$699 Trillion Derivatives Catastrophe | Michael Burry Issues Warning

If you are watching this, American lives are not a political game. 42 million Americans, half of them children, will not be able to put food on the table on Saturday. $699.5 trillion derivative catastrophe, and we can't even afford to feed Americans. Absolutely shocking. As you guys see on your screen here, as of the end of 2024, the derivatives market across the world was about $700 trillion. $548 trillion alone is in credit derivatives, and $130 trillion alone is in foreign exchange. Now, the really amazing thing about this number, again, think about this, $699 trillion. We don't even have 5% of that in M2 money supply. M2 money supply, we have $22.2 trillion. We're getting more and more signs of a catastrophe as we now have the S&P 500 Hindenburg Omen. The Hindenburg Omen is a technical indicator designed to signal an increased probability of a stock market crash or a downturn. It is named after the Hindenburg airship disaster back in May 6th of 1937. It symbolizes a potential sudden collapse in the market. Now, the primary goal of the Hindenburg Omen is to identify an increased likelihood of a stock market crash. It attempts to measure the health of the NYSE and consequently, the broader stock market. The rationale behind the Hindenburg Omen is that under normal circumstances, a significant number of stocks tend to set either new annual highs or new lows, but not both simultaneously. The simultaneous occurrence of many new highs and lows may indicate trouble as a healthy market typically exhibits a degree of uniformity in its movements. On top of that, Michael Berry also tweeted, sometimes we see bubbles. Sometimes there's something we can do about it. But also sometimes the only winning move is not to play because again, you guys have been playing so hard and leveraging up things so badly that there's 700 trillion minimum that we can at least just see in the derivatives market. Mitch, before we take the viewers under the hood to show them how bad corporate bonds and corporate debt is private equity and the commercial mortgage backed security, as well as the ending segment talking about local debt and what to do to make a difference. Can you first talk about how bad the derivatives market really is and what happens if it starts to fall apart? And if you can just articulate one more time to mom and pop, what is the derivatives market? Derivatives are like an insurance policy, which can be used to hedge your portfolio or hedge a bank loan quite often happens between banks. They have derivatives on other banks going into default. So they're basically bets, the financial bets, insurance policies that says if X happens, I get Y rate of return on my money. It's speculative at best. The problem is, although they claim upwards of $690 trillion worth of this crap, nobody really knows the true answer. But I want to make a point, which is in finance, there's a term called clustering. And clustering occurs when the market starts to shake severely. And what happens, the traders leave the market. They're looking for the exit. They don't care. They just want out. And when those days occur, as an example, you get a thousand point down day in NASDAQ. Well, the Dow, the S&P, the underlying stocks, the bonds will react. The interest rates will react. Interest will go up due to fear in the market. Bonds will go down. It depends whether somebody is looking for security of what they're doing. So there's all sorts of triggers that are on the go. But clustering means that the market gyrates wildly, and it causes volatility to go up. When volatility goes up, you have the clustering effect. These derivatives are heavily levered. And there's such a thing as a percent move. How much is the derivative going to move based on a 0.001% gamma? And that means that if you have a very small move, what is the magnitude of the underlying? Well, let's say that it is 690 trillion for sake of conversation. What if that's only 30 trillion worth of actual cash? Everything else is levered. The point being that when the clustering occurs, the probability of default, based on the derivatives themselves, the probability of default is massive because it's not a one-for-one move. It's many times greater. 0.001% can turn into a 10, 20% move of the underlying principle. That's the magnitude of what happens when you lever this stuff. Beware of the clustering. Speaking of default, let's go over the defaults now when it comes to corporate bonds, private equity, and commercial mortgage-backed securities. Starting with corporate bond debt, the U.S. corporate bond market reached approximately $11.4 trillion in Q1 of 2025, reflecting a 3.7% year-over-year increase. Most, if not all, of that debt doesn't have collateral. This is one of the most important debts to keep an eye on because it's $11.4 trillion. The trailing 12-month default rate for speculative-grade debt has been above 4% for the past two years. It was 4.8% as of August of 2025. However, the bond debt is what we really want to look at for this segment. Bond debt default rate was 3.7%, but when we look at speculative, you can really see that there's only been one time going back to 2008 where this reached over 4% and we weren't going into recession. That is right here in 2016. If we take the $11.4 trillion and if we use a default rate of 3.7%, that means that there's $421 billion right now in corporate debt, minimum, that we can see on the surface that's in default. Let's move on to private equity. Private equity is incredibly hard to figure out the total amount of money and the total amount of debt. This is saying, and this is according to Statista.com, I would dispute this, but they're saying a little under $1 trillion, $929 billion. The default rate on Moody's, the average risk of default for US public companies, reached a post-global financial crisis high. I'm going to read it again. The default reached a post-global financial crisis high of 9.2% at the end of 2024 and is predicted to remain elevated throughout the year according to a forecast by Moody's. When we scroll down here and we look at the chart, you guys can see this is going back to 2019. My head's in the way, but that goes back to 2019. Before this whole mess, the default rate was a little over 4%. It has more than doubled since 2019. If we take the $1 trillion and we multiply that by the 9.2% default rate, that gives us an additional $92 billion that is currently in default. When we look at the commercial mortgage-backed security market that you guys see right here, the commercial mortgage-backed security market is $1.8 trillion. Commercial mortgage-backed security is $1.8 trillion, but look at the default rate here. This goes back to the year of 2000. Even during the global financial crisis, in the depth of recession, the commercial delinquency rate was lower. What does that mean right now? If we have a delinquency rate right now, it's roughly 12%. You guys can see that right there, roughly 12%. They're not even claiming we're in a recession and that exceeds the turmoil during the last global financial crisis. Then what are we in right now? When we take the $1.8 trillion and multiply that by 12%, that gives us an additional $216 billion in debt. We know that this is starting to become a massive problem because take a look at this. This is the overnight repurchase agreement chart. The Fed has injected through one way or the other, at least, you guys see right here, and this is over the past couple of weeks, at least $30 billion to stimulate and support the banks. Mitch, not counting any federal, state, or local debt, which of those three categories of debt being private equity, corporate bonds, or commercial mortgage-backed securities, which worries you the most and why? All three, because all three have notoriously defaulted. When a default occurs, it doesn't necessarily mean that the company is bankrupt. However, it gets worse in today's world because the federal government signed into law something called the ability to bail in. Well, if your corporate bonds, i.e. from a bank default, you realize that the bank can use your deposits as part of their bail-in program, they can do a swap and say, great, we have your deposit. We, the bank, have your money. We're going to hand you back shares in what could be our bankrupt bank. You've got a piece of paper in exchange for your hard cash with the idea that eventually the bank will survive. Question is, is part of that survival mechanism courtesy of the Federal Reserve when they print money? So there's money coming to the banks in two directions, one of which would be the bail-in, the other one of which would be the bailout via the Federal Reserve. Either way, all three of these mechanisms, by virtue of the over-leverage, this isn't for those entities that are responsible for their debt. The problem is not that many people, when you see this amount of derivatives, not that many companies are being responsible for their debt. They're playing a game of last child standing. And that's just a game that, personally, I don't want anything to do with. I don't believe in it. And we wouldn't even be here but for this game being played by the central appraisal districts and the school districts. The bonds have simply gotten out of hand. The bonds mathematically cannot be paid off. Mitch, do you look at the $30 billion in the overnight repo market as a sign of distress and also as a sign of a type of quantitative easing, the Fed helping the banks? The reverse repo and the repo market itself, yes, is a sign of stress. Well, the reason being, think this through for a minute, your mortgage-backed securities, if a bank is holding mortgage-backed securities as just part of their portfolio, and they say, we want to participate in the reverse repo with the Federal Reserve because the Federal Reserve will give us face value for our mortgage-backed securities in exchange for the U.S. Treasuries, which means we on paper, we the bank, can shore up our balance sheet using U.S. Treasuries versus the complete nonsense on the mortgage-backed securities. Mortgage-backed securities don't have a face value at par. They can't. There's risk inside those mortgage-backed securities. So if you simply said, well, the face value on the mortgage-backed securities is really 70 cents on the dollar, do you realize the Federal Reserve just gave a 30% boost to the balance sheet of that portion of the portfolio for the bank? That is a bailout. Unless the bank is hyper-greedy, because correct me if I'm wrong, if I'm a bank and I go to the repo market and I trade or reverse repo market, I trade my mortgage-backed security to the Federal Reserve for those Treasuries, say it's a million dollars. So I trade a million dollars mortgage-backed securities. The Fed gives me a million dollars in Treasuries. Here's the other thing that happens. If I'm not mistaken, the Treasury's tier one capital and tier one capital allows you to leverage it 33 to 1. So can't we say they're getting a balance, potentially in that little section, a 3,300% increase in balance sheet for that line item? Because again, 1 million could be now turned into 33 million if they're taking that money from Treasuries and then using those Treasuries as securities to get more money. Is that accurate to say? Is that fair enough, Mitch? No. What happens, where the leverage comes from, so if you're a bank and you have, according to law, are able to use 8% of your shareholder value as what makes the bank, that's your equity into the bank. The bank puts in 8% and that's its shareholder value. That 8% can then go out and lever up multiple times. So if it goes to 16, it goes to 32, just doubles, doubles, doubles. So from that point, you could end up 10X very easily based on the original shareholder equity. And yes, they can blow past that. But the point of the matter is that that's where the leverage comes from. So think about it for a second. If the bank's got the original 8% of shareholder equity, they've levered into the mortgage-backed securities, let's say 10 times. Then at that point, they've exchanged the mortgage-backed securities through the reverse repo for the US Treasuries, which are the tier one assets. The mortgage-backed securities are tier one assets. Right. So they're using debt to purchase securities to create more debt. You could say that that treasury can be used, right? I mean, the other thing that's crazy though, Mitch, is they're using leverage to get more leverage to get security. So leverage, leverage, asset, what? The more that it's leveraged, it finally becomes an asset. That doesn't make any sense to me. Well, and thus, you end up with the stupidity of the bail-in program, right? Because that's just more leverage. That's literally taking depositor's money. Now, they'll look at it and say, well, the depositor's money is an asset on our books. The depositor's money is a tier one. Well, if they're trying to swap the paper to survive, they'll grab the deposit. That's part of the bail-in. The Federal Reserve will also work on the other end as part of the bailout, if necessary, to print money. And when all this stuff blows, the clustering will occur. And it'll just be a free fall. And by the way, this has happened in history multiple times, but as recently as Greece, just several years ago, it was a bail-in. They took the depositor's money to rescue the banks. This is just more and more info that we should do as best we can to debank and to put our money to hard assets. Because if we don't do that, we're literally giving money to banks to increase the cost of living for us. So when we put our money that we're making into that bank, they're going to mess us up by driving prices up. And then you guys just saw the derivatives market. How did the derivatives market get 700 trillion? We don't even have that much money in existence. It doesn't make any sense. It's all a lie. Now, if you guys want to do something about it, remember, the biggest, most important thing you guys can do right now is understanding how local debt works. Because what is happening is most of the local debt is being derived through the school districts. And pretty much every American can say, we want children to be well-educated, we want them to be safe, and we want teachers to make more money. But that's not what's happening with this local debt. What's happening with this local debt is reckless and outrageous spending. And the debt has gotten so bad that my children's children can't even pay it off. And so Mitch has created a brand new document that we're going to read just a little bit today. But if you guys want to read the entire document, it's 28 pages. It goes into great detail about how local debt works. This is titled For the Kids. And this is by Mitch Vexler, the 3rd of November. It's going to be linked in our description. It does have links. Everything in blue does link you to another area. So this is a really powerful document. We're not going to read it all, but I want you guys to please come back here. Starting with the executive summary, For the Kids, a comprehensive review of the Texas school bonds, aka intent to defraud. Many people suffer from cognitive dissonance or unwillingness to believe that the facts show and wanting to transfer their wishes onto others in society. I'm willing to help my community, but there's a lot of polarizing parents that are indoctrinated that are saying to me, because I'm fighting bonds locally, they're saying, Travis, you don't care about kids because I'm asking about the math. I mean, these guys are so confused. They are such pawns. It's hard to stomach. It's hard to stomach because the people that really care about children and teachers are going to look under the hood and they're going to make sure that people that are responsible for spending our money are spending it wisely. And if you're just automatically going to bash someone, then you are adding to the problem and you're still not awake. So hopefully this will all make sense. They would rather claim the school districts would not act in such a manner. They suspend their own critical thinking because again, children, teachers not recognizing that they are being defrauded as they too are property taxpayers. The bottom line is that Mitch would not be writing this article for the kids. If the school districts had not intended to commit accounting fraud and bond fraud, and then required the central appraisal districts to commit property tax fraud, both of which are violating dozens of laws. How many households in the US? About 148 million. How many single family homes or SFRs or SFHs? 82 million of which owner occupied is 68 million. But here's what's interesting. This one caught me off guard. The average mortgage value in the US is 379,000. Remember that because the average home value in the US is 363,000, which means the average mortgage in the US is higher than the average value of a house. That's how much of a debt bubble and debt problem we have right now. Again, you guys, the average mortgage is higher than the average value of a home. The average household income, remember this is about $83,730. The population total of the US is about 332 million. The amount of homes that are owned, freed and cleared is about 30 million. The average mortgage payment, okay, using a 30-year fixed rate mortgage is $2,617. Annually, that's 31,404, which means on average, 37.41% of someone's gross income is going towards their mortgage. But the problem is, is Mitch just has to do it that way. You and I both know that that's not accurate because that's using gross income. We don't take home our gross income unless you're self-employed. We take home our net income after Social Security, medical and other taxes of that nature. So the true net debt to income ratio is probably closer to 55%. He's also calculated property taxes based on only 2%, totaling an annual property tax rate of 7,278, which means that approximately, and this is really specific to Texas, that 8.69% of our yearly gross income goes towards property taxes. If we take our net income, it's probably more like 15% of our net income. But then he's also showing you the total revenue from single-family homes for Texas in 2025, which is 596 billion. School districts get about 83% of those tax receipts, which total $495 billion. A little bit hard to figure that out because they also get billions in federal and state grants as well because they're patching holes in the dam. If we lever that up 20 to 1, that's $9.9 trillion. If it's levered up 10 to 1, that's $4.9 trillion. We're in the middle of bond elections. The last day to vote is actually tomorrow, but this is good. This is already circulating. What makes the school district bond debt fraudulent? Roll the principal payment out and roll the interest rate up. Raise additional bonds to pay off the current bonds. Utilize a predetermined budget given to the central appraisal district to raise taxes to hit the budget outside the confines of law, or rather USPAP, Uniform Standards of Professional Appraisal Practices. Utilizing an appraisal review board, or ARB, as the exclusive remedy to protest when the ARB is not capable to determine values and or fraud. The CAD raises property value for the purpose of creating revenue to meet the predetermined school district's budget, and they do that through the software. The cost of interest based on the rule of 72 has outstripped the original principal by multiples. As the property tax is fraudulent, then so is the school district bonds. RICO creating a false debt and demanding payment. There is no such thing as a full faith guarantee of a school district. There are no unlevered assets, just liabilities which are transformed to unlimited tax to be paid in the future by property owners. But, and there's a huge but, there's no such thing as an unlimited tax. We've literally went to war over this multiple times in our history. These are questions to be asked if you're a citizen and you want to go to your school board. You can click this here. It's going to take you to several questions. The last thing I want to read here before giving this back up to Mitch, and I want you guys to really please think about this because a lot of people are just so reckless and so emotional. And all they hear is, no, we got to keep the children safe. So let's just give this board of small amount of people, hundreds of millions of dollars. Think about what you're doing by not holding them accountable. You're allowing them to rip off you, your family, and your community by not looking at the math. And that's a fact. Now, a few Texans realize how much debt they've imposed on future generations. Also the federal reserve in the state with their votes for bond measures meant to fund the construction of new and modernized school facilities. Mitch, starting on page four, if you can, can you kind of just summarize this document and share with us on why this is so important for people to read? I found a document on Friday from the California Policy Center. It was dated 2015 and studied the bonds that California had created from the year 2001. And I was shocked when I found the document. It was over 300 pages. I read all of it. But the reason I was shocked is because I found the direct correlation to exactly verbatim, 100% pattern and practice being identical to the state of Texas. So after reading it, I thought about it overnight and I got up really early Saturday morning and I just started typing. So I used the California Policy Center document as a frame and I just took the headings. And then I said, okay, let me take one sentence from these important headings and I'll duplicate exactly what had happened in Texas. So the bottom line is I've proved by virtue of what happened in California happening in Texas. Therefore, as goes California, goes Texas. And that's because of the leverage in the bonds. That's because of the bonds existence themselves. They both use what's called zero coupon bonds and they are the equivalent of a neutron bomb. Because when these things blow, they will blow in mass. And it doesn't matter whether it's California, because as Travis pointed out before, many of the derivatives are hooked to these bonds. So what I want to go through, starting at the bottom of page four, I'm going to go just by the titles to give you an idea where this is all headed. There's a credit analysis and systemic moral hazard, and that equals terminal failure. I wrote that document and that's linked. And then as we go through this, for you, everybody that's watching this video, there are a series of questions which is under the motion to compel that you can take to your school district and you can ask your school district these questions, and that will prove to you on your own local level exactly what has happened. And they won't give you the documents, but you should ask. You need to ask. You need to be involved. Where does this lead? Well, when they don't give you the documents, you end up with institutionalized systemic moral hazard. They hide behind sovereign immunity. Sovereign immunity can't exist when, in fact, fraud is the motion that they are putting forward into the public. Sovereign immunity doesn't cover off fraud. They want it to, but it can't under federal law. And that's why it's so important that the Vexler case to everybody in Texas and across the United States because it is laying out our case. It was filed with the Texas Supreme Court and in the amicus brief, both the petition and the amicus brief, points out that nobody is allowed to hide behind sovereign immunity. Whether they take this case up or not isn't the point. The evidence is the evidence. They need to take this case up because people need to go to jail. That's where we are. Why this document that we're looking at matters, that's one of the major headings here, and that is because they continue to raise bonds. Quantifying and explaining the Texas education construction debt, that's another important point. It walks you through how the bonds are done. The capital appreciation bonds, a capital appreciation bond is the same thing as a zero coupon bond. They are weapons of mass destruction. There's no doubt about it. Questionable behavior with the bonds, well, that goes right down to the methods of advertising and duping the public into believing something that simply isn't true because they refuse to turn over the mass to prove to the public that their statements are true. Therefore, they're false. The system is skewed to pass the bond measures. Do you know that those people who are participating, i.e. architects, contractors, anybody up and down the chain that receives benefit is allowed to pay in and give money as a donation through PACs to create the advertising to rip you off? The oversight, the accountability, and the fiscal responsibility, bottom line between California and Texas, there isn't any. They're getting away with what you, mama, papa, allow them to get away with because they, be it the school district and the central plazo districts are in cahoots to steal your money. This cannot be paid off. The only solution to this is the uniformed states sales tax and the repeal of all property tax in favor of the uniformed states sales tax. About that point, from page nine down to about page 27, I've left some of the direct quotes from the California Policy Center as to their evidence. And I even left the links to their sources so that you, the reader, mama, papa, can see exactly the pattern and practice of how you have been defrauded. Absolutely incredible workup, Mitch. And don't forget, guys, go to Mitch's website, mockingbirdproperties.com. You can go to my website, realestatemindset.org. We have a plethora of information, evidence, and training. We want you guys to take full advantage of that. Everything is going to be linked in this description as well as the article that we just went over. And if you guys can, please help us get this message out there. Share this video, comment on the video, and like the video. And the most important thing, let us know what you learned and let us know what you want to learn in the future. And we really appreciate you. Hold on to your hope. And if you're out there investing in real estate, your life, banking, whatever it is, you guys already know we wish you luck. And we hope you win.