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#389
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daniel
Original Transcript
There's a market worth $600 trillion that almost nobody understands that nearly destroyed the global economy in 2008. And it's now 10 times bigger than it was back then. Now Warren Buffett calls derivative the financial weapon of mass destruction in 2003 and he was right. So what is this market? It's called the derivatives market. Let me explain. A derivative is like a side bet on something and you don't really own any investment asset. It can be a bet on interest rates, a bet on mortgages, a bet on currencies, a bet on stocks. And banks use them a lot and they don't just bet a little, they bet massive amounts. Numbers so big that normal people can't even imagine them and that's exactly how the market got to $600 trillion in derivatives. And the reason why derivatives are so dangerous is because derivatives multiply risk like crazy. If a stock moves, let's say 5%, you lose 5%. If a derivative moves the same amount, you can lose 100% or go negative and you owe money. This is because derivatives borrow money to make the bet bigger. And right now the stock market is around $100 trillion. But the derivatives market is 600 trillion plus. That's 6 times bigger. And when you compare to the actual derivative market in the GFC, that's a whopping 10 times bigger. That if stocks do fall, market hurt. But if derivatives fall, the entire world blows up. The derivatives multiply risk throughout the whole system. And this is exactly what happened in the GFC 2008. People bet on mortgages that will never go to get paid. And one piece cracked and the whole system, the whole global system exploded and broke. And today, that system is even more fragile and here's where it gets even scarier. The K wave or the commodity wave, the real state cycle, the 10 year business cycle and global debt cycles, they all point to 2026 as a major reset year. And what happens at the top of these cycles? Interest rates move fast, long defaults rise and commodity prices spike and banks get stretched. And when interest rates move suddenly, the derivatives explode. Because derivatives are basically giant bets on interest rates and debt. If rates swing too much, the system cracks just like 2008. And the same signs are showing today. Banks are holding huge derivative books. Property markets are at all time high when comparing to personal income. Shall a PE ratio above 40 and AI bubble running ahead of earnings and governments printing money nonstop. So what am I doing? I'm not panicking. I'm preparing. I'm holding more cash. I'm avoiding hype stocks and I'm focusing on strong companies with real profits. Watch banks and credit markets. And I'm building my buying list for after the reset. Because after the system clears out, the next bull run, especially in technology, will be massive. But only for those people who stayed liquid and ready. Now if you do want to understand these big cycles, how debt feels crashes, how to protect and grow your wealth, join my newsletter, link in buyer. Also let me know, how do you think the market will crash? I'll be reading in the