InvestorMind

When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned. But the truth is that this is just the beginning. This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market. When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds. But over the past couple of decades it has evolved into much more than that. Today, Wall Street is the biggest casino in the entire world. When the “too big to fail” banks make good bets, they can make a lot of money. When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan. Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days. But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market. It has bee...

SAN FRANCISCO (MarketWatch) -- The International Swaps and Derivatives Association said Friday that the Greek government's use of collective-action clauses, or CACs, to amend to terms of Greece-issued bonds qualifies as a "credit event" for Greece. A credit event requires a payout to those who held credit default swaps as insurance to protect themselves in the event of a Greek default. The ISDA decision could trigger payouts on $3.2 billion of those insurance-like contracts, according to Dow Jones Newswires. The news comes after the Greek government announced that 83.5% of its private-sector bondholders agreed to a bond-swap deal. That rate fell short of the 90% needed to prevent legal force to get the rest of the private bondholders to participate, so Greece's finance ministry said it got approval for CACs, which would bring the total participation rate to 96% by forcing some bondholders on board. Original source

Anyone seeking joyous holiday greetings and cheerful forecasts for the new year is advised to avoid the following most recent Mark Faber interview, in which in addition to his predictions for 2012 (led with "more printing" by the dodecatupling down central planners, and far less prosperity), we get the following: "I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don't know: you can postpone the problems with monetary measures for a long time but you can't solve them... Greece should have defaulted - it would have sent a message that not all derivatives are equal because it depends on the counterparty." And on the long-term future: "I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification - some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we ...