Why The Stock Market Is Rising

[ralfy]

What?

Credit has been easy to create, and the stock markets are part of it.

That hasn't changed in a long time. So what?

It started changing during the early 1980s.

It started changing during the early 1980s.

How do you feel it changed? Be specific.
Why does it matter?

It changed due to deregulation starting in the 1980s, with significant amounts created only during the last fifteen years or so. It matters because only a trillion dollars of that from subprime lending was enough to cause cascading crashes worldwide from 2008 to only recently.

 

[william the wie]

All income streams are returns on investment because they are defined as such.

 

[ralfy]

...because much of credit is commercially created and not regulated, including derivatives:

Top Derivatives Expert Estimates Size of the Global Derivatives Market at 1 200 Trillion Dollars ... 20 Times Larger than the Global Economy Washington s Blog

The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy. QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system.

A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.

Remember this is only part of a much larger market that includes hundreds of trillions of dollars in non-reported agreements and private contracts. The article below explores some of the ins and outs including the risk derivatives pose and why they could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html

Since the majority of the money supply even when narrowly defined is in the form of derivatives I find it quite likely that the 693 T is quite minimal. At a risk adjusted interest rate of 3% it would take 2.5 Quadrillion in derivatives to support a world economy of 70T. For example each piece of rental property generally has at least three derivatives with four or more not at all uncommon. Similar results are found in transportation, utilities and even to some extent in retail. So, first derivatives have to be defined in way that separates plain vanilla stuff like your debit card from Forex options.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T

I made a $5 bet on a hockey game.
My derivative was based on hundreds of millions in value, which is much more than my personal GDP.
If I lose, do I have to default on anything?

Derivatives go beyond small bets.

 

[ralfy]

All income streams are returns on investment because they are defined as such.

But derivatives involve going beyond income streams.

 

[Toddsterpatriot]

...because much of credit is commercially created and not regulated, including derivatives:

Top Derivatives Expert Estimates Size of the Global Derivatives Market at 1 200 Trillion Dollars ... 20 Times Larger than the Global Economy Washington s Blog

The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy. QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system.

A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.

Remember this is only part of a much larger market that includes hundreds of trillions of dollars in non-reported agreements and private contracts. The article below explores some of the ins and outs including the risk derivatives pose and why they could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html

Since the majority of the money supply even when narrowly defined is in the form of derivatives I find it quite likely that the 693 T is quite minimal. At a risk adjusted interest rate of 3% it would take 2.5 Quadrillion in derivatives to support a world economy of 70T. For example each piece of rental property generally has at least three derivatives with four or more not at all uncommon. Similar results are found in transportation, utilities and even to some extent in retail. So, first derivatives have to be defined in way that separates plain vanilla stuff like your debit card from Forex options.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T

I made a $5 bet on a hockey game.
My derivative was based on hundreds of millions in value, which is much more than my personal GDP.
If I lose, do I have to default on anything?

Derivatives go beyond small bets.

My small bet is a derivative.
Many derivatives have much much less at risk than the notional value.

 

[Toddsterpatriot]

...because much of credit is commercially created and not regulated, including derivatives:

Top Derivatives Expert Estimates Size of the Global Derivatives Market at 1 200 Trillion Dollars ... 20 Times Larger than the Global Economy Washington s Blog

The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy. QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system.

A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.

Remember this is only part of a much larger market that includes hundreds of trillions of dollars in non-reported agreements and private contracts. The article below explores some of the ins and outs including the risk derivatives pose and why they could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html

Since the majority of the money supply even when narrowly defined is in the form of derivatives I find it quite likely that the 693 T is quite minimal. At a risk adjusted interest rate of 3% it would take 2.5 Quadrillion in derivatives to support a world economy of 70T. For example each piece of rental property generally has at least three derivatives with four or more not at all uncommon. Similar results are found in transportation, utilities and even to some extent in retail. So, first derivatives have to be defined in way that separates plain vanilla stuff like your debit card from Forex options.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T

I made a $5 bet on a hockey game.
My derivative was based on hundreds of millions in value, which is much more than my personal GDP.
If I lose, do I have to default on anything?

Reread your sig.

Not everyone confused about derivatives is an idiot.
Most idiots are confused about derivatives.
I'm trying to help the confused.

 

[william the wie]

The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy. QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system.

A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.

Remember this is only part of a much larger market that includes hundreds of trillions of dollars in non-reported agreements and private contracts. The article below explores some of the ins and outs including the risk derivatives pose and why they could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html

Since the majority of the money supply even when narrowly defined is in the form of derivatives I find it quite likely that the 693 T is quite minimal. At a risk adjusted interest rate of 3% it would take 2.5 Quadrillion in derivatives to support a world economy of 70T. For example each piece of rental property generally has at least three derivatives with four or more not at all uncommon. Similar results are found in transportation, utilities and even to some extent in retail. So, first derivatives have to be defined in way that separates plain vanilla stuff like your debit card from Forex options.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T.

From what I remember, in 2000, global GDP was around 30T but derivative levels were around 100T

I made a $5 bet on a hockey game.
My derivative was based on hundreds of millions in value, which is much more than my personal GDP.
If I lose, do I have to default on anything?

Reread your sig.

Not everyone confused about derivatives is an idiot.
Most idiots are confused about derivatives.
I'm trying to help the confused.

Good enough.

Let's get simple and concrete

Bonds are currently paying little interest therefore derivatives, put and call options, are less risky that the underlying bonds and bond ETFs at least if they are covered by the bonds in case of calls and cash in the case of puts. The one exception are uncollateralized municipal bonds. The courts are denying primacy of uncollateralized debts in municipal bankruptcies. This is why the state of CA has to mortgage state buildings. Those mortgages are protected by the 4th amendment.

The Dow is a notorious counter indicator so buy AT&T and puts on Apple. Then issue calls against your AT&T position. if you lose you will lose small. If you win you will win big.

The purpose of using derivatives is to reduce risk. If you don't know what will happen and none of us do then derivatives if used properly will reduce risk.