of $0.3 billion or 21 cents a year ago.
Revenues inched up 0.2% year over year to $19.8 billion in the reported quarter. Sales were almost unchanged from the prior quarter as improved steel shipments were partly offset by lower...
Divergence with small cap stocks and junk bonds persists.
Credit spreads widening suggests building short-term financial stress.
Markets oversold and how risk areas react will be telling.
One of the most widely followed market theories is Dow Theory, which has been around for more than 100 years. The essence of Dow Theory is to focus on confirmations or non-confirmations between the Dow Jones Transportation Average and the Dow Jones Industrial Average for assessing market trends and reversals. If one of the indexes breaks out to a new high while the other does not, we have a non-confirmation and the potential for a market reversal.
Similar to Dow Theory I like to look for confirmation between the stock market and the credit markets. When one market does not confirm the other, caution is ...
A large call spread initiated on Orexigen Therapeutics, Inc. (Ticker: OREX) on Monday morning looks for shares in the name to rally approximately 30% by September expiration. The September expiration is noteworthy as the company awaits the results of the FDA’s review of its resubmitted New Drug Application (NDA) for NB32, an investigational medication being evaluated for weight loss, after the review was extended for three months back in June. The upcoming Prescription Drug User Fee Act (PDUFA) date is September 11, 2014, according to a press release issued by the company. Shares in Orexigen today are up roughly 0.40% at $5.34 as of 2:15 p.m. ET.
Despite a highly eventful week in the news, not much has changed from a stock market perspective. No doubt, investors have grown immune to the daily reports of geopolitical turmoil, including Ukraine vs. Russia for control of the eastern regions, Japan’s dispute with China over territorial waters, Sunni vs. Shiite for control of Iraq, Christians being driven out by Islamists, and other religious conflicts in places like Nigeria and Central African Republic. But last Thursday’s news of the Malaysian airliner tragically getting shot down over Ukraine, coupled with Israel’s ground incursion into Gaza, had the makings of a potential Black Swan event, which in my view is the only thing that could derail the relentless bull march higher in stocks.
Nevertheless, when it became clear that the airline...
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We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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