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WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !!
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THE WTF GUY !!
User ID: 322321
10/15/2008 2:41 AM
Report abusive post | WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !!
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 TOO LATE ??
[link to seekingalpha.com]
Coming Soon: The 600 Trillion Derivatives Emergency Meeting
by: The Prudent Investor October 13, 2008
The Prudent Investor
Add to Your WatchlistAbout Toni Straka:
Bio & more articles
Toni's blog: The Prudent Investor
Become a Contributor Submit an Article Font Size: PrintEmail Here is an update on the size of the derivatives market with the latest official figures (.pdf) from the Bank for International Settlements (BIS). Hold your breath, as we are not anymore talking paltry billions but TRILLIONS of whichever fiat currency.
Current emergency meetings on banks and markets are still only in the stage where politicians and central bankers are bickering over how to create a few more hundred billions Euros and FRNs. But toxic MBS pale in comparison to the mushrooming growth of the derivatives market. According to figures released in the quarterly review of the BIS (pp A103) in September the total notional amount of outstanding derivatives in all categories rose 15% to a mindboggling $596 TRILLION as of December 2007.
Two thirds of contracts by volume or $393 TRILLION fell into the category of interest rate derivatives. Credit Default Swaps had a notional volume of $58 TRILLION, seeing the sharpest relative increase after a volume of $43 TRILLION a year earlier.
Currency derivatives reached a volume of $56 TRILLION.
Oh, and every grand balance sheet comes with a trash can. Unallocated derivatives with a notional amount of $71 TRILLION are looming over the heads of the disintegrating investment community too.
However You Look At It, This Is an Accident Waiting To Happen
Don't lose your sleep because of these numbers that KO my desktop calculator. In an ideal world - in which we are not - long and short derivatives would net out each other, leaving only a fraction of risk. The BIS tries to assess this net risk with a total of $14.5 TRILLION (2006: 11.1 TRILLION) in gross market value for all contracts but comes up with a second figure.
The so called Gross Credit Exposure appears almost moderate at $3.256 TRILLION after $2.672 TRILLION a year earlier.
Even when taking the lowest of these figures shudders run down my spine. All emergency talks have so far focused on a few hundred billions in fiat currencies, but the current nervousness demonstrated by hectic talks of finance ministers and central bankers all over the globe should give everybody a vague idea that something here may blow up any day. This pool of so far silent derivatives without a major bust can come to life any day with the failure of a multinational financial firm.
The BIS review is a good way to grasp the dimensions long term monetary expansion has brought upon us. A net risk of $14 TRILLION compares with the annual GDP of the USA. Nobody, absolutely nobody can afford this tab in the case of an unorderly unwinding of this market that is roughly 12 times the size of the global economy. I conclude a lot more paper promises will be burnt in the coming derivatives tsunami. As a reminder, most of these contracts have been moved off balance sheets into under capitalized subsidiaries that profited from the good rating of the parent company. But in case of a default it is this nasty, nasty huge notional amount that becomes a liability.
As the vast majority of these contracts have no market, failure will come in the form of counterparty risk. This makes all the current emergency meeting a bit more understandable if politicians are already aware of the biggest bubble that may find no other way of deflation than a sudden burst. I base my sense of urgency on the rapid growth of the net risk in only one year, rising a stunning 30% at a time when the first signs of the credit crunch appeared.
German chancellor Angela Merkel said ahead of an emergency meeting with French president Nicolas Sarkozy in a TV interview that she would present a rescue package for German banks on Monday. This is also expected from several other European countries. Italian president Silvio Berlusconi went so far as to suggest a concerted stock exchange holiday. It would fit the other crooked nails in the coffin of free markets |
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Anonymous Coward
User ID: 185055
10/15/2008 2:42 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Well we are fucked now, aren't we WTF guy |
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Anonymous Coward
User ID: 185055
10/15/2008 2:43 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
OMFG an instant pin. Very impressive |
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deepend 
User ID: 341709
10/15/2008 2:46 AM
 | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
People. If the derivatives market survives the last couple of weeks, then they are good to go. I foresee a bankruptcy larger than the entire worth of the world in todays dollars. And well, that would be a hoot, wouldn't it. Something like that would certainly not hurt the middle class.
^^ gravity is a harsh reality, never try to catch a falling turd. ^^ |
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0
User ID: 506320
10/15/2008 2:48 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Modern Money Mechanics:
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Anonymous Coward
User ID: 447360
10/15/2008 2:49 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Popular quote doing rounds:
There are two sides to a Balance Sheet:
Left & the Right ( Liabilities and Assets respectively)
On the Left side
there is nothing right..
and
on the Right side
there is nothing left
Latest:
The US Government today announced that it is changing
its emblem from an Eagle to a CONDOM, because it
more accurately reflects the government's stance.
A condom allows for inflation, halts production,
destroys the next generation, protects a bunch of
pricks, and gives you a sense of security while
you're actually being screwed. |
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The BEST One Yet...
User ID: 526643
10/15/2008 2:57 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Popular quote doing rounds:
There are two sides to a Balance Sheet:
Left & the Right ( Liabilities and Assets respectively)
On the Left side
there is nothing right..
and
on the Right side
there is nothing left
Good Word Play and SO True.
Latest:
The US Government today announced that it is changing
its emblem from an Eagle to a CONDOM, because it
more accurately reflects the government's stance.
A condom allows for inflation, halts production,
destroys the next generation, protects a bunch of
pricks, and gives you a sense of security while
you're actually being screwed. Quoting: Anonymous Coward 447360
Could Not Have PUT IT ANY BETTER.
We ARE ALL So Screwed.
Just ME.
 |
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Anonymous Coward
User ID: 526654
10/15/2008 3:04 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Well we are fucked now, aren't we WTF guy Quoting: Anonymous Coward 185055
NO , THERE IS A CHANCE IF... IF ...IN A UN-PRECEDENT AND COORDINATE WORLDWIDE ACTION , ALL GOVERNMENTS TAKE CONTROL OF BIG BANKS AND TRY TO DES-ACTIVE AND DISARM ONE BY ONE MOST OF THOSE DERIVATIVES DEADLY BETS !!
THERE WILL BE A LOT OF CAUSALITIES IN THIS MISSION BUT ITS A BETTER CHOICE THAN DESTROYING EACH OTHER .
RECCESION ?? YOU BET....DEEP, LONG ,PAINFULL AND WORDWIDE .......DEPRESSION ?? ...DONT KNOW !! .....ALL DEPEND IF WE PLAY THE RIGHT MOVES !!
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THE WTF GUY !!
User ID: 526654
10/15/2008 3:10 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
[link to www.bis.org]
THIS ARE THE MOST IMPRESSIVE FIGURES I EVER SEEN .... ALL THAT MONEY ARE OUT OF BALANCE !!!
THOSE FIGURES ARE ....IN BILLION US DOLLARS !!!
HOW DO THEY GET THERE ??
"The BIS review is a good way to grasp the dimensions long term monetary expansion has brought upon us. A net risk of $14 TRILLION compares with the annual GDP of the USA. Nobody, absolutely nobody can afford this tab in the case of an unorderly unwinding of this market that is roughly 12 times the size of the global economy. I conclude a lot more paper promises will be burnt in the coming derivatives tsunami. As a reminder, most of these contracts have been moved off balance sheets into under capitalized subsidiaries that profited from the good rating of the parent company. But in case of a default it is this nasty, nasty huge notional amount that becomes a liability." |
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Anonymous Coward
User ID: 526654
10/15/2008 3:15 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Now , dont ask why GVT and Central Banks want to gold /silver prices down !! |
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Anonymous Coward
User ID: 482097
10/15/2008 3:16 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
if one or two countries fall out, ok, shit happens...but the whole world? nah, this shit didn't just happen, it was rigged...
what we need is a global solution that will guarantee this will never happen again...something like a central world bank...and just to make sure each region, er, country (ahem) doesn't suffer any more than they have to, we should form some sort of oversight committee - one that can ensure order in this new world of peace and commerce |
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Anonymous Coward
User ID: 365558
10/15/2008 3:27 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Great and very well and simple way spoken.
Thanks.
4w. |
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Anonymous Coward
User ID: 506323
10/15/2008 3:35 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
To put in perspective how big this is. The national debt is 10 Trillion dollars. |
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WLV888
User ID: 526667
10/15/2008 3:36 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Can anyone please tell me what exactly will happen when this monster of a thing called derivatives implode? |
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Anonymous Coward
User ID: 502659
10/15/2008 3:39 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
if one or two countries fall out, ok, shit happens...but the whole world? nah, this shit didn't just happen, it was rigged...
what we need is a global solution that will guarantee this will never happen again...something like a central world bank...and just to make sure each region, er, country (ahem) doesn't suffer any more than they have to, we should form some sort of oversight committee - one that can ensure order in this new world of peace and commerce Quoting: Anonymous Coward 482097
Are you crazy, the Last thing we need is a Central World Bank. |
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Anonymous Coward
User ID: 516260
10/15/2008 3:44 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
We may need a bailout from the Muslim world.
Wave a white hankie, and bow your head in
preparation for beheading. |
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Anonymous Coward
User ID: 521654
10/15/2008 3:47 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
And to think this is all because a few thousand happy boys were having fun and making the big bucks gambling.
Credit default swaps represent one of the fastest-growing derivatives markets. Dealing in these derivatives began in 1994. According to the International Swaps and Derivatives Association, the market grew 33% in the second half of 2006, rising from $26.0 trillion in notional value to $34.5 trillion by the end of the year. Financial firms and hedge funds comprise most of the participants in the market. They find it less expensive and easier to use these contracts to hedge and to speculate rather than to buy and sell the underlying debt.
some beneficiaries
Ivy League endowments (Investment banker's training ground)
Individual Investment Bankers and Executives
US Treasury Secretary Henry Paulson (half billion dollar personal fortune) former head of Goldman Sachs
Hedge Fund Managers
Fannie Mae and Freddie Mac's senior officers (major political contributors to both political parties)
What this experiment proved was that as long as the risk you take is big enough, then the federal government and your former coworkers down at the Treasury Department can be absolutely relied upon to bail you out. The risks have to be so large that you cannot afford to lose, and the economy and markets cannot afford for you to lose. Then one of two things happens. Either the risk event does not come about and you make an extraordinary amount of money as an individual and as a firm for having taken on this huge amount of risk. Or the risk happens and you have to pay out. Except you really don't, because you can't afford to pay out and you have effectively blackmailed the rest of the population through being too big to fail. Then the government steps in and bails you out. Except it's not really the government, because the government can't truly do that, it is the rest of the population which bails you out. |
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Irdooomed
User ID: 329170
10/15/2008 3:59 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Wasn't there 1.14 quadrillion in outstanding derivatives? What happened to the other 540 trillion in derivatives?
I want to be a microbiologist!
He who fishes with actinides goes over the fish limit. 7 days
What runs around yelling "for Allah" and goes bang, a terrorist with a cobalt bomb!
Now that I have Word 2007, no longer will the denizens of the internet see me as illiterate.
You make it sound like it's a bad thing to be a pervert. |
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anonymous
User ID: 526674
10/15/2008 4:13 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Derivatives are iou's and payments can be extended..europe countries each have thier own currency plus the euro... |
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Anonymous Coward
User ID: 357529
10/15/2008 4:14 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
WE WILL DIE |
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Anonymous Coward
User ID: 526690
10/15/2008 4:21 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
WE WILL DIE Quoting: Anonymous Coward 357529
Yes. But look how much fun we're having along the way! |
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Anonymous Coward
User ID: 526682
10/15/2008 4:57 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Can anyone please tell me what exactly will happen when this monster of a thing called derivatives implode? Quoting: WLV888 526667
Just for starters, you local law agencies are now short-funded soon to be without funds.
Imagine what that means. No law! No response to 911 calls! Law may be out writing tickets trying to get cash in the cofer to cover their Friday paycheck, but you are not going to get arrests, no money for jails, etc.
That is why martial law is coming!
Schools closing, at least part time to save utilities, and diesel fuel to run busses.
Retirement pension checks will steadily decrease, perhaps all the way down to nothing and people who have worked and saved all theirs lives will be forced to live on base Social Security pension checks.
If your car, home furnace, or whatever needs repair, you'll have to front the money for parts - if parts are available.
There will be an allocation process for buying staples, like beans, rice, flour, eggs, milk, cheese. Don't know how tptb will work that out, but look at all the new discount groceries around and you'll figure it out.
There's more, but maybe someone else will come on and post ideas. |
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Anonymous Coward
User ID: 490531
10/15/2008 5:09 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Something like that would certainly not hurt the middle class. Quoting: deepend
lol, trickle down my friend, everything trickles down. |
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Anonymous Coward
User ID: 482097
10/15/2008 5:22 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
if one or two countries fall out, ok, shit happens...but the whole world? nah, this shit didn't just happen, it was rigged...
what we need is a global solution that will guarantee this will never happen again...something like a central world bank...and just to make sure each region, er, country (ahem) doesn't suffer any more than they have to, we should form some sort of oversight committee - one that can ensure order in this new world of peace and commerce
Are you crazy, the Last thing we need is a Central World Bank. Quoting: Anonymous Coward 502659
was my sarcasm too subtle? |
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Anonymous Coward
User ID: 526185
10/15/2008 5:26 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
Uh...
Not to advocate violence...
But wouldn't it be cheaper to hunt down all the people involved in this derivative scheme and put a bullet in the back of their head and another bullet in the back of their closest next of kin?
Seems more reasonable to "cull" the heard of a few "no-gooders" than to destroy the entire world's economy..
But that's just me trapped in my american mind... |
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Anonymous Coward
User ID: 526185
10/15/2008 5:27 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
eh wrong herd  |
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Anonymous Coward
User ID: 461373
10/15/2008 5:52 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
"kinda brings a tear to your eye,don't it!"
Outstanding video, thanks for posting! |
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Arcaneshift
User ID: 526138
10/15/2008 6:15 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
People. If the derivatives market survives the last couple of weeks, then they are good to go. I foresee a bankruptcy larger than the entire worth of the world in todays dollars. And well, that would be a hoot, wouldn't it. Something like that would certainly not hurt the middle class. Quoting: deepend
Yes folks you heard it!!! derivatives 600 trillion dollars worth of debt shoved onto a worlds assets whose actual estimated dollar worth is estimated to be approximately 165 trillion. Now this tells it like it is! |
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itdincor
User ID: 493005
10/15/2008 6:28 AM
 | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
I have read that the Bank of International Settlements claims $1 3/4 QUADRILLION dollar's worth of deriviatives out there. Or, at least that's the alleged nominal worth. Actual worth? 5 to 95 cents on the dollar, and nobody knows which is which.
Seems to me that nobody really knows how much is out there. I mean, I don't think they know.
But, apparently, it's more than all the money on Earth. More than everything on Earth is worth.
I can't see how this can possibly turn out anywhere near well.
Lehman's clients now have to unwind Lehman's derivatives. That alone may take years.
But a QUADRILLION dollar's worth? Two? I think these things should just be voided out, and everybody take the bite, and move on.
 |
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shaggy
User ID: 8528
10/15/2008 6:36 AM | | Re: WTF !! WTF !!! THE 600 TRILLION DERIVATIVES MAYDAY MEETING !! | Quote |
and if we let it crash....?
refocus on ACTUAL worth? bad idea? |
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Anonymous Coward
User ID: 526622
10/15/2008 6:38 AM | |
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