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
The Greek day of decision has arrived, and with it so did the Greek finance minister at his local voting booth...
... who then proceeded to enshrine today's referendum vote as a holy moment for Greece:
"Today, after five years of failure, the Greek people have the opportunity to decide on the last ultimatum of the Eurogroup, the institutions and our partners. This is about a holy moment. A moment of hope for the whole of Europe. A moment that gives hope to Europe that the common currency and democracy can co-exist, and they do co-exist "
Unknown Magazine and cannonballs at Battery Rodgers, Alexandria 1863
I hardly ever go out in the morning, the first 7-8 hours of every single day are taken up by reading and writing. But today I did, to feel the mood in the city. Not sure I got it, though. Everything’s quiet. It may not help that I’m staying smack in the middle of the Acropolis tourist area (still haven’t figured out why 90% of them are American).
Not sure if many Greeks even really understand what is going on, and who can blame them, they have every reason to be scared more than anything else.
And I’m still trying to wrap my head around the trouble just about everyone seems to have with the simplest and most basic exercise in direct democracy that’s taking place right now. The ...
Supply and demand is the leading force within stock prices, you must know the tea leaves. Richard Wyckoff logic is the only known method of understanding supply and demand with the stock market.Readtheticker.com provides all the tools you need to be a Wyckoff master analyst.More from RTT TvNOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party ima...
Much of the attention around the world seems to be revolving around a small country called Greece. What about the most populated country in the world (China), any key messages coming from there of late?
Well another Month, Quarter and Half a year are in the books. With this in mind I wanted to look at Monthly action of the hottest stock market in the world, the Shanghai Index. Above looks at the Shanghai index over the past 25-years. The 100%+ rally over the past year has pushed the Shanghai index up to its 23% Fibonacci ratio and a long-term resistance line, that has been in play for 25-years at (1) above.
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BitGold, a platform for savings and payments in gold, is pleased to announce the launch of the BitGold platform for residents of the US and US territories. As of today, US residents can sign up on the BitGold platform and buy, sell, or redeem gold using BitGold’s Aurum payment and settlement technology. US residents will also have access to the BitGold mobile app and a prepaid card when these features launch over the coming weeks. Send and receive gold payment features are not initially available in the US.
Two weeks ago, bulls seemed ready to push stocks higher as long-standing support reliably kicked in. But with just one full week to go before the Independence Day holiday week arrives, we will see if bulls can muster some reinforcements and make another run at the May highs. Small caps and NASDAQ are already there, but it is questionable whether those segments can drag along the broader market. To be sure, there is plenty of potential fuel floating around in the form of a friendly Fed and abundant global liquidity seeking the safety and strength of US stocks and bonds. While the technical picture has glimmers of strength, summer bears lie in wait.
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
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 firstname.lastname@example.org 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.
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