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Politics : Ask Michael Burke
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To: Bilow who wrote (88791)1/24/2001 2:50:15 PM
From: Mike M2  Read Replies (1) of 132070
 
Carl, yes it is true that equity derivatives -options existing prior to the 1920s . Phil Caret also speaks of equity options in his 1927 book " The Art of Speculation" It is my impression that stock options had minimal impact from a macro perspective back then. I suspect there were no derivatives for currencies or interest rates back then- commodities ? I've not heard of them but it is possible since they are useful for commerce and industry. It is safe to say that in todays environment the impact of derivatives is huge. I seem to recall figures of $100 trillion dollars in notional value -in excess of 3X global GDP. I recall reading that the majority of todays derivatives are interest rate related. Some years ago Martin Armstrong PEI mentioned that in the 20's 10% margin was allowed only on certain stocks. In addition, I think only 43% of brokerage accounts were margin accounts. I also share your feelings that the impact of 10% from a macro perspective is over emphasized in the minds of the public - in part to assure the investing public that it cannot happen again. I don't have the debt/ GDP figures for 1929 and now handy but i think it was 140% then vs 260% now. There is considerable leverage out there in different forms in the 20s we had consumer installment debt ( I have some figures I'll post in a few days) - now we have credit cards CHARGE! , home equity loans, auto leases which are not included in consumer installment debt last that I knew - its a fixed payment every month -sounds like debt to me -g-. You brought up some interesting issues illustrating that things are always as different as they seem- history may not repeat but it does rhyme. mike
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