Posts Tagged ‘derivatives market’

The Horrific Derivatives Bubble That Could One Day Destroy The Entire World Financial System

The Horrific Derivatives Bubble That Could One Day Destroy The Entire World Financial System

Courtesy of Michael Snyder at Economic Collapse 

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.…
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Recession 2010?

Recession 2010?

Courtesy of Michael Snyder at The Economic Collapse

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
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Stiglitz: The Banks Must Be Restrained, The Financial System Must Be Reformed

Stiglitz: The Banks Must Be Restrained, The Financial System Must Be Reformed

Joseph StiglitzCourtesy of Jesse’s Café Américain

"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 a video 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.

Again, here is a link to this ‘must see’ video which can be a bit slow to start because of Bloomberg’s video platform.

Stiglitz Says Banks Should Be Banned From CDS Trading
By Ben Moshinsky
October 12, 2009 06:28 EDT

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.

“We will have another armed robbery unless we
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The Economic Recovery is an Illusion

The Economic Recovery is an Illusion

The Bank for International Settlements (BIS) Warns of Future Crises


Courtesy of Global Research, by Andrew Gavin Marshall

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.[1] 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

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Zero Hedge

Slumping Used Car Prices Spell Disaster For Subprime Auto Securitizations

Courtesy of ZeroHedge. View original post here.

It will come as no surprise to our readers that sales of automobiles in the U.S. have bubbled over in recent years and stood at a SAAR of 17.7mm units at the end of September.  To put that number in context, an assumed 15-year useful life for vehicles would imply that's more than 1 car for every driving age person in the United States.  Obviously that's likely not sustainable which is probably why Ford executives admitted on a recent conference call that U.S. auto sales have reached a "plateau."

As we've argued in the past, the main reason auto...

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Farnam Street October 2016 Letter - The Importance of Capital Allocation

By VW Staff. Originally published at ValueWalk.

Farnam Street letter for the month of October 2016.

Also see

Farnam Street – The Importance of Capital Allocation

“The lack of...

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Phil's Favorites

Walloons Relent, CETA "Salvaged" (Or Was It?) Competing Stories

Courtesy of Mish.

After months of haggling, and shortly after Justin Trudeau, Canada’s prime minister, cancelled a trip to sign the Comprehensive Economic and Trade Agreement in Brussels, the Walloons gave into pressure and agreed to approve the the deal.

The Financial Times reports EU Trade Deal with Canada Salvaged after Belgian Regions Concede.

The EU’s trade deal with Canada was pulled back from the brink on Thursday after Belgian regional leaders dropped their objections to Belgium’s government signing the pact in an eleventh-hour rescue.

The Ceta affair has been deeply e...

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Digital Currencies

Needham Raises Bitcoin Price Target To $848: Here's Why

Courtesy of ZeroHedge. View original post here.

With bitcoin breaking out of its recent trading range as Chinese buyers once again flock to the currency as the Yuan slides (as we predicted over a year ago they would), even Wall Street analysts are starting to pay attention, and in a recent report by Needham's Spencer Bogart, the analyst has raised his price...

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Kimble Charting Solutions

London- 4th attempt to breakout in 16-years, results different this time?

Courtesy of Chris Kimble.

Four months ago the world seemed scared that the Brexit vote would be negative for Europe and potentially around the world. Four months later, almost the polar opposite deserves discussion.

Below updates the FTSE -100 Index on a monthly basis over the past few decades.


FTSE Index is now testing a resistance zone for the 4th time in the past 16-years at (1), as well as testing the underside of line (3) at the same time.

Monthly MACD has created a series of ...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Investors want out of the stock market (Business Insider)

Retail investors seem to have cooled on the stock market.

According to a note from Bespoke Investment Group, equity mutual funds have experienced their largest weekly outflows since August 2011.

National Living Wage Helps Boost Pay for Lowest U.K. Earners (Bloomberg)

The U.K.’s increased national minimum wage is showing signs of success.

The lowest-paid British workers had the strongest salary growt...

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Members' Corner


Courtesy of Nattering Naybob.


Discussion of the potential impacts on equity, bond, commodity, capital and asset markets regarding the following:

  • Rising Libor and Bond Yields
  • Negative Swap Spreads, Eurodollar Curve, Repo Effects
  • Compliance, Expectations, Liquidity, Fed Action

Last Time Out

"25-54 yr old prime earners peaking at 101083 in Nov 2007; today at 97628, for a net decline of 3.5M prime earning jobs during this "recovery". No real jobs, just McJobs for McPay."

"Above note, 55yrs+ in Nov 2007 at 26376, now at 34353, for a net increase of 8 million employed. Not for sheer enjoyment and mostly out of economic necessity. The above attests to no real jobs, just McJobs for McPay and work till you die?" - 08...

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Chart School

Tech Hold Breakout,.but S&P Wedge Bound

Courtesy of Declan.

It was a mixed day for indices. Large Caps remain bound by wedge support/resistance, but Tech broke upside yesterday from similar wedges and held those breakout today.

There was little change for the S&P over the last couple of days. The one technical change was the MACD trigger 'buy' as other technicals stayed on the bearish side.

Meanwhile, the Nasdaq cleared wedge resistance yesterday, and was able to hang on to the breakout despite today's loss. It too enjoyed a MACD trigger 'buy', but had an On-Bal...

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Swing trading portfolio - week of October 24th,2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Mapping The Market

The Most Overlooked Trait of Investing Success

Via Jean-Luc

Good article on investing success:

The Most Overlooked Trait of Investing Success

By Morgan Housel

There is a reason no Berkshire Hathaway investor chides Buffett when the company has a bad quarter. It’s because Buffett has so thoroughly convinced his investors that it’s pointless to try to navigate around 90-day intervals. He’s done that by writing incredibly lucid letters to investors for the last 50 years, communicating in easy-to-understand language at annual meetings, and speaking on TV in ways that someone with no investing experience can grasp.

Yes, Buffett runs an amazing investment company. But he also runs an amazing investor company. One of the most underappreciated part of his s...

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Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more! features the most important and most interesting news items from around the web, all day, every day!

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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