<< <i>Oh, and on time premium price decay, too, as many many hedging options positions expire worthless and the seller, long or short, simply pockets the premium he was paid.
What I'm not seeing in those charts is any sign of the general monetary inflation, so feared by so many for so long due to accommodative fed monetary policy (low interest rates and QE)
If and when most of these charts turn back up, we'll certainly take notice, and if they were all or even most of them moving toward new highs, it would, to me, signal an inflationary trend, rather than specific commodities or sectors rotating in and out of favor over the intermediate term >>
If I'm the FED/USTreasury I know that all the available inflationary forces were pushed into the rebound of the stocks, housing, USD and bond markets from 2009-2015. Nothing else really got those $TRILLIONS of QE infusion. It's definitely price inflation....albeit channeled to particular sources. So when that liquidity wants to go elsewhere, where does it go? No way the govt's want that to channel that back into commodities again like it did from 2001-2011. I would pull every string in my power to manage that better than last time around.
What does the FED do with $4 TRILL in bank reserves? They've never once effectively reduced reserves once they have created them. Inflation is where you want to see it. I think the FED & Co. did a good job of choosing/supporting winners the past 6 years, better than has ever been done before. Monetary inflation in 2015 is vastly different from 1985....and probably even vastly different from 2005 or 2010. It's even hard to define and/or track "money" today. It would make much more sense to include credit, debt, margin, currency swaps, derivatives, etc. as the 2015 equivalent of "money" or the standard monetary aggregates (MB, M1, M2, M3...and now M4).
I know that all the available inflationary forces were pushed into the rebound of the stocks, housing, and bond markets from 2009-2015. Nothing else really got those $TRILLIONS of QEinfusion. It's definitely inflation....albeit channeled to particular sources. So when that liquidity wants to go elsewhere, where does it go? No way the govt's want that to channel that back into commodities again like it did from 2001-2011.
It seems to me (as a buyer of stocks, real estate, and metals throughout 2001-2015) that it was me making the choices in what assets to place my own earned liquidity into, for my own self interests and seeking a combination of safety and return, with acknowledged risk, too. It was not the government or Fed making me make those choices, was it? They feel rational and done of free will as the decisions are being made. I'd imagine that all of the individual market participants make decisions based on free will, from a farmer's decision to plant cotton or corn or soybeans, depending on his own calculus, or a factory worker's decision to move to a different state where there's a plant going up, to well, every other individual. Are they "being channeled" to do things? I guess it's all semantics when one discusses incentives, I'll once again contend that the market prices speak louder than any words.
It seems to me (as a buyer of stocks, real estate, and metals throughout 2001-2015) that it was me making the choices in what assets to place my own earned liquidity into, for my own self interests and seeking a combination of safety and return, with acknowledged risk, too. It was not the government or Fed making me make those choices, was it? They feel rational and done of free will as the decisions are being made.
Your approach is diversification among asset classes with periodic rebalancing as you've stated several times. That's a good management methodology, to be sure. Whether or not you assessed the impact of QE and weighed it vs. the moral hazard of currency debasement is something only you know. In any event, your approach hasn't hurt you and you've undoubtedly made some good picks along the way. The only thing I would point out is that the time period from 2001 to 2015 hasn't been monolithic. I would break it into 3 segments, from 2001 to 2007, from 2008 to 2011, and from 2012 to present. The important factors aren't the same in each period.
I'd imagine that all of the individual market participants make decisions based on free will, from a farmer's decision to plant cotton or corn or soybeans, depending on his own calculus, or a factory worker's decision to move to a different state where there's a plant going up, to well, every other individual. Are they "being channeled" to do things? I guess it's all semantics when one discusses incentives, I'll once again contend that the market prices speak louder than any words.
I think it depends on where the incentives originate, how they occur and who pays for them.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>..... It was not the government or Fed making me make those choices, was it? They feel rational and done of free will as the decisions are being made. I'd imagine that all of the individual market participants make decisions based on free will, from a farmer's decision to plant cotton or corn or soybeans, depending on his own calculus, or a factory worker's decision to move to a different state where there's a plant going up, to well, every other individual. Are they "being channeled" to do things? I guess it's all semantics when one discusses incentives, I'll once again contend that the market prices speak louder than any words. >>
In my mind it was the FED/gov't "helping" you to make those choices. Isn't that what they do? They "helped" us into Real Estate in 2003-2008. And into the stock market from 2009-2015. You "help" people make decisions by ensuring that downside is limited, at least for a period that suits those managing markets. J6P is "free" to make his choice. Odds highly favor it will be the same choice the FED/gov't would want him to make. How does JPM's $4 TRILL commodity position affect J6P's "free will"? And Joe doesn't even know there is such a position. How did the $7 TRILL in MBS during the 2006-2008 housing run up affect old Joe's "free will?" Of course, he bought a house during that rise, and likely closer to the market peak vs. the 1995 bottom. All the while his "free will" was being channeled to buy real estate, there was JPM, GS, and others shorting real estate with 30-1 leverage. Can you you really have "free will" if you have no clue what's going on behind the scenes? "Free will" assumes free markets, transparent markets, and fair markets. When was the last decade that really existed?
There's lot of "free will" out there...as long as you assume there is no linkage to $4 TRILL in US bank reserves, $4 TRILL in otc commodity derivs, and $900 TRILL in overall world otc interest rate derivatives. It smells like freedom to me. If Obama wants all the coal producers to go to zero and solar producers to excel, what could be more free? In the end, the market price decides who won and who lost. That's reality. Freedom might have little to do with it. When the stock market crashed on August 24th (following the mid-July all time highs) was that a collective of J6P's making a free market decision? Are the HFT computer algo's that make up the majority of market trading a form of "free will?"
I'd love to know how JPM's position is spread across energy, base metals, grains, and softs. Are they short or are they long? Would the US Govt even allow them to go long on commodities to that extent
Why is that we seem to know about JPMs silver position, but not other commodities? Is it selective information distribution? Or is the silver position just "made up"?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I'd love to know how JPM's position is spread across energy, base metals, grains, and softs. Are they short or are they long? Would the US Govt even allow them to go long on commodities to that extent
Why is that we seem to know about JPMs silver position, but not other commodities? Is it selective information distribution? Or is the silver position just "made up"? >>
It's a function of how the OCC publishes the quarterly derivative's report. You've taken the 10 min to read at least one of them in the past 10 years, right? I've listed them here numerous times over the past 10 yrs.
Prior to last quarter, we did know exactly what the gold positions were of the big reporting banks. No we don't since Gold and FX derivatives are now combined (and FX positions are 100X larger!). We still get the information of "other precious metals" from the same banks. That is generally believed to be mostly all silver because of the small trading quantities and volumes for PLAT and PALL. JPM's silver (or other PMs) position is actually quite moderate at around $13.4 BILL (1 yr of world silver production). It's Citibank that surged into the lead recently by adding $50 BILL the previous quarter....now holding $53 BILL in "precious metals derivs." Note that gold is definitely not included in the "other PMs" position, and never has been since I've been following these reports. 82% of the other precious metals derivatives have a maturity of <1 yr. So these are short term plays.
Commodities aren't broken down either so no way to know individual items. JPM "made" $3.5 BILL last quarter on their otc derivatives. Citibank make $1.4 BILL and BoA at $1.1 BILL. The CFTC monthly Bank Participation Report listed the 3-4 largest US banks' positioning in futures for silver, gold, and most other commodities. There's no way to break down to single banks. Though you could probably assume that >75% of the US silver futures positioning by reporting US banks is JPM and Citigroup.
<< <i>So it is selective information dispersion.... >>
Not from where I sit. There's nothing I can select from the US Treasury's OCC's data as provided that doesn't look like the big banks aren't gaming the markets. Ever hear of the game "Monopoly?"
When you don't read the source reports before commenting on them....that's pretty "selective" don't ya think?
There is a derivative's report on currencies....if you'd only look. Commodities as well. Also credit and equity derivatives. Hey, maybe they should break down every equity derivative's position into S&P 500 or Russell 200 components? I can understand what $4 TRILL in commodity derivatives means....as well as $30 TRILL in Forex. It's also more than interesting that up until last quarter, the equity derivatives (you know, that little thing called the stock market) were 2X to 3X the size of commodity derivatives. Not any more though. Commodity derivatives are now 2X the size of equity derivatives, with 93% of those owned by one bank. What's not to love?
You only get what you put into something. Sorry if the reports out of the OCC and BIS don't make sense to you. And you are incorrect about currencies being the largest market of all. The $156 TRILL in US bank interest rate derivatives dwarfs those by a factor of 5X. And on a world-wide scale there are $900 TRILL of those. But, it's only "notional" so that doesn't count, right? Just ask Lehman, LTCM, BSC, or AIG who also though derivs "don't count" and "net out."
One thing that should have been learned since 2008: Reports do not reflect reality.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>And how much did AIG have in derivatives? >>
Obviously, way more than they could cover. Just like LTCM. It's all good when you can value them yourself. It stinks when the market finally tells you what they're really worth.
<< <i>it's only "notional" so that doesn't count, right?
I knew you could figure it out. >>
The same concept of "notional" applies to futures, options, currencies, etc. I guess those markets "don't count" either....lol.
Ever hear of concepts like margin, leverage, etc? In derivatives they prefer to call it "notional".....precisely so the uninformed will stay that way....uninformed. At least you're in the majority.
no·tion·al adjective: notional
1. existing only in theory or as a suggestion or idea. "notional budgets for hospital and community health services" synonyms: hypothetical, theoretical, speculative, conjectural, suppositional, putative, conceptual; More imaginary, fanciful, unreal, illusory "the notional line between East and West" antonyms: actual existing only in the imagination. "Lizzie seemed to vanish into thin air, as if her presence were merely notional"
Thing is, we learned with LTCM, Lehman, AIG, GM, etc. that notional became reality. The same type of people that came up with "notional" also created the title for the Federal Reserve System. Yet the Federal Reserve is not Federal, nor do they have any reserves. But the sheeple lap this stuff up. I'd bet half the country still thinks their FRN's are guaranteed/backed by the gold at Fort Knox. The one term above that does apply to derivative's is "speculative." And how! Maybe Lehman should have pressed their bankruptcy in court and said those 91% in notional derivatives losses they took were just "imaginary." Apparently, the 87% in effective "netting" via modeling that the banks rely on didn't work so well for those that blew up. It appears those "safety nettings" were "imaginary" too....lol.
www.investopedia.com/terms/n/notionalvalue.asp Investopedia DEFINITION of 'Notional Value' The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).
Come on Cohodk, even Investopedia of all places seems to know more about "notional" and "leverage" than you do. And the irony of this is, they don't even mention derivatives in their summary above, the world's largest "notional' market by far. I rest my case.
<< <i>Thank you for proving my point that notional is meaningless..... >>
You've recently made some of the most ludicrous statements ever posted around here. And can't argue your way out of them. At least that much we agree on. This one with "notional" derivatives being fiction is just another in a long string that began over a decade ago.
<< <i>Thank you for proving my point that notional is meaningless..... >>
You've recently made some of the most ludicrous statements ever posted around here. And can't argue your way out of them. At least that much we agree on. This one with "notional" derivatives being fiction is just another in a long string that began over a decade ago. >>
Didnt you provide this as a definition of notional?
1. existing only in theory or as a suggestion or idea. "notional budgets for hospital and community health services" synonyms: hypothetical, theoretical, speculative, conjectural, suppositional, putative, conceptual; More imaginary, fanciful, unreal, illusory "the notional line between East and West" antonyms: actual existing only in the imagination. "Lizzie seemed to vanish into thin air, as if her presence were merely notional"
<< <i>Didnt you provide this as a definition of notional? >>
I sure did. That's the general use of "notional" in the general context of daily speaking and writing....the way you'd find it in a novel or short story....in the true literary sense. That's why I listed that. That's what J6P generally sees. If you asked Joe what notional was in financial markets he'd be clueless. The financial terminology of notional is quite different, very real, but with some similarities. I'd figure you being a professional in the financial field would be able to see the reasoning for these two different uses. But, clearly I assumed too much. I challenged your brain and logic, and you failed. What else is new? There's no such thing as financial leverage in trading positions. That's essentially what you just stated.
The irony of this is that your last reply refutes your own concept of financial "market dynamics" which most certainly uses leverage, and plenty of it, that is, unless you're now saying that market dynamics is imaginary, unreal, illusory, etc. The more you say, the further down your throat your foot goes. Are you a literary trader or a financial one?
You should also go to your investopedia website and search world's largest financial markets.
Do you believe everything you read on the internet? Apparently you do from the mainstream financial media.
Why would I? Clearly, investopedia, like yourself doesn't fully understand derivatives. They didn't even list them in their definition of "notional." You're financial education must have been along the same lines as theirs. That market was $1.1 QUAD in size back in Dec 2008. It's certainly just as large today, if not larger. Find me something larger than that in notional declared value that trades on a daily basis between the world's biggest banks. Are you telling me there is $1.1 QUAD in total currencies in the world? Problem here, is that even the financial media doesn't want to declare otc derivs as the world's biggest market. They don't understand it and don't want to being them out into the open. If your "fairy dust" model works for you....then by all means keep utilizing it. How did that model work in Sept 2008?
Notional value as defined by Cohodk's Investopedia is total market leverage....period. Right there is suggests reality and the potential for real losses. The way it has worked is that the banks have been determining notional value per their computer models since Dec 2008. Marked to market value disappeared. Lehman found out that "notional value" became 91% of total worst case leverage....essentially, quite close to full 100% notional losses. And they weren't imaginary or hypothetical either. Show me that XF 1860-s quarter and I'll tell you what it's worth today. You'll get a real offer for it too from someone in the LSCC. The bankers can just as easily tell you what their derivatives contracts are really worth....but they won't. They value them in-house, per computer model, such that +trading revenues are generated. It looks good on paper....which is all that counts for now. The LTCM PhD's that ran their derivatives in 1998 "knew" what they were worth because the computer told them so.....until it was proven wrong and they went bankrupt.
By Andrew Beattie | March 25, 2010 AAA |
Forex is the largest and most liquid market in the world. In 2010, it accounted for more than $3 trillion of daily trading..... .
First of all, let's not confuse "trading" with the size of a market. A market doesn't have to have huge trading volume to be the largest. Forex is probably the most liquid and oldest....doesn't make it the biggest. Forex generally trades on real and regulated exchanges. That's not the case for otc derivs which are agreements between 2 parties (usually TBTF banks) where there is no regulation. If one party defaults, then notional risk = actual risk.
Playing Cohodk's game above is the headline I found on Investopedia. But is it true? The last number I found was $5.3 TRILL of daily trading in 2013. Maybe it's a bit more today. Could be $10 TRILL...or approx $2.5 QUAD/yr. in "trades." How much leverage and repetition are in those trades? I'll estimate 100X-300X which is about the amount of gold contracts traded every day vs. actual physical gold in the world. So let's use 100X. That reduces the $2.5 QUAD down to $250 TRILL. And even that seems ridiculous considering the US M2 money aggregate is $12.186 TRILL. You could add up the M2 for all the currencies in the world and probably not get past $40 TRILL. The USD is 50% of the USDX and >40% of the IMF SDR. Either way, $40 TRILL or $250 TRILL notional.....pales next to the reported BIS stated derivatives of approx $700 TRILL (and don't forget that took a 40% "accounting terminology" haircut in 2008. The real number is still >$1 QUAD.). That also assumes that otc derivatives are static. They aren't. Considering that 48% of the interest rate swaps have maturities <1 yr, and they make up 80% of the entire deriv's market, then 50% is a fair approximation. So that $1.14 QUAD is now raised to $1.68 QUAD when turnover is involved. And we're assuming a single turnover per year. Some of these <1 yr contracts could be turning over weekly, monthly, quarterly, etc. Deriv's trading could account for multiples of $1.68 TRILL. We're also excluding the 1-5 year maturities which makes up another 35% of the total amount. Suffice to say, the number is bigger than $1.68 QUAD. And this is only what gets reported to BIS and OCC. We have no idea what goes unreported.
<< <i> Show me that XF 1860-s quarter and I'll tell you what it's worth today. You'll get a real offer for it too from someone in the LSCC.
Exactly. What's it worth if I have 10 of them, and there's a line of guys behind me, each with 10 more, and we all want cash money right now?
Derivatives are just like everything else, they trade just fine in an orderly market between willing buyers and sellers who each assume the risk.
what's a barrel of oil worth?
Less than it was last year-- a lot less. >>
Too funny. There probably aren't 10 1860-s XF quarters in the entire world. There's not even a true unc known of that date. Try again. There's only about 125-175 of those in existence in all grades, maybe only 25% or less problem free, the vast majority in VG-Fine or less. If those guys want cash money right now, they would have many potential buyers, including me. <$100,000 would probably buy all the problem-free examples known. I don't see how that equates to $1.1 QUAD in otc derivatives. No one can possibly pay off all the winners tomorrow if the system defaulted similar to 2008 or 1998. Those otc derivatives ONLY trade between 5 US banks and a similar number of foreign TBTF banks. That's not an "orderly" market imo. It's a contrived market and a monopoly where no one else plays. There are no real end users other than the banks themselves. It's like a coin market of only coin dealers who trade among themselves and say everything is great.....we're all making money......until one guy in that chain can't pay or won't pay. No, otc derivatives are "not like everything else." There's no market out there like them....illiquid, unregulated, opaque, marked to computer model, misunderstood by 98% of the financial market (including Cohodk). Rather than reduce risk, they have engorged it and centralized it. I'll take the 1860-s XF quarter for $5,000 Alex ( I wish). If only Lehman had a pile of better date seated coins (or actual tangible assets) instead of 91% worthless derivatives....they'd still be here today.
JPM and the others are market makers, they'll buy or sell derivative insurance to whoever wants it. Farmers, oil producers, boxed cereal producers who use corn, wheat, and rice, coffee companies.. the list goes on and on. You or I may not need to hedge our buy or sell prices for futures contracts, but others do, and they go ahead and buy or sell those contracts.
Might as well harp on how much the car, life, auto, and home insurance industry would be "on the hook" for if all the houses in the US burned down simultaneously, or if everyone crashed their cars at once, or all the wage earners died the same day. OH my Gawd it TRILLS!
No, otc derivatives are "not like everything else." There's no market out there like them....illiquid, unregulated, opaque, marked to computer model, misunderstood by 98% of the financial market
LMAO, the "market" for rare coins is exactly like that. Maybe worse.
Comments
No, of course not "fully discounted", any more than it should be "fully believed and acted upon as if it was the only important fact in the world"
It's just more data, and appreciated as such.
Liberty: Parent of Science & Industry
<< <i>Oh, and on time premium price decay, too, as many many hedging options positions expire worthless and the seller, long or short, simply pockets the premium he was paid.
What I'm not seeing in those charts is any sign of the general monetary inflation, so feared by so many for so long due to accommodative fed monetary policy (low interest rates and QE)
If and when most of these charts turn back up, we'll certainly take notice, and if they were all or even most of them moving toward new highs, it would, to me, signal an inflationary trend, rather than specific commodities or sectors rotating in and out of favor over the intermediate term >>
If I'm the FED/USTreasury I know that all the available inflationary forces were pushed into the rebound of the stocks, housing, USD and bond markets from 2009-2015. Nothing else really got those $TRILLIONS of QE infusion. It's definitely price inflation....albeit channeled to particular sources. So when that liquidity wants to go elsewhere, where does it go? No way the govt's want that to channel that back into commodities again like it did from 2001-2011. I would pull every string in my power to manage that better than last time around.
What does the FED do with $4 TRILL in bank reserves? They've never once effectively reduced reserves once they have created them. Inflation is where you want to see it. I think the FED & Co. did a good job of choosing/supporting winners the past 6 years, better than has ever been done before. Monetary inflation in 2015 is vastly different from 1985....and probably even vastly different from 2005 or 2010. It's even hard to define and/or track "money" today. It would make much more sense to include credit, debt, margin, currency swaps, derivatives, etc. as the 2015 equivalent of "money" or the standard monetary aggregates (MB, M1, M2, M3...and now M4).
It seems to me (as a buyer of stocks, real estate, and metals throughout 2001-2015) that it was me making the choices in what assets to place my own earned liquidity into, for my own self interests and seeking a combination of safety and return, with acknowledged risk, too. It was not the government or Fed making me make those choices, was it? They feel rational and done of free will as the decisions are being made. I'd imagine that all of the individual market participants make decisions based on free will, from a farmer's decision to plant cotton or corn or soybeans, depending on his own calculus, or a factory worker's decision to move to a different state where there's a plant going up, to well, every other individual. Are they "being channeled" to do things? I guess it's all semantics when one discusses incentives, I'll once again contend that the market prices speak louder than any words.
Liberty: Parent of Science & Industry
Your approach is diversification among asset classes with periodic rebalancing as you've stated several times. That's a good management methodology, to be sure. Whether or not you assessed the impact of QE and weighed it vs. the moral hazard of currency debasement is something only you know. In any event, your approach hasn't hurt you and you've undoubtedly made some good picks along the way. The only thing I would point out is that the time period from 2001 to 2015 hasn't been monolithic. I would break it into 3 segments, from 2001 to 2007, from 2008 to 2011, and from 2012 to present. The important factors aren't the same in each period.
I'd imagine that all of the individual market participants make decisions based on free will, from a farmer's decision to plant cotton or corn or soybeans, depending on his own calculus, or a factory worker's decision to move to a different state where there's a plant going up, to well, every other individual. Are they "being channeled" to do things? I guess it's all semantics when one discusses incentives, I'll once again contend that the market prices speak louder than any words.
I think it depends on where the incentives originate, how they occur and who pays for them.
I knew it would happen.
<< <i>..... It was not the government or Fed making me make those choices, was it? They feel rational and done of free will as the decisions are being made. I'd imagine that all of the individual market participants make decisions based on free will, from a farmer's decision to plant cotton or corn or soybeans, depending on his own calculus, or a factory worker's decision to move to a different state where there's a plant going up, to well, every other individual. Are they "being channeled" to do things? I guess it's all semantics when one discusses incentives, I'll once again contend that the market prices speak louder than any words. >>
In my mind it was the FED/gov't "helping" you to make those choices. Isn't that what they do? They "helped" us into Real Estate in 2003-2008. And into the stock market from 2009-2015. You "help" people make decisions by ensuring that downside is limited, at least for a period that suits those managing markets. J6P is "free" to make his choice. Odds highly favor it will be the same choice the FED/gov't would want him to make. How does JPM's $4 TRILL commodity position affect J6P's "free will"? And Joe doesn't even know there is such a position. How did the $7 TRILL in MBS during the 2006-2008 housing run up affect old Joe's "free will?" Of course, he bought a house during that rise, and likely closer to the market peak vs. the 1995 bottom. All the while his "free will" was being channeled to buy real estate, there was JPM, GS, and others shorting real estate with 30-1 leverage. Can you you really have "free will" if you have no clue what's going on behind the scenes? "Free will" assumes free markets, transparent markets, and fair markets. When was the last decade that really existed?
There's lot of "free will" out there...as long as you assume there is no linkage to $4 TRILL in US bank reserves, $4 TRILL in otc commodity derivs, and $900 TRILL in overall world otc interest rate derivatives. It smells like freedom to me. If Obama wants all the coal producers to go to zero and solar producers to excel, what could be more free? In the end, the market price decides who won and who lost. That's reality. Freedom might have little to do with it. When the stock market crashed on August 24th (following the mid-July all time highs) was that a collective of J6P's making a free market decision? Are the HFT computer algo's that make up the majority of market trading a form of "free will?"
Corporations buying back their stock - just more "free will" for J6P?
This sounds lke the "C" word to me. This guy has been bearish on PMs for a couple of years....so it just be "OK" to link him.
Hoye is a bit more even keeled. Brings up LTCM. Trying to put the genie back in the bottle
Why is that we seem to know about JPMs silver position, but not other commodities? Is it selective information distribution? Or is the silver position just "made up"?
Knowledge is the enemy of fear
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I'd love to know how JPM's position is spread across energy, base metals, grains, and softs. Are they short or are they long? Would the US Govt even allow them to go long on commodities to that extent
Why is that we seem to know about JPMs silver position, but not other commodities? Is it selective information distribution? Or is the silver position just "made up"? >>
It's a function of how the OCC publishes the quarterly derivative's report. You've taken the 10 min to read at least one of them in the past 10 years, right? I've listed them here numerous times over the past 10 yrs.
Prior to last quarter, we did know exactly what the gold positions were of the big reporting banks. No we don't since Gold and FX derivatives are now combined (and FX positions are 100X larger!). We still get the information of "other precious metals" from the same banks. That is generally believed to be mostly all silver because of the small trading quantities and volumes for PLAT and PALL. JPM's silver (or other PMs) position is actually quite moderate at around $13.4 BILL (1 yr of world silver production). It's Citibank that surged into the lead recently by adding $50 BILL the previous quarter....now holding $53 BILL in "precious metals derivs." Note that gold is definitely not included in the "other PMs" position, and never has been since I've been following these reports. 82% of the other precious metals derivatives have a maturity of <1 yr. So these are short term plays.
Commodities aren't broken down either so no way to know individual items. JPM "made" $3.5 BILL last quarter on their otc derivatives. Citibank make $1.4 BILL and BoA at $1.1 BILL. The CFTC monthly Bank Participation Report listed the 3-4 largest US banks' positioning in futures for silver, gold, and most other commodities. There's no way to break down to single banks. Though you could probably assume that >75% of the US silver futures positioning by reporting US banks is JPM and Citigroup.
OCC 1st QTR report
Knowledge is the enemy of fear
<< <i>So it is selective information dispersion.... >>
Not from where I sit. There's nothing I can select from the US Treasury's OCC's data as provided that doesn't look like the big banks aren't gaming the markets. Ever hear of the game "Monopoly?"
When you don't read the source reports before commenting on them....that's pretty "selective" don't ya think?
Or on currencies, the largest market of all?
Maybe you are being fed what "they" want you to eat?
Knowledge is the enemy of fear
You only get what you put into something. Sorry if the reports out of the OCC and BIS don't make sense to you. And you are incorrect about currencies being the largest market of all. The $156 TRILL in US bank interest rate derivatives dwarfs those by a factor of 5X. And on a world-wide scale there are $900 TRILL of those. But, it's only "notional" so that doesn't count, right? Just ask Lehman, LTCM, BSC, or AIG who also though derivs "don't count" and "net out."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
I knew you could figure it out.
Knowledge is the enemy of fear
<< <i>And how much did AIG have in derivatives? >>
Obviously, way more than they could cover. Just like LTCM. It's all good when you can value them yourself. It stinks when the market finally tells you what they're really worth.
<< <i>it's only "notional" so that doesn't count, right?
I knew you could figure it out. >>
The same concept of "notional" applies to futures, options, currencies, etc. I guess those markets "don't count" either....lol.
Ever hear of concepts like margin, leverage, etc? In derivatives they prefer to call it "notional".....precisely so the uninformed will stay that way....uninformed. At least you're in the majority.
no·tion·al
adjective: notional
1.
existing only in theory or as a suggestion or idea.
"notional budgets for hospital and community health services"
synonyms: hypothetical, theoretical, speculative, conjectural, suppositional, putative, conceptual; More
imaginary, fanciful, unreal, illusory
"the notional line between East and West"
antonyms: actual
existing only in the imagination.
"Lizzie seemed to vanish into thin air, as if her presence were merely notional"
Thing is, we learned with LTCM, Lehman, AIG, GM, etc. that notional became reality. The same type of people that came up with "notional" also created the title for the Federal Reserve System. Yet the Federal Reserve is not Federal, nor do they have any reserves. But the sheeple lap this stuff up. I'd bet half the country still thinks their FRN's are guaranteed/backed by the gold at Fort Knox. The one term above that does apply to derivative's is "speculative." And how! Maybe Lehman should have pressed their bankruptcy in court and said those 91% in notional derivatives losses they took were just "imaginary." Apparently, the 87% in effective "netting" via modeling that the banks rely on didn't work so well for those that blew up. It appears those "safety nettings" were "imaginary" too....lol.
www.investopedia.com/terms/n/notionalvalue.asp
Investopedia
DEFINITION of 'Notional Value' The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).
Come on Cohodk, even Investopedia of all places seems to know more about "notional" and "leverage" than you do. And the irony of this is, they don't even mention derivatives in their summary above, the world's largest "notional' market by far. I rest my case.
CFTC - which one is biggest?
You should also go to your investopedia website and search world's largest financial markets.
You really should stick to "seated coin stories from the 70s", for $600 Alex.
Knowledge is the enemy of fear
1860-S 25C PCGS XF40 CAC
Liberty: Parent of Science & Industry
Liberty: Parent of Science & Industry
<< <i>Thank you for proving my point that notional is meaningless..... >>
You've recently made some of the most ludicrous statements ever posted around here. And can't argue your way out of them. At least that much we agree on. This one with "notional" derivatives being fiction is just another in a long string that began over a decade ago.
<< <i>
<< <i>Thank you for proving my point that notional is meaningless..... >>
You've recently made some of the most ludicrous statements ever posted around here. And can't argue your way out of them. At least that much we agree on. This one with "notional" derivatives being fiction is just another in a long string that began over a decade ago. >>
Didnt you provide this as a definition of notional?
1.
existing only in theory or as a suggestion or idea.
"notional budgets for hospital and community health services"
synonyms: hypothetical, theoretical, speculative, conjectural, suppositional, putative, conceptual; More
imaginary, fanciful, unreal, illusory
"the notional line between East and West"
antonyms: actual
existing only in the imagination.
"Lizzie seemed to vanish into thin air, as if her presence were merely notional"
You've lost it roadrunner.
Knowledge is the enemy of fear
<< <i>Didnt you provide this as a definition of notional? >>
I sure did. That's the general use of "notional" in the general context of daily speaking and writing....the way you'd find it in a novel or short story....in the true literary sense. That's why I listed that. That's what J6P generally sees. If you asked Joe what notional was in financial markets he'd be clueless. The financial terminology of notional is quite different, very real, but with some similarities. I'd figure you being a professional in the financial field would be able to see the reasoning for these two different uses. But, clearly I assumed too much. I challenged your brain and logic, and you failed. What else is new? There's no such thing as financial leverage in trading positions. That's essentially what you just stated.
The irony of this is that your last reply refutes your own concept of financial "market dynamics" which most certainly uses leverage, and plenty of it, that is, unless you're now saying that market dynamics is imaginary, unreal, illusory, etc. The more you say, the further down your throat your foot goes. Are you a literary trader or a financial one?
You should also go to your investopedia website and search world's largest financial markets.
Do you believe everything you read on the internet? Apparently you do from the mainstream financial media.
Why would I? Clearly, investopedia, like yourself doesn't fully understand derivatives. They didn't even list them in their definition of "notional." You're financial education must have been along the same lines as theirs. That market was $1.1 QUAD in size back in Dec 2008. It's certainly just as large today, if not larger. Find me something larger than that in notional declared value that trades on a daily basis between the world's biggest banks. Are you telling me there is $1.1 QUAD in total currencies in the world? Problem here, is that even the financial media doesn't want to declare otc derivs as the world's biggest market. They don't understand it and don't want to being them out into the open. If your "fairy dust" model works for you....then by all means keep utilizing it. How did that model work in Sept 2008?
Book value.
What's that XF 1860-S quarter "worth"
it depends.
Liberty: Parent of Science & Industry
By Andrew Beattie | March 25, 2010 AAA |
Forex is the largest and most liquid market in the world. In 2010, it accounted for more than $3 trillion of daily trading..... .
First of all, let's not confuse "trading" with the size of a market. A market doesn't have to have huge trading volume to be the largest. Forex is probably the most liquid and oldest....doesn't make it the biggest. Forex generally trades on real and regulated exchanges. That's not the case for otc derivs which are agreements between 2 parties (usually TBTF banks) where there is no regulation. If one party defaults, then notional risk = actual risk.
Playing Cohodk's game above is the headline I found on Investopedia. But is it true? The last number I found was $5.3 TRILL of daily trading in 2013. Maybe it's a bit more today. Could be $10 TRILL...or approx $2.5 QUAD/yr. in "trades." How much leverage and repetition are in those trades? I'll estimate 100X-300X which is about the amount of gold contracts traded every day vs. actual physical gold in the world. So let's use 100X. That reduces the $2.5 QUAD down to $250 TRILL. And even that seems ridiculous considering the US M2 money aggregate is $12.186 TRILL. You could add up the M2 for all the currencies in the world and probably not get past $40 TRILL. The USD is 50% of the USDX and >40% of the IMF SDR. Either way, $40 TRILL or $250 TRILL notional.....pales next to the reported BIS stated derivatives of approx $700 TRILL (and don't forget that took a 40% "accounting terminology" haircut in 2008. The real number is still >$1 QUAD.). That also assumes that otc derivatives are static. They aren't. Considering that 48% of the interest rate swaps have maturities <1 yr, and they make up 80% of the entire deriv's market, then 50% is a fair approximation. So that $1.14 QUAD is now raised to $1.68 QUAD when turnover is involved. And we're assuming a single turnover per year. Some of these <1 yr contracts could be turning over weekly, monthly, quarterly, etc. Deriv's trading could account for multiples of $1.68 TRILL. We're also excluding the 1-5 year maturities which makes up another 35% of the total amount. Suffice to say, the number is bigger than $1.68 QUAD. And this is only what gets reported to BIS and OCC. We have no idea what goes unreported.
Exactly. What's it worth if I have 10 of them, and there's a line of guys behind me, each with 10 more, and we all want cash money right now?
Derivatives are just like everything else, they trade just fine in an orderly market between willing buyers and sellers who each assume the risk.
what's a barrel of oil worth?
Less than it was last year-- a lot less.
Liberty: Parent of Science & Industry
<< <i> Show me that XF 1860-s quarter and I'll tell you what it's worth today. You'll get a real offer for it too from someone in the LSCC.
Exactly. What's it worth if I have 10 of them, and there's a line of guys behind me, each with 10 more, and we all want cash money right now?
Derivatives are just like everything else, they trade just fine in an orderly market between willing buyers and sellers who each assume the risk.
what's a barrel of oil worth?
Less than it was last year-- a lot less. >>
Too funny. There probably aren't 10 1860-s XF quarters in the entire world. There's not even a true unc known of that date. Try again. There's only about 125-175 of those in existence in all grades, maybe only 25% or less problem free, the vast majority in VG-Fine or less. If those guys want cash money right now, they would have many potential buyers, including me. <$100,000 would probably buy all the problem-free examples known. I don't see how that equates to $1.1 QUAD in otc derivatives. No one can possibly pay off all the winners tomorrow if the system defaulted similar to 2008 or 1998. Those otc derivatives ONLY trade between 5 US banks and a similar number of foreign TBTF banks. That's not an "orderly" market imo. It's a contrived market and a monopoly where no one else plays. There are no real end users other than the banks themselves. It's like a coin market of only coin dealers who trade among themselves and say everything is great.....we're all making money......until one guy in that chain can't pay or won't pay. No, otc derivatives are "not like everything else." There's no market out there like them....illiquid, unregulated, opaque, marked to computer model, misunderstood by 98% of the financial market (including Cohodk). Rather than reduce risk, they have engorged it and centralized it. I'll take the 1860-s XF quarter for $5,000 Alex ( I wish). If only Lehman had a pile of better date seated coins (or actual tangible assets) instead of 91% worthless derivatives....they'd still be here today.
the list goes on and on. You or I may not need to hedge our buy or sell prices for futures contracts, but others do, and they go ahead and buy or sell those contracts.
Might as well harp on how much the car, life, auto, and home insurance industry would be "on the hook" for if all the houses in the US burned down simultaneously, or if everyone crashed their cars at once, or all the wage earners died the same day. OH my Gawd it TRILLS!
Liberty: Parent of Science & Industry
I do think your spin has made you dizzy.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
LMAO, the "market" for rare coins is exactly like that. Maybe worse.
Liberty: Parent of Science & Industry