Category: financial derivatives

FMV PART 2: IMPACT OF DERIVATIVES MARKETS

The core cause of the financial crisis of 2008, and again today in 2020, has been the dangerous impact of derivatives markets created by large banks, insurance companies and hedge funds. Speculative trading practices by large banks were outlawed in this country under the Glass-Stegal Act of 1935. But in 1999, at the end of the Clinton Administration, Glass-Stegal was repealed. This repeal, along with passage of the Commodity Futures Modernization Act), during the Bush II administration, opened the door for massive speculative trades in complex derivative instruments.

To be sure, in 2009, the Dodd-Frank Wall Street Reform Act attempted to regulate credit default swaps to a degree. But in response, US banks and hedge funds shifted speculative derivatives trading overseas, and then lobbied congress to limit meaningful regulatory enforcement of Dodd-Frank, the “Volker Rule.” As a result, speculative trading in the global derivatives markets has continued relatively unabated to this day.

In recent years, famed investor Warren Buffett pulled no punches in calling speculative derivatives “weapons of mass destruction.” In his 2017 letter to shareholders, Mr. Buffett explained: Continue reading “FMV PART 2: IMPACT OF DERIVATIVES MARKETS”

WALL STREET ON PARADE: “THE TIDE IS GOING OUT…”

Wall Street on Parade is the best available blog site that follows the daily activities of the Wall Street banks and the Federal Reserve.  Authored by Pam and Russ Martens, the Wall Street on Parade blog routinely tracks the relationship between the worst derivative speculators and their counter-party insurers. The title of this article (March 29, 2020) succinctly describes the most recent economic and financial disaster caused by derivatives speculation: The Tide Is Going Out and JPMorgan, Deutsche Bank and AIG Appear to Be Swimming (Read Trading) Naked.

While last week’s bailouts, by both Treasury and the Fed, have helped stem the “tide” (no pun intended), the share prices for JPMorgan, Deutche Bank, AIG and Ameriprise Financial are falling significantly faster and farther than other financial and corporate share prices. This derivatives disaster is highly material to holders of annuities and life policies from any of these insurers, forecasting a near certainty that policy and contract claims will go unpaid–or at the very least–only partially paid. Continue reading “WALL STREET ON PARADE: “THE TIDE IS GOING OUT…””

SPECULATIVE DERIVATIVES ARE ABOUT TO COLLAPSE

How does this affect every-day Americans? Continue reading “SPECULATIVE DERIVATIVES ARE ABOUT TO COLLAPSE”

Speculative derivatives markets are in the process of collapse–with serious consequences for us all. This will eventually have broad-reaching ramifications for every sector of business, not least of which is in valuations for bankruptcy proceedings and other court proceedings.  

Directly and heavily impacted will be the insurance industry.  Insurers with significant exposure to speculative derivatives include: Lincoln National Corp., Ameriprise Financial, AIG, Prudential Financial, and Voya Financial.

This is a problem that has been brewing since Sept. 16, 2019 with break-down of the Federal Reserve’s overnight repo market.  Months later, even with massive Fed repo injections, commercial paper purchases by the Federal Reserve, announcement of $800 billion Fed QE program, announcement of $1 Trillion IMF QE program and a Fed Discount Window rate cut to .25%, the US and European equity markets opened the day limit down–which triggered circuit breakers to temporarily stop equities trading.

How does this affect every-day Americans? Continue reading “SPECULATIVE DERIVATIVES ARE ABOUT TO COLLAPSE”