Might 100 trillion USD be the notional value of the derivatives? I do not think it is the amount of counterpary credit risk. The actual value of the payments is much smaller, although I am not sure by how much.
Hardrock makes a much misunderstood point. If I'm a bookie and one guy bets a hundred on the Jets and another guy puts $150 on the Giants, my normal "exposure" is only $50, not the total amount I've booked. Now counter party risk is something else. If one of those bettors loses and lays down on me, my risk is the complete side of one of the transactions. But just the same, the overall derivatives "risk" to institutions is a fraction of the much ballyhooed 100 trill figure.
Since two year ago, I know a lot of contrarians that have time to buy, they have lost also a lot of money. One of these day, I suppose that a caller would be able to win. Personnaly, I don't have a preference for an up or down market, hope only to have volatility!
I believe that it is a bullish sign that such downbeat views have taken on such prominence of late in the media. People are putting on a P/E of 16 on $40 in earnings producing an S&P level of 640. Never mind that the S&P500 first reached $40.00 in trailing earnings over 5 years ago. Has there been no growth??? So, Bill Gross goes on to say that in order for the Dow Jones to yield close to 3.5% before it approaches fair value, the Dow would have to decline to 5,000 and the S&P would be 650. Gee, never mind that the last time the divident yield on the S&P 500 was so high, was back when inflation expectations were over 4% and the 10-year Treasury ( now 4% ) was at 9%. This guy ought to stick with managing Bonds!!!
Excessive bearishness is a signal to buy..... in a bull market. Its similar to the idea of buying on dips. Thats bull market thinking.
As far as predicting a number on the Dow, that is really impossible to do consistently. If I had to guess I would say that the July low will be retested this year, maybe by the end of October. As far as Dow 5000, that could happen but it might take several years due to bear market rallies.
Check this out: www.marketwatch.com/news/yhoo/story.asp?guid={BE730D6C-934F-406A-9847-35FDA571307E} This is exactly what I was talking about last week. This is only the beginning. Yeah for those of us who make money in a declining market it doesn't matter. But this is not going to be good for anybody but us. It is the tip of the iceberg folks.
Remember Bill's comments were eluding to Dow 5000 as fair value based on current earnings and dividend yield of 3.5%. BTW the Dow index is a price weighted index, so higher priced stocks ie. MMM at 120 vs T at 12 has more of an impact on the index. So if MMM goes up or down 5% vs T up/down 5%, MMM price change of 6.00 will have a major impact on the index vs T .60 price change. Also, several new stocks were added to the Dow in the last severals years that pay little or no dividend. Stocks such as MSFT, HD, INTC, DIS have lowered the Dow's dividend yield in recent years. I've read Bill's comments on www.pimco.com for a while and I share his views on bonds and equities in general. This guy is one of the great minds in the investment world and everyone should know what this guy is thinking. Thanks Bill Gross for your great insight!