Hi im max kaiser this is a kaiser report you know things are not what they seem. To say. Well max youve often talked about the me mcconnel me and the you know the economy getting ever lighter and lighter there are more and more intangibles and this is shown in this chart 84 percent of the s. And p. 500. 00 assets are now intend to fools this is a chart of the corporate Balance Sheets are more knowledge driven s. And p. 500. 00 Company Assets in trillions of dollars and as you see the tangible part of companies they just increase slowly since 975 when 17 percent of a companys assets were intangible back in 1075 and now its 84 Percent Companies used to make stuff and they had the value terms of the factories and their employees and their trade deals etc but now we have a situation as the chart shows 84 percent of the value intangibles or the Knowledge Based on knowledge so take a look at tesla for example they must has knowledge about how to go on joe rogan and promote his means he has knowledge about creating me see his knowledge about branding he has knowledge about interesting engineering ideas but the actual book value of the company itself is nowhere near the hundreds of billions of dollars we see in the stock market thats true across the board for every Single Company really in the s. And p. 500 they make their cash flow on the ability to game the system and to exert arbitrage spliffs on the data thats being rolled on the various cash tasks of different banks and like you have on lost so eloquently demonstrated on the joe rogan show so. This is interesting use the Word Knowledge because you think about knowledge any think that it has some basis in some kind of foundation of wisdom but this is knowledge about how to use Artificial Intelligence and knowledge about how to use propaganda knowledge about how to use subliminal advertising that its evil its evil or they might as well just replace intangible with the word evil well i dont know about that but certainly it is an interesting time and we do see it you and i grew up in the 1970 so we saw what it was like to have a more tangible economy and that could be part of why so many people are having a meltdown while we are having problems domestically in the United States in terms of the economic disadvantage you know and the inequality growing so you know its not like an intangible thing as you mentioned tesla is worth what 400000000000. 00 based on one guy got his team of engineers its not all that other stuff is this one guy so you know you dont have to manufacture something to be worth tens of billions or hundreds of billions of dollars right well how to get the valuation you get by multiplication of stock price times current number of shares outstanding and if you have knowledge on how to buy back your own stock and pump up those stock prices and executive Stock Options then you have a hierarchy where you actually didnt create anything for the economy you didnt engage in any capital expense expenditures a cap ex to expand your company in any way then whatll happen is what will happen the i. B. M. You know they want to the whole stock buyback routine then eventually played out and the Car Companies a shambles or General Electric General Electric is almost absolutely out of business by trying to push me a miss instead of products well find out one day if theres any if the fact that theres no there there matters that all its also coincides 1975 we had only been off the Gold Standard for a few years so the good. Economy and global trade used to have more there there because if you sent us your oil or you sent us your manufactured good you got gold back in return now you cant fluffy paper and that could disappear you could be cut off your whole nation could get cut off from the swift grid so your paper might not mean anything your gold had you you know Exchange Goods and services for gold those would always mean something and it would always be fungible but lets move on to another thing thats going on in the markets about this you know weve had intangible now we have the issue of inertia and the investors are pretty angry well investors vent frustration over feds Balance Sheet inertia well apparently the fed Balance Sheet growth stalls max and you see that in the little top bit of the chart its stalled and what do we always say here on kaiser report you cant taper a ponzi and thats tapering a ponzi you have to keep on feeding the ponzi scheme you have to keep on feeding fresh new debt credit and cast so if youre not doing that then it all comes apart well the core intangible all asset of the American Economy is the u. S. Dollar that has no Intrinsic Value it has no value at all really and the country itself is mired in debt right so its got negative value their acts are going to go to negative Interest Rate so the as you point out the only me value of money particular borough in the ponzi scheme that come to have a massive multitrillion dollar printing schemes. To be illusion of a working economy and if that money spigot is turned off its like turning off switch on the whole a gram that is the American Economy they were active economy if you put all those names together right thats it was a holy ground and that is the u. S. Domestic economy its a 25. 00 trillion dollar hologram composed with entities like a tesla or a General Electric but our teams within the whole of gram if you turn it all off by cutting off the money supply then everything disappear. As overnight well the chief me maker of all is of course how fed chairman who has created the best me my of all the educated the world instantly at the same time so everybody got knowledge at the same time of what this money printer go but it does in order to keep up well keep this wealth and income gap that a lot of people around the world are really starting to take issue with that money printing that these investors demand hedge funds and private equity and friends of the fed demand is also causing the threat of inflation everybodys wondering whether were going to have inflation or deflation whether the fed printing is going to cause more g. Place in our if its going to cause inflation some people like re deleo and gun locker saying that the inflation could get up to 10 percent well here is adam back with a tweet about our guests Michael Saylor of micro strategies he says we just have the awful realisation that we are sitting on top of a 500000000. 00 ice cube that is melting said Michael Saylor on micro strategies 425 1000000. 00 bitcoin buy this is not a speculation nor is it a hedge this was a deliberate Corporate Strategy to adopt a big queen standard i think this is for some a moment in this it marks the transition and the Inflection Point where we go from this story about deflation to a story about inflation because corporations up until this moment have been using that cheap money to buy back their own stock and boost executive Stock Options and basically gaming the system and encouraging the central bank to print trillions and trillions of dollars what Michael Saylor of micro strategies and his team have realized is that ultimately this is incredibly destructive to the dollar and the dollars purchasing power will crash as it has done in other. Countries like venezuela in some bob way and therefore its prudent to prepare for this collapse of the us dollar by owning the hardest possible asset that you can and that means bitcoin and he very eloquently describes why big corn is much harder magnitudes harder than gold and well get into that in the 2nd half but i think the importantly what this signals is a really a watershed moment stick going all the way back to the 1980 period when we saw the beginning of this bull market in the bond market which has now been going on for 40 years and Interest Rates have been going down for 40 years and weve had this this inflation deflation story and that cycle i believe now this is the top of the bond market finally with this micro strategies by bitcoin so hes protecting the company by converting the dollar treasury to bitcoin is 500 1000000. 00 ice cube that is melting so heres a tweet from ice cube who perhaps one time was worth 500000000. 00 the rapper the rap star and he tweeted a link to the photo of the deficit mess by stephanie calton. M m t modern monetary theory right. Where the vast majority of people are looking at the situation and seeing this rise in wealth and income gap especially the wealth gap and why is the wealth gap happening because the cantillon a fact we have a class of cantillon heiress who get fed all this free money from the fed the fed buys their Corporate Bonds above par so theyre paying above the market rate and what were seeing is people are starting to think well if the feds printing them free money why dont we get free money like give us free money and then we could compete with them so he ice cube tweeted america loves to cry broke but in america money does grow on trees right so this is going to be a very confusing time for a lot of people because they dont understand that the can tell you marriage did so in a way that was subversive and undermine democracy and so m. M. T. Or modern monetary ferry is not the solution to a club talk or say. Its just trying to grab some of that kleptocratic money for your own but the kleptocrats are not going to give you any sadly icet. Thats the truth. Its ice cube ice q. Ok fine i know but this is the way every single Banana Republic starts the oligarchs take a huge amount of money they becomes corrupt and they plunder the state then the people rise up and they throw them out and install a dictator who will then give them free money and then it all falls apart thats thats kind of the the path it takes so the people are now starting to rise up and say hey give us a free money because weve sat here for 40 years waiting for our free money even giving free money to these bankers and your friends on wall street for the last 40 years wheres our cut were finally ready for it and if they go down that path it doesnt solve the problem of wages as ive been saying now for 20 years if youre sincerely interested in the left wing. Policy to combat the kleptocrats you need to time money supply with wages if money supply goes up by 15 percent so to wages thats the connection you need to make and that would restore balance to the economy and it would get rid of the controlling there to a large degree but since labor has no organization and has no representation thats not going to happen either well we dont have labor we dont produce anything we dont make our cars here we dont make our stereos here we dont make our anything here everything is made in china so you know you need to create wealth in order to distribute wealth so if we dont have any Wealth Creation all we have is free money and you know only a small group of people can live off the labor of you know a 1000000000 chinese like you cant have a huge middle class in the United States offer that might fall saylor and micro strategies theyre not philanthropist theyre not doing this because they are you know egalitarianism minded guys theyre doing it opportunistically because they see that the tide has turned and every Single Company in america is going to come to the same conclusion. And were going to talk more with Michael Saylor in the 2nd half dont go away. Were segregated only by social class. People also in poverty by 1st. If youre born into a poor family youre born into a minority family if youre born into a family that only has a single parent that really constrains your life chances people die on average 15 years old if youre born into generational poverty. And into the fight every day you meet your needs and the needs of your family. As a culture war consumes american politics during this election cycle the economy remains in a big area millions of people live on the margins the only constant for them is insecurity economists debate individual recovery. And you know what is the reality of changing. Permanent one. Welcome back to the kaiser report by max keiser time now to turn to Michael Saylor c e o of micro strategy who bought 38250. 00 bitcoin for 425000000. 00 cost averaging every 3 seconds in over 88000 trades michael welcome thank you match great to be here micro strategy is the 1st s. And p. 500 company to actually adopt a bit coin standard or something close to it what was this lets revisit your road to damascus air years ago you had tweeted that bitcoin would go to 0 now what so what changed your mind i didnt really i tweeted 2013 i didnt i forgot about it and then 2020 came along and in 2020 we watched a v. Shaped recovery on wall street we watched an l. Shaped nonrecovery on main street i looked at my cash and i realized my i had 500000000. 00 of cash it was going to melt away my understanding inflation flipped then and i realized that the real inflation rate is the asset inflation rate asset inflation rate was looking like 25 percent this year and looking to be 10 percent or more in the next 3 or 4 years and i just imagine losing 50. 00 to 100000000. 00 a year in asset inflation and i dont want a scary journey to try to find something to do. And eventually dont lead me for you know to Precious Metals or bitcoin and analyze it all. I looked at bitcoin and i jumped through hoops wondering well what big coin well were not a crypto currency replacement and i think the thing that really was a big big Decision Point for me as i realize a bit klein is more than 90 percent of the market for true for work tripped ocurred c. Which meant it was completely dominant and then i realized that all the hard forks that had taken place in 2017 had merely made the point Value Proposition better and they had made sure that it had gotten out of its adolescence and start it if i was making that decision in 2014 or 2013 before the hard forks and before decline cash bequests be in all that complexity and if i was making the decision before i saw all the institutional great cost to the ins or exchanges come online it would have been very difficult and i dont doubt i could have done as a Public Company officer but i think in 2020 i finally had as a security that i thought i could invest the treasury and because of those things the moment this news broke and i looked at it and a lot of things are answer my mind and one of the things that popped into my way of thinking is that theres a company with a big cast position and every Single Company that ive been writing about the last few years of big cash positions they end up buying back their own stop and a lot of times they finance these purchases because Interest Rates are near 0 or add 0 and you can borrow money at near 0 percent buy back your own stock of course this diminishes the shares outstanding it gives a big boost to the stock it gives a big boost to the executive Stock Options and i and i see what micro strategy is doing and i thought wait a minute. Is this a turning point in terms of inflation because that stock buyback. Only works if you can get away with that without any inflation i know i. B. M. Went through a big Stock Buyback Program at eventually it worked against them so i guess the question is on a Corporate Strategy level eat it not for the stock buyback and he went with a bit coy walk me through that decision 1st of all i think if youre sitting on cash he either have to buy equity with it or you have to buy some other asset with it if if the inflation rate felt like 3 percent then your cost couples 3 percent but this year the inflation rate seems like its going to be north of 10 percent for the next 5 years so your cost a calculus north of 10 percent if your companys not growing its cash flows faster than 10 percent then if you buy your companys stock then youre actually going to be deluding yourself and so a low Growth Company and a high inflationary environment buying a stock but thats a losing proposition and on the other hand if you could find the well dollar huge company that had you know 20 or 30 percent cash flow growth that was not overvalued you could buy that maybe thats good but you cant find those today we actually looked at this and we said we have to do this mobile we have to do in a respectful way to our shareholders so we actually announced we were exploring it 1st and gave her body a chance to digest that then we announced we bought 250000000. 00 of bitcoin and simultaneously we made a 2 150000000. 00 tender offer to our shareholders at a premium so anybody and our Shareholder Base that disagreed with the big point strategy and wanted to tender for cash had the option to do so we let that tender offer run we only had about 60000000. 00 worth of shares tendered we took we took that share count out and reduced our our our shares outstanding but then we took the. Sure a 175000000. 00 and we reinvested that in bitcoin so that over the course of 6 weeks we substantially converted the entire 500000000. 00 into either bank or or to equity you know my investors would say why dont you just give us back all that money and buy back 500000000. 00 worth of stock and the answer is if i didnt capitalize the company so that we have no new treasury assets left if we run into a problem then we could be insolvent you know like i have a bad year i dont make 50000000 i make 10000000 i run out of cash i cant make good on my obligations to my customers my employees my vendors my counterparty so you cant dick out the lies and institution that you wish to last for the next 30 years and thats the problem with buybacks exclusively they put the company at risk weve seen in this town downturn companies are short of cash and theyre highly leveraged and a lot of are facing huge problems so now but again on a Macro Economic scale here at that you are kind of making a bet in terms of the reemergence of inflation in a big way you used 10 Percent Inflation number the fed says are trying to shoot for 2 percent theres a disconnect there with their methodology has been played up by many folks they dont include in their basket of inflation things that actually go up in price its a misnomer it doesnt really catch inflation of course being an executive at a company like yourself you cant drink the koolaid and go along with the program youve got at the liver results for real so is tell us about this inflation rate its really 10 percent i mean if you look at the right and number the best my 1st question and then the 2nd kind of add on there is. Are you the tip of the spear i mean these Companies Like apple and all these other Big Tech Companies with hundreds of billions if not trillions of casts on their Balance Sheet that you characterize as a melting ice cube in the face of this rail inflation is this the beginning of a wave of rid of corporate of Due Diligence and prudence that youre obligated purtier shareholders to move in to pay a claim michael i think it is the beginning of a wave i think youll see various groups 1st find out where the individuals and Family Offices 1st then youll see private investors and private corporations 2nd and then youll see institutions and hedge funds and then and youll see Public Companies come and then after that eventually smaller ones midsize ones then the big ones then you know then the sovereign funds excite her but with regard to inflation yeah the idea that she p. R. Is inflation is a misnomer right as it is so its a fallacy what you if you think about inflation its not a scalar its a vector which means that theres a different inflation rate on Different Things theres a bucket and im out a Market Basket of deflationary assets like youtube and oberon and stuff you can get from an apple and pandora and spotify and amazon and that stuff is going down i think its manufactured by robots or a ais its getting cheaper. Then theres another bucket of things that are going up 0 to 2 percent and theyre lightly manufactured commodities and generics then theres another bucket of things going up 78 percent there are luxury branded items like a Harvard Education or a gucci bag or something thats thats thought to be unique and then the the highest inflation rate is on assets that are inflated between 8 percent and 25 percent you know and this is the stuff that i dont Pay Attention to most people dont if you bought a 1000000. 00 bond in the year 2010 pages 50000. 00 a year an annuity stream you can retire on it and this year you have to pay 10000000. 00 for the same bond so it went up by a 1000 percent over 10 years and that means that its been running inflation rate of 22 percent for the last 5 decade the same you know the s. And p. And x. Is about 8 percent for a decade truly scarce assets like beachfront property where you want to live or someplace that you really anything you want thats where i scarce is going up north of 8 percent a year in a good year and this year you know if you wanted to share of apple stock at the beginning of the year well it cost 3040 percent more now because it cost a lot more for all those in nobodys so i think you look at inflation is a vector and the assets that will allow you to never work the rest your life are inflating your to 10 percent and the things you can buy like a Dominos Pizza and a you tube streaming free video is deflating if you wish to create a Market Basket of deflationary assets you can park the inflation rate to be below 0 for ever but of course you know its kind of like a jet i mind trick its like id like to work make a 1000000. 00 and retire and never work again i need to buy a bond for that these are not the droids youre looking for you dont want that on thats not for you somebody else wants to bond so based on empirical evidence we can say. With a high degree of confidence that jay powell at the Federal Reserve bank is understating inflation by 8 and a half percent at least and thats the reality today and if people understood that they would understand a lot more about why these markets are doing what theyre doing now youre not the only guy who sees this inflation risk Paul Tudor Jones went long bit calling famously a few months ago re dahlia was piled into gold Warren Buffett dumped his long held bank shares and went long some gold miners and also japanese stocks kind of get out the dollar stand talking miller is warning about 10 percent in place and of course he was a partner over there with soros and renowned money manager so you have people in your camp and again i get back to the sea change in markets and weve had and you mention the bond market there as being priced in a way that doesnt reflect the real economic environment out there but it has been an almost 40 year bull market going back to 1980 so is this an Inflection Point or you know can we say based on wallys smart people and what youre doing that maybe the bond market itself is about to turn what are your thoughts on that i think it is because i remember i came of age during Paul Volckers administration and i remember 18 Percent Inflation huge and and huge Interest Rates and then we just saw our interest risk really Interest Rates mortgage down successively for the cost 3035 years they can once they go below 0 what we have is a warm current sheet and not not like a war to make the u. S. Currency weaker than the euro the war in currency is anybody holding currency is getting attacked and so now that were starting to realize that currency is being made toxic by the political you know financial policies of the central. Banks you kind of have to run away from that currency this something thats not toxic and i think decline is that non toxic currency all right were going to take care of this over to a park too but thanks for being on this portion of the cause report Michael Saylor thank you all right thats going to do it for this edition of the kaiser report with me max kaiser and Stacy Herbert want to thank our guest Michael Saylor of micro strategy until next time. Join me every thursday on the alex salmond show and ill be speaking to guest of the world of politics sports business im show business ill see you then. Time after time corporations repeat the same mantra sustainability very important to accelerate the transition to sustainable transport sustainability stay in her manner a more equitable and sustainable well. They claim their production is completely harmless. Leave. It to the Companies Want us to feel good about buying their products while the damage is being done far away and this is Something Else this must be going down even as im looking. At new business we didnt dream and then the best understood look at who is going and. Hello and welcome across top where all things are considered im Peter Lavelle as the culture war consumes american politics during this election cycle the economy remains in a big area state millions of people live on the margins the only constant for them is insecurity economists debate and eventual recovery they speak of a u. Of the end of now but is the reality a chain recovery a permanent underclass. To discuss this and more im joined by my guest Richard Wolffe in new york he is professor emeritus
comparemela.com © 2020. All Rights Reserved.