E if there was such thing as an efficient market then either george soros or Warren Buffett could compound money at 20 percent for 20 or 30 years because i would be impossible if markets were efficient and all information was known in the price reflected all that information so clearly markets are not if not efficient and this idea of reflexivity its a bit of a Quantum Mechanics entering into the finance space you know this like schrodingers cat as a Quantum Hedge Fund operator. And thats very. Scientific in that way but it nevertheless it does have a huge impact and i do think that we are seeing that in markets today people are looking at stock markets and assuming you know they hated the dow jones when it was at 9500 you know 1011 years ago after the 2008 financial crisis remember it was too high of 9500 its going to go to 3000 well here we are near 29000 and people are saying well its going to go to 50000 and they love it at this price because as somebody famously wrote in a. Book people are predictably unpredictable i believe is the title right and you know in terms of equilibrium theory in equilibrium theory prices in the long run at equilibrium reflect the underlying economic fundamentals which are unaffected by prices remember in the last episode where i showed you that the s. And p. 500 is way outpacing the actual growth of the economy that shouldnt happen in equilibrium theory and yet this is what the economists working at the fed will keep on telling you that this is all equilibrium the prices are you know as they should be and reflect the underlying fundamentals but what soros pointed out reflexivity asserts that prices do in fact influence the fundamentals and that these newly influenced that fundamentals then proceed to change expectation thus influence in prices the process continues in a self reinforcing pattern because the pattern is self reinforcing markets tend towards a disequilibrium and thats why we have boom and bust boom bust and they get bigger and bigger over the last 20 years since 1990000 sensi wrote that theres been the emergence of ai Artificial Intelligence and there the emergence of ai journalism so a lot of the Financial Press and forbes already has this digitally assisted editorial content that they produce where machines are reading prices and then they generate stories those stories are then picked up by trading algorithms on wall street and 90 percent of the volume on wall street is by robot so the robots are reading the output of the robots and theyre changing prices on the exchanges which are then well go back to the editorial robots who write about those new prices so robots are trading based on the editorial robots who are then impacted by the price changes generated by robots so thats a new chapter in this reflexivity story the observer changes the observed so Warren Buffett issues and annual newsletter for shareholders and Berkshire Hathaway everybody in the world reason i think is every february right and he observed a few years ago if you recall that. Most investors would be better off in a passive index fund just stop treating in and out stop trying to be like soros just that thats how you lose money just do a passive index fund and everybody listen to him thus changing the dynamics of the market i thats why he has 128000000000 in cash but now this is what has emerged a new risk to the market caused by these sort of observations that everybody would just be better off and a passive index fund perhaps that would be ok if it was just a few people following his advice but when the entire market follow a set of his advice were nearing a future where 3 index Fund Companies control Corporate America the largest asset manager in the world black rock with ice shares has 7 trillion dollars under management then guard has 5. 00 trillion and state street with s p d r manages 2. 9 trillion these Companies Hold 80 percent of all indexed funds as weve covered just recently more more of our of the markets are just passive investors so back in 1907 before the crash you had the emergence of whats called portfolio insurance yes now when i was a stockbroker at the time so i know this quite well so the amount of this portfolio insurance product was sold in many multiples of what was actually supposed to be insured the underlying stocks and when that became clear you had the crash of 87. 00 now it currently with these passive Investor Funds and also e. T. F. Exchange traded funds if you have an Exchange Traded fund that supposed to cover the Mining Sector and in Exchange Traded fund the supposed to cover lets say north american stocks they would both own the the same stock but they dont actually own the shares of the same stock they just own the they just referenced the number of where that stock is trading without owning the stock so youve got now many many multiples of these e. T. F. Than index funds that are referencing stocks but dont own the stocks so if there is a downtick in the actual stock price its magnified. 102030. 00 times because youve got it impacts in a highly leveraged manner this whole facade this whole ponzi scheme of index an e. T. F. That are owning 2030 times more equity than actually exists on the actual Stock Exchange so remember back in the 26007 to 2009 period when the whole Global Financial system fell apart and we had Something Like 7000 banks in america and now we have like 4000 but 3 or 4 huge ones right j. P. Morgan citibank Goldman Sachs bank of america they own like the vast majority of the funds there are too big to fail so again here you have even more concentration 3 own all these funds for the majority of the ordinary american obviously george soros and warren buffets or its. Operate differently in the market but in terms of what they own here you see a good summary of the various risks resulting from passive funds increasing ownership of the largest firms blackrock vanguard and state street combined own 18 percent of apples shares up from 7 percent at the end of 2009 so theyre owning more and more of the Largest Companies and the Largest Companies like apple or microsoft become bigger and bigger percentage of the s. And p. 500 and they become too big to fail these 3 funds are too big to fail member one the money markets were too big to fail back in 2008 so what are the extraordinary measures that like for example that are happening in the repo market we dont know what the causes could it be connected to this it could be just as valid as any hedge fund or or any bank going under as well we dont know. Because were supposed to read the market but because of all this reflexivity we dont know who drive what came 1st the chicken or the fed in the case of apple because you have so much concentration in these funds and as you point out the market does reflect the concentration of apple in the index so these passive index fund. As are required to have the allocation that represents the market so they buy more apple shares but they do so concurrently across multiple e. T. S. And they do so without actually having the shares on their books they dont take delivery of those shares they dont have those shares they just reference that number as something that they would own so its exactly the problem of issuing claims against an asset too many claims against that asset its like the broadway show the producers right the idea was the oversold the play he sold tickets to the play and then he purposefully did a horrible play because he figured everyone would not go and cancel the tickets and they would just take all that money upfront well it was a smash hit then people came to the theatre with their tickets but they had no seats of the 6 e. T. F. Market currently is the exact same they have many many of these funds they claim they own apple shares but they own but they dont so if in fact they want to all simultaneously collect their shares they couldnt blackrock really close examination on this of course black rock is much bigger than most european economies if you look over in europe there is a lot of controversy about black rock having so much of a dominant position in places like ireland spain france i think france just they had some protesters stormed the offices of black rock only in the past week or 2 so this is the reality of the amount of power theyre getting as this article here and that in bloomberg points out and then finally in terms of this reflexivity of course its Warren Buffett Value Investor who came up with that that number of 100 percent as soon as stock market equals 100 percent of g. D. P. Thats perhaps bubble territory thats why he has 120000000000. 00 in cash just sitting there well weve never had it so good Global Equities now worth 88. 00 trillion dollars the highest value in history and it equals 100 percent of world g. D. P. So again the reflexive. The prices were going to start youre going to see i dont know how fast its going to go but youre going to see more and more people chasing this price higher because they the observer and the observed right and a lot of people do cash and some of those gains increases g. D. P. And then itll look like the stocks are not quite trying to get a percentage of pay that off again thats another reflexivity its all really reflects somebody is at the heart of everything because we live in a simulation. Even real not of its real this shows im not even here im a hologram. I think we have to go to the break and when we come back we wont be here just pure holograms. This is a story about what happens auster a stray bullet kills a young girl in the streets. What happens to her. Daughters in florida. The mother daughter is very serious and terry. What happens to the community the public was screaming for a scapegoat the Police Needed a scapegoat so why not choose a 19 year old black kid with a criminal record who better to plan this than him and what happens in court. Shot. We dont know this is true. We. Are going to fulfill that promise is probably to the people. You know weve all pots. This is. Pretty. Much. If you want to 1st. Know. All. This is a story about what happens auster a stray bullet kills a young girl in the streets. What happens to her family and daughters in florida the mother daughter is buried in a cemetery it really messes with your head what happens to the community the public was screaming for a scapegoat the Police Needed a scapegoat so why not choose a 19 year old black kid with a criminal record who better to pen this than him and what happens in courts be. Shocked shocked as far. As i feel. We dont know still just from. The end of this trial unfortunately you. Will still not know the children. That. God. But. Welcome back to the kaiser report imax kaiser its time now to continue our conversation on theyve got. Gold shorts on dot com and welcome back thank you you know you got i got to ask you a quick question here i used to hear all the time particularly when i was working on wall street this phrase the no of switzerland or the gnomes of switzerland are you anonymous for someone. No one knows and no tool does someone whos trying to help if you will do chris there well because you know right now i think that goal is the best insurance against physical gold is the best insurance against the risk in the world and thats what i decided to already back in 2000 too many for our our own money we started with and a few people we had buys in the bench and we opened it up. So as you know only. A wall says go and so theres just a minuscule amount and very very few people who are actually even good looking at gold are considering using gold as insurance. For you know i wouldnt call most of the normal home all im saying is that the few people who are interested in preserving well some of those we are trying to help and you know its a real pleasure to meet people who are actually Free Thinkers because most of the investors in the world just think about the stock markets going up and of course every other period for a long long time you know i wrote an article or somebody called alfred and he invested through his family when he was born in the stock market or even 945 and today by just keep it hes staying in the market the whole time never selling no going through big corrections barely 405060 percent hes still just using his savings and that was sending his today 16000000 dont as he hasnt ever worried about had to read any Company Report he just invested in the index and no skills so its you know its been an easy game i think that game is over now and therefore you know we are trying to help if you will to actually protect against what i see coming so d now last discussion we were talking about something he gave us a data point that i wanted to cover because a lot of times markets are an odd data that people like yourself spot who are in these markets are studying them very closely youre talking about the m. A c. The the moving average convergence and divergence i think is down versus the gault at this could be a fascinating data point and i think it could be revealing some interesting transair it could. Get 11 more into it for a cigar so this is a trending indicator it is not you know is obviously that there is a delay in this because the turn only happens our offer something has turned it doesnt walk off the butt but is a very long term trending indicator as i said that on a quarterly chart of the of the dow against go thats been going out since 2010 so its got been going up for 9 years and it just turned the end of 2019 and that is a very very strong indication it doesnt tell you that the markets going to crash tomorrow because actually says we talk about a quarter inch off but the trend is not that the trend has not changed from up to down. And those are these are long term trends that are a lot are likely to play out with now. A market in dow and the dow or in old stocks lets say all stock markets in the world will be the same again is real money going to go and thats not surprising because you know all the old stocks as weve talked about and previously all stocks have just gone up because of brendan money and massive injection by Central Banks massive massive credit expansion so the fact that were not going to see a turn. Against real money im not surprised now because as you rightly said gold is outperformed every single asset market in the 2000 buses 2009 stocks have outperformed gold and because so we so we had a run a very big fall of the dow by about what it fell about the dow gold ratio fell from its high sell by and deep sand between 2002011 then we see in a correction now to just over 20 of the racial. And i know that correction is finished and that correction still only took the market up i took the down to 50 percent of the form so is still on it only recovered 50 percent of the falls in 2000 so the goal still dow is still down 50 percent right now against goals as 2000 and now comes the next leg and this next leg down of the dow against go well bishes and as i said our being there we are going to go down at least 2. 00 to 1. 00 to 1. 00 we are around 18 now and that ratio 18. 00 to 1. 00 down divided by by go and i think we are going to go at least one that would be a 95 percent from now and i see that coming i think is inevitable. Due to what has happened in markets and always liquidity will fade into the created in the last 10 years or so right while another negative indicator might be taking a look at Warren Buffett sparks hes now 128000000000 in cash which i think is the highest cash level hes ever had he. Not jumping in at these high prices at the moment which you would you say that supports the theory that maybe stocks are better high Warren Buffett i dont know im sure you know some gold today i dont know if you know and still rebut you know you remember last time in the ninetys he went into silver and when the market went up dramatically he still managed through hedging and trading in and hes he still managed to lose on silver since part of bear that was going up so i think he you know he should put that 120 or 1000000000 into Precious Metals instead because if im right about the destruction of paper money in coming years and the massive money printing we will see then of course that cash will be not be worth some something so why dont you give him a call and we will help him yeah i think thats a great idea. I was gonna have lunch with them but i decided to cancel at the last minute. Like just a son now it is actually its up 56 times higher than gold at the moment this is a runaway commodity its absolutely burning the barn down in terms of price appreciation i mean that should also be a harbinger in the precious about all. Sector right i mean theres a precious metal its absolutely skyrocketing and that could be a leading precious battle in this next belfast egon what do you think yes of course that is an industrial metal rather than money. That goal is so it has to use to and of course that use with all the electronics. Which is going still going to do well in the future and that probably will do well but it you know is a liquid it is very bad indeed smaller metals and the the you know you come with gold you can lift the phone and have sold the old position or buy in the same way within seconds with a rope its a lot more difficult so anyone who wants to preserve well i would stick to go primarily and then some silver i wouldnt go into these my minor metals because and theyre also you know there are very few people who control those metals so therefore its not an absolutely clean market and youre not going to get you know the margins between buying and selling on spread is going to be very big and so there are only a few dealers who control that so id prefer to stick to the high liquid metals that you can trade any time of the day with just that if you need a telephone call were few seconds and you sold your position or moved more so that the other one is more speculative but certainly people are specialists in that area there will be a lot of other methods im sure and lots of them will certainly do well also and im very very oversold in relation to gold and silver and probably will form in the next few years and i mean anyone who wants a piece of well. More than that as i do it will cause you well also by holding Precious Metals i think gold and silver will serve your purpose you dont need to go into other metals i believe last year there were reports that the refineries and switzerland there is a huge backlog and refiners and switzerland is that still the case is that the story in switzerland refining and what they have inherited a thing updates on that we are in daily touch with there on the refiners because we buy all our metals from the refiners even new fresh go or still rules so that was a false rumor. That was the shortest last year there was never a shortage there were never so that was some money and i know one or 2 people who did it also but im not going to mention names but that was someone who just did that to his own purpose so that refiners whenever she wanted metals and in the autumn. 2019 they had a more quiet market they never had for many years so it was actually and that was in spite of the fact that e. T. S. Had been buying gold and cetera because we know the n. E. T. s buying go they dont actually take physical gold they get is just the bullion banks that move a bit of gold from the from the Central Banks over to the sorts of agel who sold 2 times or 3 times over and that you know no so there was no increase in physical gold a month from the refunds and all went when these e. T. S were increasing their loans so again to ask you a question that there were there was never no backlogs from that major refiners last year ok well thanks for clearing that up finally a question about satchel banks Central Banks have been. Very have acquired a. Record 50 years time and yet theres this other. Seem to get out my faithful are talking about it it seems like an important bit of news around the world what are your thoughts on this yes but the interesting thing is you know the paper reports and bags of buying gold is like everybody in the every cent of bank in the world is buy gold but you know that the fed is not buying call back or. Go the bank in germany is not buying gold d so the Central Banks that were buying gold are the ones who understand whats happening in the world so its all so youre talking about china youre talking about russia youre talking about turkey. Poland border bit also hungry but is that it was mainly east and Central Banks more gold rather than west and still that was enough for the gold in monto bars and the banks going up substantially last year and of course then you had banks like the bank and on the banks that actually created gold also last year because they are them clearly theyre seeing whats happening by the one youre really seeing it is rigs almost russia they know that the dollar is going to collapse so theres china of course china doesnt reveal its true position of gold holding and they only revealing around 2000 tonnes but they probably in my view 20000. 00 tons that they have gathered over a very long period of time so theyre not revealing it but you know these countries russia and china they see that the dollars days are counted and i agree with that totally i think we are at some point and you know it should happen this year and i think it will that were going to see in Dollar Collapse and that would be very serious for the world then of course very serious for the united states. Thanks for being on the kaiser report thank you max good to speak to you thanks very much and thats going to do it for this edition of the concert for with me max kaiser and Stacey Herbert id like to thank our guests got avant gras. Galts whats all and if youd like to get in touch tweet us excise a report until next time by you know. Whether they should be. One of the people so you can be in luck because. Thats me what i mean i well me and my. Mom always was a. Problem. In school im. Only in the spirit in that these images he said but what musical. Comedy is going to come. When to intimate oh is that and there have been removed can you. You michel i. Was a minister then since most im. From the us lead me to a little boy is no good he the slums you or smear the focus on the message you sleep. If you want to get what. You see in the film was not just for the most good movie the. Other week. Youre little more a lot. More. Evolution you will hear them let us. Know what is. It. That you have. Come to. The u. N. Security council the west continues to defend by chemical weapons watchdogs reports on syrias do my incident in 2018 thats on the watchdog zone for main suspect to court and get contradictory. The findings in the final dissent that reforms were contradictory but were concrete. Work that you heard understood. The chasm between rich and poor grows father is still with us as the globes wealthiest and most powerful of the 50th well dick anomic forum in this west out. Of the us secretary of state means venezuelan Opposition Leader one why does american firms getting another wave on the science
comparemela.com © 2020. All Rights Reserved.