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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (12691)	10/8/2008 7:22:07 PM
From: Real Man	2 Recommendations Read Replies (1) \| Respond to of 71454

We are in a market crash now, so a sharp reversal can come at any time. I honestly thought the bottom would happen 100 SP points higher. How to quantify the influence of the derivative monster on all this? Because of such a huge bubble in derivatives, I expected those to eventually crash when the bubble becomes bigger than what the Fed can contain. It is very scary to watch this development live, because, according to this "story", when the monster overwhelms the Fed, it's a collapse of the whole 1000 Trillion derivative pyramid and the market control mechanism that has been built up for more than 20 years since 1987 crash. The DOW can go down then to very unreasonable prices, such as 1000. Of course, things will get shut down long before the DOW reaches that. The problem with stock market derivatives is that essentially derivatives don't help to stop the crash when it's in an advanced stage. Rather, they reinforce it when the market makers sell the market short as it blows fast through put strike prices. Lack of liquidity is the cause of it, that's why the Fed is saying it's "liquidity problem", and keeps pumping ... trillions... and can't stop the monster. This is what happened in 1987 (portfolio insurance instead of puts), but now these markets are 1000 times bigger. Not to mention that not just stock market derivatives went haywire - all of them. Crazy moves are in every markets except commodities (where moves are always crazy) Now, they used ALL methods they could when VIX was at 30, including banning short sales, all on expiration week. Both in July and in September. Now VIX is at 60, real values of these puts grew 10 to 100-fold. How can the crash be stopped? Put holders can simply sell the puts then drive prices higher, but they probably drove most if not all speculators away at this point. Put holders who hedge their portfolios won't sell.