Economic Depression Crisis

April 28, 2010

Derivatives not worth the paper they are written on - NOT TRUE!

by Walter Burien - 04/27/10

Derivatives are a trading vehicle. They are "advance commitments" for a buyer or seller with time commitments at set prices. (placing a bet)

The Commodity Futures Market are all derivative contracts - http://www2.barchart.com/mktcom.asp?code=BSTK

Categories cover [ Metals; Currencies; Energy; Grains; Meats; etc,]

A derivative contract can be traded in and out of in 5 minutes; five hours; five days; or a year or two. (no significance in the use of five, it was just an example of time)

If you are a buyer, and let's use gold as an example: You think gold is going from $1000 per oz to $1500 in three months so you buy one August 2010 gold contract at $1000 (if the current market price that day is $1000) and if your objective is reached of $1500 per oz two months from now you then sell one August Gold contract at $1500 and that closes the trade.

A gold contract is 100 oz so here a net $500 per oz was locked in on the trade X 100 or a profit of $50,000.

Now on the other hand if Gold was at $1000 and you though the price was going to collapse down to $500 per oz, you would then sell first. So you sell one August Gold contract at $1000 and if in two months gold did collapse down to $500 per oz you then buy one AUG Gold contract closing out the trade X 100 or a profit of $50,000.

So up or down it does not make a difference the same profit can be pulled. The same applies if you are a day trader and are going for a $10 move in gold.

EXAMPLE: at 8:30 AM in the morning gold is at $1073 per oz and you think it is going to pop to $1083 (or drop to $1063) you enter your position to buy a contract (long) or sell a contract (short). If 10 minutes later gold moves $10 (up or down to your target price depending if you are long or short) you then close out your trade and walk with the cash, or $10 x 100 = $1000 made on the trade.

The same, same on all of the other commodities also. The catch here is when you take a position there is a set margin requirement (good faith money against loss) set for each and every commodity before you can enter a trade. Additionally, you must maintain that dollar value if the trade goes against you and if you can not, the "house" will force liquidate your trade locking in the loss on your account. If you have a profit on the position there is no problem, but a loss the margin set must be maintained.

A derivative trade is yes only a paper record. But when it allows for transfer of wealth to the tune of trillions of dollars a year, those that say derivatives are worthless have their heads stuck in a very dark, warm, and wet place.

Sounds easy for walking with tons of cash right? Wrong! 95% of the public looses all of their money. The public is caught in "the only thing to fear is fear itself" syndrome. Oh. it is going up, no down, no up - - - CRASH - loss on trade!

Keep in mind this is all about wealth transfer. Collective Government is the #1 institutional trader in the derivatives market (thousands of separate accounts).

They work hand in hand (networked through private associations) with the syndicated media; political parties; controlled education locked tighter than two dogs in heat in cooperation DUE TO THE MONEY AND CONTROL INVOLVED.

Government through the CFTC (Commodity Futures Trading Commission) and SEC (Security Exchange Commission) know every trade entered by the public; institutional; etc., on a minute by minute basis. They also have access to all historical trades over decades. They know historically if they move the market with their own activity how many people will over extend themselves; or bail on positions depending on how fast the markets are moved and with what sound-bite conditioning the public is being saturated with at the time.

They are pros at baiting the public into certain trades and then cutting their you know what off and this amounts to MASSIVE wealth transfer from the public each and every year. (Derivatives used, cash on the trades accomplished!)

People who trade metals from the public seem to have very short term memories. Over the last twenty years the same games were played in conjunction with the same sound-bite conditioning (with a few modifications) to run the price up over weeks and then to slam the price down in a few days with most from the public in the trading arena getting their you know what cut off so many times they could start a restaurant serving Rocky Mountain Oysters and never run out.

I have learned from over 32 years trading derivatives that when I say to myself "That looks like a really great buy or sell" I then have to catch and ask myself one question: "Now where would they push it to if they wanted to really screw everyone?" Now with that question being asked and adjusting my target marks accordingly, the bulls-eye is hit more often then not.

Government institutional fund management (much being handled off-shore now) has been walking off with truck loads of cash through the use of derivatives each and every year. The two years that they made the quickest killings through derivatives were the end of 2001 and the end of 2008. (Primarily short positions established)

Not a peep from the syndicated media; talking heads; political parties; or controlled education being that they do an EXCELLENT job for what they are PAID to do, and that is to ENTERTAIN the public as the wealth transfer takes place right under the public's nose and in plain sight.

What I find humorous (sadly) is that they do such a good job that they get people to parrot comments like "derivatives are worthless" when in fact they are used to transfer wealth "CASH" each and every year (day) from the public. AND in fact were used at the end of 2008 to suck 35 to 40 trillion dollars out of the world economy at the end of 2008 in just a little over one and a half months.

Promoted by the media doing their job: "Massive loses; Stock market tumbles with fortunes wiped out" Yeh right, BUT WHO TOOK THE OTHER SIDE OF THE TRADE into which those loses and fortunes were transferred into????

Might as well not keep everyone in suspense: Government institutional trading accounts (and I repeat many handled off-shore now) did.. you catch on the latest news Goldman Sacs made a profit on the collapse at the end of 2008? Well, just a sacrificial lamb mentioned to appease the masses and chump change involved compared to the collective government institutional accounts.

A good example of a domestically handled clearing operation for government institutional accounts just before the clip at the end of 2008 was the derivative holdings held by JP MORGAN CHASE BANK.

The amount shown held by them was primarily for their government institutional accounts under management or that they were acting as clearing agent for. It is a small figure of only 90 trillion dollars worth. The Federal Government report put out by the Comptroller of Currencies that shows the positions of CHASE Bank and a few others can be downloaded here (March 2008 Bank Derivatives holdings) and when downloaded go 2/3rds down in the report to "Table 1" - http://cafr1.com/STATES/US-TreasuryReports/BankDerivativesMa...

Now keep in mind this was a domestic clearing operation. Many and larger "international" clearing operations are in place now handling clearing operations for US local and federal Government institutional accounts. If you did a cross comparison of their derivatives position plays just before the market collapses at the end of 2001 and 2008, the public never stood an ice cubes chance in hell of not being decimated.

Again, IT IS ALL ABOUT WEALTH TRANSFER! And when you are talking this amount of wealth transfer in the tens of trillions of dollars it is imperative to keep the public masterfully entertained off in LA LA land parroting the exact opposite of what actually took place..

But then they do an EXCELLENT job due to the money and control involved. Ron Paul is aware of this structure but he can NOT discuss it. Anyone in politics that does so qualifying a cognitive though in the masses breaches the "Silence is Golden Rule". It is political suicide to do so. Mr. Paul would be taken out so fast he would not know what hit him.

I like Ron Paul, he is a fence rider doing the best he can and I understand that he can not cross this line if he wishes to do what he can. I support him in whole being that he is "doing what he can".

In 1999 virtually no one knew how this game is played. Now in 2010 a lot (millions) of people now have had that cognitive thought triggered in their minds to the dismay of the control structure.

Who knows, all may be just a step away from a massive awakening of clear comprehension where no longer are they "the easy mark" and regain true ownership of their country again.

What I brought forward several months ago with the TRF (Tax Retirement Fund) http://TaxRetirement.com when it is finally understood and comprehended for it's true impact by the populace it may just burst forward like the birth of a super nova benefiting not just the people here in the USA but the entire planet with a mode of operation for government that brings forth the proverbial millennium, a thousand years of prosperity for all!

And then people like Ron Paul and others can openly discuss governments true "collective" investment ownership and the income derived therefrom without fear of retaliation....

Walter Burien - CAFR1
Prior CTA (Commodity Trading Advisor) 1978 - 1992 and derivatives
trader of 32 years.

This above article was kindly provided by Walter Burien to Informamericanet. I sincerely hope you help us take back our America and you may visit the CAFR1 site to leave a donation. Thank you, joe martin.

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