Comments
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JEI disagree with a lot of this. In my experience the vast majority of derivatives are basically cash flow swaps, meaning the two parties involved in the transaction exactly swap exposure levels to suit them better. The derivative will pay either one of the parties depending on market prices at settlement or periodically over the term. It is a zero sum contract in its totality (one party's losses = the other party's gains) and so therefore cannot be systemic. The massive reduction in derivatives exposure globally since the crisis is most likely because banks aren't allowed to take much risk anymore and therefore don't need to use derivatives as frequently. I think this presentation is a classic example of mistaking correlation for causation
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BBravo, this has been quite extraordinary! People who think they can control all this suffer from the oldest destroyer of individuals and empires: human hubris. I will rather bet on nature.
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BSIt is an excellent analysis of the impact of CB activities, but I am left wondering what the best investment strategy should be. I do know that every major market crash I have experienced was caused by shrinkage of liquidity. This seems to be the end result of current policies, if I interpret it corrrectly.
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RPBrilliant stuff. If you add debt plus derivative you get to $1 quadrillion. Let that sink in. Its the first use of the Q word in finance...
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SSMy brain is hurting too. Thank you. More please.
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PHSay what...........my brain hurts
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DHI enjoyed this presentation very much. The approach discussed here was well presented and to me, has a lot of merit. It may be that some of us naturally like to think in a systems way and others like to specialise in a narrow interest and dig deep. Both would have merit but perhaps the world and academia has too much of the latter?
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GBI recall his gold call from the last presentation: Terrible.
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JVGreat presentation. However, I believe his observations of "central bank" motivations and behavior may be largely limited to CBs of the west. China and Japan have their own unique problems and motivations (even if their respective strategies currently rhyme with those of the west).
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amHow long can Central Bankers keep the charade going? Gold would be good collateral to have when the musical chairs stop. Thanks Daniel once again for a brilliant explanation of a complex system.
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RMVery good, but I wish he would continue for another 5 minutes on how he is positioning.
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wwDaniel's 'Adaptive' investment strategy reminds me of Ben Hunt's general advice for navigating these perilous times (and the 'convexity' theme of several other Wise ones). Wonderful! Thanks!
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GHThis presentation and the Shadow Banking Presentation (or should I say educational seminars) were fantastic. More of these would be great.
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T~@Ken, I found a working link in the downloaded transcript: Presentation Slides Download Link: https://we.tl/6D2nfZJkW9 It worked for me, hope it works for you.
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DSExcellent presentation. Was the hyper-increase in the derivatives market a result of banking and market deregulation around the world; thereby allowing the genie out of the bottle? DLS
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RSKEN there is a link to download the charts in the transscript
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KTThe downloaded transcript did NOT include any charts so it was hard to follow in certain areas. This is a rather difficult subject to fully grasp and appreciate and by reading the transcript I thought it would help. But because you left off the graphs and charts, not so much.
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JLVery thought provoking but would like more concrete actionable ideas and/or views in a defined time horizon to objectively judge calls.
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MLExcellent dive into the role of collateral and the implications for the effectiveness of central bank policy. Combined with Jeff Snider's presentation on the role of eurodollar in the derivatives market provides a useful framework of analysis.
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JMNever thought I'd enjoy so much a video presentation that featured an ending quote by Tom Friedman.
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IJDaniel, please open a mutual fund!
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REExcellent overview of Macro picture. Bravo Daniel.
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FCGreat presentation. I also thought that the adaptive investment strategy about the financial system is a lot similar to George Soros's theory of Reflexivity..
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CCIf you take a whole world systematic approach and assign the economic system a priority below that of priority for health of the planet (i.e. the p.h. of the oceans, air quality, freshwater quality, amount of global ground coverage of forests, etc.) wouldn't it make sense to shrink the global financial system output? (via reduced productivity if macro productivity = macro environmental impact) I think I understand and appreciate the brilliance of this piece. I just keep wondering where the boundary between the trees and the forest should be drawn and is being drawn in the minds of policymakers.
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TJHighly thought provoking and an another important piece of the global financial plumbing jigsaw to complement the excellent presentation from Jeff Snider on the role of the eurodollar in creating the derivatives monster that haunts investment markets today.