Mark Faber: "I Am Convinced The Whole Derivatives Market Will Cease To Exist And Will Go To Zero"

Tyler Durden's picture

Anyone seeking joyous holiday greetings and cheerful forecasts for the new year is advised to avoid the following most recent Mark Faber interview, in which in addition to his predictions for 2012 (led with "more printing" by the dodecatupling down central planners, and far less prosperity), we get the following: "I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don't know: you can postpone the problems with monetary measures for a long time but you can't solve them... Greece should have defaulted - it would have sent a message that not all derivatives are equal because it depends on the counterparty." And on the long-term future: "I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification - some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we had WWI, we had hyperinflation, WWII, cash holders and bondholders they lost everything 3 times, but if you owned equities you'd be ok. In equities in general you will not lose it all, it may not be a good investment, unless you put it all in one company and it goes bankrupt." As for gold: "I am worried that one day the government will take it away." As for the one thing he hates the most? No surprise here -government bonds.

Full clip:

h/t Scrataliano

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JR's picture

Capitalism is owning the means of production; owning the government is not capitalism.  The bankers from within are destroying America from within. Just as bankers such as Jacob Schiff, Max Warburg, and Paul Warburg inserted themselves into the Bolshevik Revolution to become key benefactors in the political and economic rape of Russia, these very bankers inserted themselves into the American economy in 1913 by bringing their money and techniques into America to create the Federal Reserve System. The same cabal as then rules the Fed today.

Bill Bonner writes on Lew Rockwell’s site today that the Fed's collectivist “depression-prevention” system “is protecting the insiders at the expense of the outsiders.”  In “Collectivist Action to Prolong a Depression,” Bonner writes,

"Have  yourself a merry little depression…

"What’s this? Christine Lagarde, IMF chief, said last week that the world’s nations needed to work together to avoid a 1930s-style depression.

But seeing the way they work together…and where they seem to be headed…we’d prefer a depression.

"The idea of the world’s authorities is not to solve the debt problem, but to make it larger. One bank goes bust; they get a bigger bank – a central bank – to bail it out. One country goes broke; they get a bigger country to bail it out.

"The US bailed out its financial sector. Europe has had trouble getting together to bail out its fringe nations. But gradually, in fits and starts, the pieces are coming together. We will all bail each other out. Then, we will all be bailed out. Together.

"We need to act 'as collectively as possible,' says Lagarde.

"She means that we all have to accept more debt…in order to prevent depression. That is, all the feds’ horses and all the feds’ men are supposed to make sure that 1) stock holders don’t lose money…2) bankers don’t go broke…3) speculators don’t get wiped out…4) business executives don’t lose their jobs… Daily Reckoning readers will note, with a wry smile, that these are precisely the things that OUGHT to happen.

"Which also happens to be what a depression would accomplish… It’s why we have depressions…and why we need them. They don’t have to be long, drawn-out disasters. They can be short and sweet. But they have to get the job done.

"On the other hand, let us look at what all this collective, depression-preventing action is accomplishing. In a word or two, it is protecting the insiders at the expense of the outsiders.

 And, oh yeez. Says Bonner: “America’s highest paid executive took home more than $145.2m, and as stock prices recovered across the board, the median value of bosses’ profits on stock options rose 70% in 2010, from $950,400 to $1.3m.” ...

NotApplicable's picture

Isn't collectivism great?

Will somebody please tell Christine that I'm still waiting for my pony ride?

MrNude's picture

History has demonstrated by now that Socialism is a scam that ultimately benefits the banks. 

There is no logical or possible way to 'equally redistribute' finite resources amongst a exponential quantity such as human populations. It is designed to fail from the start.

Who ultimately benefits from having all the seized assets of the state collected into one place,

Who ultimately benefits from the inevitable failure and crash built into the system.

Who ultimately benefits when the one place all the state assets where collected decides what gets divided out to new shell banks.

Who ultimately benefits from everything in the country that has just crashed now being for sale and dirt cheap to boot.

I'm not really a big ideological guy but look at the Gosbank during the USSR and try and tell people with a straight face it wasn't a small time version of the Fed and how it pulls the worlds strings today.

GMadScientist's picture

History has shown that banks are a scam that ultimately benefits banks.

You might want to start with the definitions of socialism and oligarchy, Tex.

Just watching you try to think makes me tired.

MrNude's picture

And skipping past your boring bullshit like you skipped past mine, Was the USSR Gosbank a fed lite or not cry baby?


Yeah thanks for inadvertently proving my point for me chief. 

sgt_doom's picture

Now, consider this: the top four US banks (JPM Chase, Citibank, Bank of America and Goldman Sachs) control nearly 95% of the US derivatives market, which has grown by 20% since last year to  $235 trillion. That figure is a third of all global derivatives of $707 trillion (up from $601 trillion in December, 2010 and $583 trillion mid-year 2010. )

Breaking that down:  JPM Chase holds 11% of the world’s derivative exposure, Citibank, Bank of America, and Goldman comprise about 7% each. But, Goldman has something the others don’t – a lot fewer assets beneath its derivatives stockpile. It has 537 times as many (from 440 times last year) derivatives as assets. Think of a 537 story skyscraper on a one story see-saw. Goldman has $88 billon in assets, and $48 trillion in notional derivatives exposure. This is by FAR the highest ratio of derivatives to assets of any so-called bank backed by a government. The next highest ratio belongs to Citibank with $1.2 trillion in assets and $56 trillion in derivative exposure, or 46 to 1. JPM Chase's ratio is 44 to 1. Bank of America’s ratio is 36 to 1.  

NotApplicable's picture

Only 20% derivatives growth? I'd think they could at least double that rate if they want to have a respectable looking ponzi.

Badabing's picture

Hay lets re-hypothecate derivatives!

lotsoffun's picture

how does any of that make any difference about goldman not having assets?  when the counterpary isn't there - it's worth about one of those little hairs hanging off your .....  infact - i think it may be better for me as a tax payer - because they won't sweep my savings deposit account.

but of course - this is all total nonsense as to how it plays out.  we are ants and they are just playing back and forth with each other.




Mr Lennon Hendrix's picture

Not all derivatives are created equal.

 Agreed, Faber.  I think I summed up how I feel about it on this post.

David Rosenberg On The Difference Between The Buy And Sell Sides, And What He Is Investing In Right Now:

AtomicWarhead's picture

Have you guys noted that Faber usually has a huge grin whenever he is interviewed, ... I think the regularly has his Thai booze ...

Neidhammel's picture

There is no money but gold and silver. Will PM really lose 50% of weight within next 5 years? Those who consider printed paper as money deserve to lose 100% at least.

Moe Howard's picture

I had to re-weight everything to check, but no, it's all still 100%.

Gasoline around here just dropped to 1.4 90% silver dimes a gallon - a bargain. In case you are math challenged, that is 14 cents face value.

Yen Cross's picture

 Tyrannosaurus / Bullshitimous

quasimodo's picture


Mr Lennon Hendrix's picture

Yeah, the derivatives market going to zero...boring!

Now time for some Latino Idol with Hennifer Lopez~

ebworthen's picture

I too, fear that governments will confiscate or outlaw PM's and institute electronic transactions only.

They would have complete control, especially over taxation.

Their ultimate goal has to be to get rid of any underground economies, and thus, means of exchange.

Hopefully, everything will collapse before we all become automatons.

Live free or die.

Moe Howard's picture

That does seem to be the goal.

Temporalist's picture

Yes but System D is the fastest growing economy in the world and it's essentially a black market.

Yen Cross's picture

 Lets talk as I enter Asia! Bitches,

Jendrzejczyk's picture

Asia is LARGE. Narrow it down for us.

lolmao500's picture

Yeah what is going on today has never happened in history. This is the biggest bubble/scam in history, even bigger than the tulip mania.

Predicting what's gonna happen based on history is kind of a waste of time.

And yeah gold is gonna get seized. Money will go digital... to protect the children from the evil drugs and black markets of course.

ebworthen's picture

We could see another FDR confiscation scheme.

And, making the buying or selling of gold illegal (i.e. - drug status, meaning, if you are found with it in your posession it is confiscated).

Sure, you could have a black market of gold and PM's, but that would hurt their currency/barter/exchange value.

If it was done in the 1930's, it could be done with greater efficacy today because of all the electronics; cameras, transaction tracking, TSA scans, etcetera.

Mr Lennon Hendrix's picture

So first off, let's say they pull it off:  the price would sky rocket and all of the gold I lost in a boating accident would increase dramatically.

But the government can't wipe its own ass, so I don't think they do pull it off.

ebworthen's picture

I hear you.

There is a lot of gold they would never get their hands on; and as RockyRacoon points out is was forced redemption not confiscation and only 10%-15% effective.

Their goal, however, was and would be to force the obedient sheeple to hold fiat, or buy equities, or not take their "money" out of the bank.

They work to defeat alternate currencies and forms of barter and exchange to keep assets under their control for taxation/confiscation and to prop the ponzi.

Believe me, I am holding gold and alternate assets, I just would not doubt that the FED and TPTB will try to defeat everything that is not trackable fiat.

RockyRacoon's picture

Gold wasn't confiscated, it was a forced redemption.  The owners were paid for their gold at the current price.   Just a minor quibble but it does reflect on the discussion.   None of it was fair, and the re-valuation of gold was criminal, of course.

ebworthen's picture

You are correct, and I agree.  I would not put it past them to do it again and get the BATF inolved.

Papasmurf's picture

That would improve the value, just like prohibition improved the price of alcohol.

NotApplicable's picture

Since there isn't much in private hands, I doubt they'll bother. Instead they'll just make the buying/selling of it illegal, with digital exceptions that they have full control over. Since they own everything anyway, it will eventually percolate back up to "them" as we consume the wealth is stored.

Mr Lennon Hendrix's picture

Buying/selling gold is illegal because....?

There is no reason, justification.  It won't fly, and the government will not be able to enforce it.

lolmao500's picture

You think a criminal government needs reasons? LOL You think Stalin needed reason to kill his own people?

Hell they'll just say that gold owners are conspiring to kill the US economy... and off to the camps!

Mr Lennon Hendrix's picture

Armed Americans won't go for it.  Not now, not ever.

swoop72's picture

YUP. economic terrorism.

JoBob's picture

Who says they need a reason? All they have to do is declare the personal possession or use of gold as an act of terrorism against the sovereign USA. Anyone caught even thinking about gold can visit a "detention center", have all of their assets confiscated, and kiss their futures goodbye. The bad news is that it could be done today with the laws already on the books. Unconstitutional laws, but adequate for the guys with the big guns.

Mr Lennon Hendrix's picture

They will have to pry the gold from the same hands that hold my gun.

400 million guns want to see your theory in action.

spekulatn's picture

The Ron Paul Portfolio


”This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds,”

NotApplicable's picture

I gotta get more groceries. (and spit on the WSJ when I pass by the news stand)

RockyRacoon's picture

Rep. Paul appears to be a strict buy-and-hold investor who rarely trades; he has held many of his mining stocks since at least 2002. But, as gold and silver prices have fallen sharply since September, precious-metals equities have also taken a pounding, with many dropping 20% or more. That exposes the risk in making a big bet on one narrow sector.

Whaaaat?  What dropping 20%?  Having owned since 2002 is not a "dropping" of any kind.  Where do they dig these hacks up?  

At our request, William Bernstein, an investment manager at Efficient Portfolio Advisors in Eastford, Conn., reviewed Rep. Paul’s portfolio as set out in the annual disclosure statement. Mr. Bernstein says he has never seen such an extreme bet on economic catastrophe. ”This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds,” he says.

Anything to make a sound investment strategy look like a tin-foil hat routine.  This sucks.

Temporalist's picture

Rocky I wish I could vote you up more...apparently that happens sometimes but I bet you'd have a lot more than two greenies right now.


Anyway I was going to say that this "article" was a ridiculous hack job and commented on at Ron Paul sites.  The funny part is that they first tried to tear him down for his portfolio doing so well in another article, that he's a big time investor and want to know how he's done so well making him out like a fat cat, and then the very next hack attack is that he's not invested properly.


It's amazing how the media snake eats itself.  They'll attack the people who were prepared for a flood as being end-of-the-worlders and then after the flood it will be wrong to have saved themselves and family because they'll point out they lost their car and didn't help every person that was drowning.


Ron Paul was wrong for investing in what he thought was right because he was successful and he's wrong because his investments lost some in the past few month.  Clearly there is no winning for him...that's how you know he's solid.

sitenine's picture


I read this with disgust a little earlier today. The quoted comment is about a half-step away from calling Paul a terrorist. We were warned about this, and we've seen examples from the administration as well (remember when Napolitano said vets were potential terrorists?). Patriots, stand firm. The time has arrived, when you will be accused of subversion and crimes against the State. Let your banner be the Constitution, and fight these mother fuckers with every last ounce of strength (or gold) that you have in you. Whether or not the financial system can be saved is not nearly as important as saving our families, our friends, our freedoms, and our souls.

sgt_doom's picture

Oh yeah...and speaking of something else worth reading, but some may have missed:


Thisson's picture

I do.  I wrote a memo summarizing the FCIC report.  If you want a copy of it, contact me at



NotApplicable's picture

Hopefully, as I can't imagine any commission headed by Phil Angelides creating anything worth reading, and I'm not going to wade through 662 pages (couldn't fit 4 more in?) of whitewash to find out.

XRAYD's picture

Surely he means the CDS market, and not the exchange traded derivatives such as index options, futures, etc.


So at most it would be about 10% of the derivative market that might go to zero, from its current $70 trillion dollars - nothing to sneeze at, because it will decimate the rest of the market but not zero it out!


NotApplicable's picture

Why would it be limited to the CDS market, when the issue is sanctity of customer accounts, specifically margin accounts? If you can't trust your broker to not hand over your assets to JPM in the middle of the night, how can you responsibly place any money there?

Corzine has fired the next "shot heard 'round the world." It will take time, but short of making all parties whole (which isn't going to happen, because it can't) there is no going back.

Yen Cross's picture

 If & I said if!  Don't catch falling knifes.  I like that ( cable) , reload under the 23.6 fibi on that last move . I like the swissie taking out the 50 area.  I like the reload on aud/jpy.