The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: carranza2 who wrote (3107)	12/28/2007 3:19:36 PM
From: Real Man	Read Replies (2) of 71456

Gold derivatives are a tiny fraction of all derivatives. I agree, however, there may be delivery issues in those. Derivative markets are supposed to be a tail of the dog (underlying asset). However, due to their enormous size, it's now the tail that wags the dog. Witness enormous stock market rally last week that was, perhaps, solely due to options imbalance (more out of the money puts than calls) and related delta-hedging buying pressure as time risk premiums in index options evaporated. The decline this week was due to unwinding of these positions. This is not normal, it's leverage upon leverage, a pyramid scheme. Bailouts promote further growth of leverage, since they eliminate the distribution "tail" events, so that derivatives can be profitably sold in accord with the Gaussian and related mathematical models. Those did not work in subprime bonds lately -g-

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