I would not go that far. I have a done fairly extensive study and understand the concepts.
I would say I would doubt the veracity of anyone who says that they can actually predict them.
Furthermore, once broken down they are simply insurance policies predicting the future movement of stocks and commodities. Personally, I think of it as educated gambling, which is probably the way the majority approach the stock market anyway.
A far cry from the original intent, namely to raise capital.
Derivatives end up serving the function of reducing the future ACTION of a financial instrument to a commodity in and of itself regardless of what is happening to the company or "goods" which were supposed to be its original basis of value.
Potential trillions involved, enough to wreck the economy world wide and utter folly. Only one of the several factors which will lead to our economic apocalypse.
LOL! well, you and I have a basic understanding of what they are.... but when you get to the nuts and bolts of the formulations being used, I think nobody really gets it.
I fully understand that a put on the futures market is a derivative. but now you drill down to exactly what formulas being used by the likes of Lehman brothers, and you will confuse a physicist!
__________________ If I do something stupid blame the Lortab!
I usually don't read the political or economic threads so I may not have read what you wrote months ago. The last economic thread I read, CC1 was calling doom and gloom folks....alarmists.
Is this what your countdown is pointing to?
No the countdown is for”it” lol.
I would agree with CC1, IF a person’s view of gloom were confined to the stock market correction. Months ago, I said that run to 14,000 was artificial and that stability was around 10,300-10,500 and that was before the current round of debacles.
Some believe the world revolves around the US stock market when in fact it is a tiny, and often disconnected part of the world economy.
China became the first nation in history to pass one trillion in foreign reserves last year, over $750,000,000,000 of that US dollars.
While we have been busy consuming (leading to our unbelievable trade deficient) other have been purchasing our capital assets (means to generate Future wealth).
Shortly after 2000 the stock market lost one and half trillion in value, this was made up within a few years by the American consumer shifting into high gear, real estate prices artificially rising and individuals taking out home equity loans (I personally am aware of those with $75,000 revolving lines of credit with their homes for collateral, stupidity has no limits) In Texas until a few years ago it was actually illegal (against the constitution) to take out a home equity loan. Following a state constitutional amendment Billions were pumped into the consumer economy.
The banking industry gave out billions to those with shaky credit just to improve their bottom line, pay their CEOs obscene bonuses, and now that their house of cards is falling around them, they want a government bailout (taxpayer money)
The credit card industry has done the same thing. Even having the bankruptcy law changed so those who they extended thousands in credit, and who had dubious ability to repay could not have them discharged.
The major shift of corporate American from defined benefit plans to employee funded 401k plans over the past few decades, led to a great infusion to the stock market, what happens in 18 years or so when the peak of the boomer generation BY LAW must start withdrawing those funds (btw the first of the boomers hit retirement age last year so it will start soonerth). Note: those who retained defined benefit plans such as GMAC et al were not forced to collect the billions they should have, so either when the time comes they renege on their agreements with their retired employees, declare bankruptcy, or seek a government (taxpayer) bailout for their artificially inflated bottom line all these years.
The price of gas is not a reflection of drilling, exploration, or refining capacity. Most economists either won’t mention or have not figured out the true culprit is the fall of the US dollar. The majority of our oil is imported so that is where it is felt first. The sad truth is while our Dow was making its historic high climb the value of the dollar was falling to all time lows abroad. My Canadian friends can correct me but I believe it is the first time in history that the Canadian dollar is worth more than the American.
These are once again only a FEW things I have skimmed, all which will lead to the inevitable conflagration.
well, OP, nice try but that's what you have? Looks to me like that is MORE REGULATION not less.....
Look, Im not here trying to defend GWB that wasnt my intent at all. the question is DEREGULATION being the cause. this isnt deregulation, it is more regulation.
seriously, someone please find me an example of current deregulation (hey I will even accept deregulation by Clinton).
Ferd,
I found the bit that I was thinking of, but couldn't re-find at the time of my last post. I don't remember where I first found it.
The HUD speech was my example of an instance of the administration applying pressure and policy to banks, without going to the extent of an actual executive order, to make sub-prime loans to sub-standard borrowers. That isn't really regulation; it's more of a gentle nudge. You are also correct that the Gramm-Leach-Bliley Act mostly adds regulation. But the story did not end after President Clinton signed it into law.
De-regulation language that Phil Gramm wanted in the Gramm-Leach-Bliley Act, but could not successfully insert into the bill, was amended to an omnibus appropriations bill that President George W. Bush signed early in his presidency. It is this 262-page amendment titled Commodity Futures Modernization Act that de-regulated derivatives trading:
Securities exchange de-regulation, authored by a Republican from Texas, and executed by a Republican from Texas.
There you have it. De-regulation enacted by President George W. Bush, and by other prominent Republicans.
Don't feel too bad, even RWR made some boo-boos (amnesty for illegal immigrants).
Quote:
Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.
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"It has been said that democracy is the worst form of government except all the others that have been tried." - Sir Winston Churchill
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I would agree with CC1, IF a person’s view of gloom were confined to the stock market correction. Months ago, I said that run to 14,000 was artificial and that stability was around 10,300-10,500 and that was before the current round of debacles.
I read an economist who said "stability" was around 9 but could go to 7500. Wow.
Personally, I will not aquire any new debt, (now is not the time to buy a new car as bad as I need one) pay off what debt I can. And sell what little stock I own and put it in short term t-bills.
We just bought a new car, and will buy another in about a year. In fact we just bought a house! A NICE one!
We refuse to "take part" in any recession..... Nor take part in all the endless conversations "doom and gloom" conversations or how they relate to the end times.
It is a pronoun and has to stand for something else. Over 12 years is a long countdown for something as nebulous as an "it"!
Quote:
My Canadian friends can correct me but I believe it is the first time in history that the Canadian dollar is worth more than the American.
These are once again only a FEW things I have skimmed, all which will lead to the inevitable conflagration.
Bottom line, James, how long before the inevitable conflagration? Would you call this conflagration " The Great Conflagration?"
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His banner over me is LOVE.... My soul followeth hard after thee....Love one another with a pure heart fervently. Jesus saith unto her, Said I not unto thee, that, if thou wouldest believe, thou shouldest see the glory of God?
To be a servant of God, it will cost us our total commitment to God, and God alone. His burden must be our burden... Sis Alvear
We just bought a new car, and will buy another in about a year. In fact we just bought a house! A NICE one!
We refuse to "take part" in any recession..... Nor take part in all the endless conversations "doom and gloom" conversations or how they relate to the end times.
Sticking your head in the sand is not a comfortable position to be in.
__________________
His banner over me is LOVE.... My soul followeth hard after thee....Love one another with a pure heart fervently. Jesus saith unto her, Said I not unto thee, that, if thou wouldest believe, thou shouldest see the glory of God?
To be a servant of God, it will cost us our total commitment to God, and God alone. His burden must be our burden... Sis Alvear
My soul followeth hard after thee....Love one another with a pure heart fervently. 
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