A disaster waiting to happen. This is how legendary bond investor Bill Gross and the richest man in the world, Warren Buffett, have described the $516 derivatives bubble.

According to a report by Dow Jones MarketWatch: “Not only Warren Buffett, but Bond King Bill Gross, our Fed Chairman Ben Bernanke, the Treasury Secretary Henry Paulson and the rest of America’s leaders can’t ‘figure out’ the world’s $516 trillion derivatives.”

This bubble, which has grown fivefold in five years from $100 trillion, now drives global economies, and it continues to grow despite the current bear market gripping the US.

It only takes a small amount of these highly-leveraged derivatives to go bad for the whole stockpile to blow up.

“The news isn’t all bad,” says Justice Litle.

“While investors gawk at America’s credit implosion like rubber neckers driving past a car wreck, there are good things happening in other parts of the world.

“For example, take a look at the iShares Brazil ETF (EWZ:AMEX) or the iShares Taiwan ETF (EWT:AMEX). The Taiwan iShares are at three-month highs as of this writing. About a week ago, the Brazilian iShares hit new record highs.”

“All over the developing world, there are real economies hungry for real growth, as opposed to the quant-engineered, subprime-juiced kind that burns up like paper in fire.”