Re: financial meldown

orangatang1@xxxxxxxxxxxxxx wrote:
The pyramid scheme that is the bond market is collapsing around us.
the scale of this meltdown is truly astonishing. the bank of
international settlements puts the "Amounts outstanding of over-the-
counter (OTC) derivatives" at 516 TRILLION dollars.
(516,000,000,000,000.00)

http://www.bis.org/statistics/otcder/dt1920a.pdf

while the bonds traded in exchanges amount to another 30 trillion. (us
gdp was 13.13 trillion in 2006).

The media is attempting to play the scale of this disaster right down.
for example, the bbc says that

"...the mortgage bond market is worth $6 trillion, and is the largest
single part of the whole $27 trillion US bond market, bigger even than
Treasury bonds."

http://news.bbc.co.uk/1/hi/business/7073131.stm

Spin is not going to work. this crash is not due to 'sentiment'. We
are looking at the evaporation of hundreds of trillions of dollars.

mark my words. this is going to be messy.


If you knew about derivatives, you would know that a $20 gain for a
trader(=computer controlled by a human) + $10 fee for a buy then sell
or sell then buy future transaction is accounted for $100000 in your
big number, it's a nonsense.

Derivatives are bets were, there are always two counterparts -the
'gamblers'- and a bookmaker: their brokers + the CME, EUREX, NYMEX,
LIFFE, ...

With a $4000 deposit/coverage, you can buy a future that underlying
value is $50000. Usually traders keep their position for very short
time, less than one hour, buy then sell or sell then buy within
one hour. So with a $4000 deposit they often make ?10 transactions
a day (fee for one future transaction is $5 to $10) this to win or
loose ?$100. In your big number, these ?$300 gain plus $70 fees
are accounted for $500000 ... not serious. It's just bets,
gambling.

When someone wins one dollar, someone loses one dollar that was
over provisionned by his broker from his account before the bet
was accepted.

Erdy

.

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