$100 trillion dollars in derivatives

Discussion in 'Index Futures' started by harrytrader, Jan 4, 2003.

  1. Do you think that derivatives market could explode as feared by David TICE and MONEYCHANGER ?

    MONEYCHANGER Derivatives. The Bank for International Settlements estimates that over $100 trillion dollars in derivatives hovers over the world financial system. To put that into perspective, it’s about 12 times the US GDP for a year. Could derivatives cause what Greenspan and policy makers call a "systemic collapse", i.e., a system-wide collapse?

    TICE I have that fear.
  2. Of course it could happen. The whole financial market could implode at any time. The only thing that holds it up is faith. If you have plenty of money you put a substantial amount in gold. If you dont have much money theres no point in worrying about it.
  3. Of course it is posible, the real questions are; What is likely to precipitate such an implosion and how probable is that or those events to happen? If we knew the answers to those questions we could develop some leading indicators for the impending doom!

  4. I'll admit I'm pretty bearish, and this is one of the reasons why I am very bearish. I think that the reserve ratio of many banks could be anywhere in the -50% to - 150% due to derivatives (yes, those are negatives).

    So if the price of gold keeps pushing higher and one of these banks fail (like JPM), I'm gonna be a friggin' millionaire many times over.
  5. m22au


    Reitberg, Easyrider

    What's your vehicle?

    Physical gold, gold stocks or gold futures?

    There are good arguments for all three -

    Physical gold is a good hedge against total financial system collapse, but does not offer leverage

    Gold stocks offer leverage, but probably not as much as the futures

    Futures offer the best leverage, but are subject to default risk, and aren't covered by SIPC
  6. That is an uninformed statement!
  7. TG


    Yes, buy gold at the high.
  8. Josh_B


    Some of the major areas in the advancement of our civilization:

    Agricultural revolution

    Industrial revolution

    Information revolution (internet etc)

    During each one wave, optimism was very high, money poured in the system etc to be followed by contractions.

    Next wave?

    Maybe some consideration should be given to nano-biotechnology, bio-engineering etc.

    When will we get there full speed? who knows...
    Will the economy drop lower and SP gets to mid 500 or even 380 regions? tough to tell. But also consider telling people while Naz was 5000 that it will see sub 1000 within a couple of years.

    As the saying goes: the night is at it's darkest just before dawn

    Well... up until we see the light, maybe trading the dark side is the prudent course of action.

  9. bone


    That $100 Trillion in derivatives is essentially delta-neutral in the sense that for every buyer there is a seller. For example, a dealer in a 2 year plain vanilla swap is selling something in his inventory, or creates an offsetting position in the agency or sovreign debt markets. The biggest concern is a drying-up of liquidity in times when a huge directional position needs to be liquidated - I direct your attention to LTCM. For anyone to insinuate or infer that the $100T is a directional bet is mistaken and/or ignorant of the derivatives market.
  10. Well, I do not want to point any fingers, but, you see who started this thread...

    Besides, I would think the $100 Trillion (if true) is only the notional value of the contracts, and not the amount of the payments themselves. Also, one must consider netting out exposure for settlements.
    #10     Jan 4, 2003