derivatives

Podcast

Janet Tavakoli: Life And Death On Wall Street

History shows systemic corruption can be overcome
Sunday, October 30, 2016, 5:06 PM

Financial markets and derivatives authority Janet Tavakoli returns to the podcast to discuss a number of the themes contained in her new book Decisions: Life And Death On Wall Street.

She paints a particularly informative timeline of the greed and rot that has come to dominate the modern financial system, and how its tentacles have fully penetrated and subjugated the halls of power in Washington DC. » Read more

Blog

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Fortunes Will Be Made & Lost When Capital Flees To Safety

As safe havens are tiny markets
Friday, June 24, 2016, 4:46 PM

Little did I realize when creating the short video below how prescient it would quickly become in the wake of last night's Brexit vote...

It's message is simple: there's a preponderance of data that shows the world's major asset markets are dangerously overvalued. And when these asset bubbles start to burst, the 'save haven' markets that investment capital will try to flee to are ridiculously small. Investors who do not start moving their capital in advance of crisis will be forced to pay much higher prices for safety -- or may find they can't get into these markets at any price. » Read more

Blog

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In A World Of Artificial Liquidity – Cash Is King

And you'd better have some stashed out of the system
Friday, July 3, 2015, 12:19 PM

It's more crucial now than ever for people to consider extracting a portion of cash from their bank accounts. » Read more

Insider

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What Awaits Us In The Future Of Higher Interest Rates

Having an action plan will be the key to preserving wealth
Friday, June 26, 2015, 12:53 PM

Executive Summary

  • Expect a bond market bloodbath as rates rise
  • Municipal, corporate and sovereign defaults will soon follow
  • Liquidity suffers as necessary goods prices rise, but securities prices fall
  • The new, nuclear risk of a derivatives market collapse

If you have not yet read Part 1: The Global Credit Market Is Now A Lit Powderkeg available free to all readers, please click here to read it first.

You may remember that what caused then Fed Chairman Paul Volcker to drive interest rates up in the late 1970’s was embedded inflationary expectations on the part of investors and the public at large. Volcker needed to break that inflationary mindset. Once inflationary expectations take hold in any system, they are very hard to reverse.

A huge advantage for Central Bankers being able to “print money” in very large magnitude in the current cycle has been that inflationary expectations have remained subdued. In fact, consumer prices as measured by government statistics (CPI) have been very low in recent years.

When Central Bankers started to print money, many were worried this currency debasement would lead to rampant inflation. Again, that has not happened for a very specific reason. For the heightened levels of inflation to sustainably take hold, wage inflation must be present. I've studied historical inflationary cycles and have not been surprised at outcomes in the current cycle in the least, as in the current cycle, continued labor market pressures have resulted in the lowest wage growth of any cycle in recent memory. But is this about to change at the margin?

The chart below shows us... » Read more

Podcast

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Gail Tverberg: This Is The Beginning Of The End For Oil Production

Why the shale collapse is ushering in a permanent turndown
Saturday, January 17, 2015, 1:28 PM

With the recent collapse in the price of oil, Gail Tverberg, returns to discuss the likely impact on the US shale oil industry, as well as the global market for oil. 

While as an actuary, Gail is one to avoid hyperbole and the let the numbers speak, her analysis of the outlook for future oil production is nothing short of dire. » Read more

Podcast

Bill Black: The Banks Have Blood on Their Hands

And our regulators are too fearful to act
Saturday, July 13, 2013, 9:13 PM

We invited Bill Black to return to explain whether the level of systemic risk due to fraud in our financial markets has improved or worsened since the dire situation he painted for us in early 2012. Sadly, it looks like abuse by the big players has only flourished since then.

In the U.S., our regulators have publicly embraced a "too big to prosecute" doctrine. We are restraining, underfunding, and dismantling regulatory oversight in the interest of short-term stability for the status quo. Which, as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity. » Read more

Blog

Investors Beware: Market Risks Today Are Higher than Ever

It's time to start worrying about the bond market
Thursday, March 21, 2013, 4:42 PM

After the shot across the bow in 2008, you might have expected regulators and market participants would use the experience to change for the better, to become more prudent, and to reduce the sorts of risky behaviors that almost crashed the entire system.

Unfortunately, you'd be wrong. » Read more

Podcast

Janet Tavakoli: Understanding Derivatives and Their Risks

Abuse is the problem
Saturday, September 15, 2012, 11:48 AM

Global financial markets are awash in hundreds of trillions of dollars worth of derivatives. By some estimates, the total amount exceeds one quadrillion.

Derivatives played a central role in the 2008 credit crisis, as they had a brutal multiplying effect on the magnitude of the carnage. As a bad asset was written down, oftentimes there were derivative contracts written against it that resulted in total losses 10x greater than the initial write-down.

But what exactly are derivatives? How do they work?

And have we learned to treat these "weapons of mass financial destruction" (as Warren Buffet colorfully coined them) any more carefully in the aftermath of the global financial crisis? » Read more