Monday, April 1, 2013

Derivatives

We know the Fed is purchasing toxic debt from the Major Banking Houses but we don't know what these banking houses are doing with the cash.  Not exactly, anyway.  They are probably doing lots of creative things with it, such as bathing in it, spending it on hookers and blow, and building paper houses.  Financially they are creating operational desks outside of their main paramet6ers so to trade without the scary eyes of the Frank-Dodd and Volcker rules watching them - Goldman Sachs announced an LLC today that does just that.  Now what exactly are they investing in?

Everything and everything.  They have OTC investments and derivative investments in dark pools.  They are buying CDSs and leveraging banking deposits.  They are toying with everything imaginable, all with cash they recieced from the Federal Reserve Bank, a private for profit bank that is under charter from the UST to "maintain the stability of the financial markets".  The markets have the appearance of being stable, so say the MSM, but is that the case?

The way the markets are being held up is by massive positions on both sides of the shorts and longs.  Imagine the Great Wall of China, but instead of its actual size, imagine it being wider than it is long.  That is what the money changers have done - they have put a massive amount of cash on both the longs and shorts to hold a price in place.

This is not only excessive but dangerous, and the slightest imbalance could bring any one option down.  It is likely that it could be the dollar, since that is the largest market.  Or it could be the UST market, as it is the biggest bond market.  It could even be a small market such as silver, since not only does silver correlate directly with oil and thus the dollar but the amount of silver traded everyday equals the total mining done in a whole year.

So the markets are highly unstable and only kept a float by massive amounts of cash long and short.  The game will end when an investment, like silver, shows that it can not be papered over.  I think silver is the best case to do this because there is such strong demand industrially and for personal invesment for the phyiscial bullion.  Other front runners include oil.  When one of these investments shows the paper price does not equal the real price based on supply/demand, the house of paper will fall and leave the whole system looking like a naked emporer.

4 comments:

  1. Asset classes are getting blown out of the waters but commodities and PMs are getting gunned down. Where does one hide now? LoL

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  2. Spend your money on useless junk please, we dont even care what it is. Please do your patriotic and civic duty to our wonderful country which has given you so much fluff n stuff. We are in desperate and dire need for our printing press fiat to catch a M2 velocity wave.....Wait a second, strike that, if we increase velocity then the snowball effect will be that of hyperinflation....(lightbulb)aha, that is what my wonderful boss has been thinking and planning all along. Silly me. Yes, continue with the buying of our useless junk and fast.

    Sincerely,

    Federal Reserve Spokesperson Du Jour

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  3. Peek runs around with giant bubble hoop humping paper !
    Miss ya Dudness ! ThHhHH

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  4. you are been called a charlatan in many blogs, I wonder why.

    ReplyDelete