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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.

Bloomberg
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

QE Is Not A Solution: "It's A Marker Of All That Is Wrong"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Jeffrey Snider via Alhambra Investment Partners,

There may be something to December after all. It was credit markets that shifted downward (bearish yield curves and credit spreads) dramatically around the end of November and the first few days of December. Given the persistence of large players moving credit and funding markets, this may not be all that hard to fathom with the close proximity of credit desks next to, say, lending desks or high yield trading. If high yield issuance is any good proxy about marginal conditions, ...



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Phil's Favorites

Lies And Deception In Ukraine's Energy Sector

Lies And Deception In Ukraine's Energy Sector 

Courtesy of Robert Bensh for Oilprice.com 

The Ukrainian government has repeatedly claimed it is doing its best to improve the oil and gas investment climate, but official statements are the opposite of the reality, as Prime Minister Arseniy Yatsenyuk is leading the great deception. 

According to Prime Minister Yatseniuk, Ukraine has taken a number of important steps to reform the energy sector, and has even achieved success in the formidable fight against rampant corruption, as well as signed open and transparent contracts for purchase of the natural gas from EU member states. Now he claims Ukraine is looking forward to Western companies' investment in Ukraine's gas transportation sys...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.Date Found: Tuesday, 13 January 2015, 01:43:37 PM

Click for popup. Clear your browser cache if image is not showing. Comment: Ouch! See the last point of demand between $60 and $70 In Dec at resistance, now strong selling, Large pattern forecast sees a price under $40

Date Found: Tuesday, 13 January 2015, 06:54:16 PM

Click for popup. Clear your browser cache if image is not showing. Comment: Coffe ETF bounces off support, minor spring, if get some strength to $40, a trade may be on!

Date Found: Friday, 16 January 2015, 02:28:29 AM

Click for popup. Clear your browser cache if image is not showing. ...



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All About Trends

Mid-Day Update

Reminder: David 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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OpTrader

Swing trading portfolio - week of January 26th, 2015

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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Sabrient

Sector Detector: With the Fed fading into shadows, investors look overseas for new catalysts

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

Courtesy of Sabrient Systems and Gradient Analytics

By Scott Martindale

Last week, the S&P 500 put an end to its streak of weekly losses, despite giving back some gains on Friday. Thursday provided the big catalyst, with the ECB’s announcement of its bold new monetary stimulus plan. Investors were cheered and soothed for the moment. And U.S. fundamentals still look strong. But with Greece trying to turn back time, with volatility elevated (and likely to continue as such), and with the technical situation still dicey, the near term outlook is still worrisome.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart...



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Market Shadows

Are You Trading or Gambling?

ARE YOU TRADING OR GAMBLING?

An interview with John Ehlers of Stock Spotter and Mesa Software

By Ilene

Ilene: John, in our last discussion about trading systems in general and yours in particular (Can trading be reduced to cycles, stresses and vibrations?) you mentioned Monte Carlo simulations and their use in measuring performance. Can you explain more about how you measure the performance of a trading system?

John: Let's start with comparing trading with gambling. The two have several things in common.  In both ...



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Digital Currencies

Jitters After Bitcoin Exchange Suspends Services

So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.  

Jitters After Bitcoin Exchange Suspends Services 

By 



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Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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Help One Of Our Own PSW Members

"Hello PSW Members –

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 jennifersurovy@yahoo.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.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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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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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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