good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for may fourth two thousand and twelve we've seen the european central bank try to prop up the thinking assets in the euro zone however. when they finished discovering just moving again. as right of vultures are scouring the continent for distressed assets but is a central bank a gap between supply and demand creating a micro bubble in these same scraps while brown bubbles will also talk about the record valuation facebook is targeting for its i.p.o. and ask if there is a friendship bubble blowing up worldwide also in the u.s.

the u.s. jobs report for april shows unemployment take down a notch to eight point one percent bull tell you why anyone enthusiastic about the u.s. job situation according to our guest is smoke and hope the meager one hundred fifteen thousand jobs the labor department says the economy added is just the beginning and the jobs report does have people again asking what the fed might do you just can't leave the fed out of any conversation these days it seems but take a look jim grant clears up the massive manipulative reach of the central bank once and for all. the federal reserve. those who. would've swore it was players who were going to hold their four i've heard. so lucky for you we have the original squid hunter on the show today reggie middleton a boom bust blog will be joining us let's get to today's capital account.

all right let's start with the u.s. jobs because as middleton puts it anyone excited about them is on hope here are a few reasons why first the obvious with the latest report only one hundred fifteen thousand jobs were added in april while economists were expecting one hundred sixty five thousand according to bloomberg take a look at this the employment rate of the population ticked up a little notch but as you can see there is still a huge ditch looking back a few years and according to karl denninger of the market ticker this is kind of the key figure that you need to be paying attention to and let's take a look at another key figure the number of people don in the labor force in april rose by more than five hundred thousand putting it to the highest number on record looking back to look at that more than eighty eight million folks eight point four

now if you're not in the labor force you are not counted as unemployed and weren't not for people dropping out of the labor force as you see here analysts like mike shed lock estimate the employment rate the unemployment rate excuse me will be well over a level in percent and this also helps to explain why the headline unemployment rate ticked down from eight point two to eight point one percent because the flip side of those people leaving the labor force is the labor participation rate and this is what likely brought the unemployment rate down ok this is the level of americans looking for jobs who are already employed and it declined last month a bit to sixty three point six percent the lowest c.m. d.c. report since december of one thousand nine hundred eighty one thirty years now it's a broader trend we've talked about but the question is where are these people going and what accounts for the decline this may help explain at least some of it the number of workers receiving social security disability insurance jumped twenty two

percent to eight point seven million in april from seven point one million in december of two thousand and seven according to social security data that helps explain as much as one corner of the decline in the u.s. . labor force participation rate during that period so these are people who say we can't work because we're impaired mentally or physically so a lot more of the let's touch on this talk about jobs before we get to bubbles with reggie middleton entrepreneurial investor and author of the boom bust log first of all reggie middleton thanks for being on the show welcome back to capital account. thank you good to be that good let's start with jobs because i read a recent post on your blog from yesterday after the the jobless claims came out where you were saying hey anybody excited about us employment is smoke and hope so with this latest jobs report there's always lots to slice and dice which each with each report that comes out what is your biggest concern if you have one with these

latest numbers out today well the numbers seem to be so for that in the face. jobs were added but you have to take a look at the whole picture jobs added this and that so you mean that there's more employment in us because you also have population increases and a climb from immigration birth etc and there is a lot that goes into the number as you experience you know very articulately in the unemployment rate is very very misleading to a person employment does not create those who are actually unemployed uses. the bafta. i don't know so much of what should be employing me by saying those who are actively looking for employment and cannot find a job or attitude on employment rate but you know there are many who are not looking for you know health reasons disability. after two or three years and cetera

and there and icon in the unemployment rate the lay person looks at the unemployment rate is eight point two eight point one percent all of this in an improvement but the lay person also considers unemployment as someone who is unemployed which of course makes sense that's not how the b.l.s. calculates it bulis being the bureau of labor statistics which is the propaganda engine of you know the us very similar to what some may consider. the russian propaganda engine to have been doing a cold war days not looking to beat to cause a conspiracy. can see its directorial go ahead rise you go down this path to me the numbers that come out of the government from a logic perspective statistical temperature perspective and policy perspective so that's it i'm not sure yeah imagine that the government being illogical or not exactly forthcoming and the best way that people would just think about

unemployment let's move on though to europe because you've been talking about this you've been writing about this let's go across the pond lots going on there now we've got p.m.i. numbers out recently and they were not good for the eurozone this adds to concerns about recovery about growth about contraction also record high unemployment numbers in the eurozone no despite all of this you think that actually investors may be overpaying for distressed assets that are being unloaded by banks first just tell us what you define as a distressed asset what you're looking at here. well said the stress as it proposed the disposition you have and see we are there is in this case nation or quasi sovereign nation i have to. identify this because i would think again the commonsense layman's definition of a sovereign nation would be a nation with sovereign powers that has autonomy but many of the nations in the

e.u. would can be considered not necessary those of the powers because they don't have control over their own. economic engine they're ruled they don't have their own central bank anymore they don't have their own currency tents they don't have their own printing press so it can be argued that now all the nations in the e.u. have you know the powers of a sovereign nation it can be argued with that being the case they are one source of distress as i said those who have to divulge disclosure assets and their private banks as well they're actually two sides two sides of the same coin because much of europe is of a socialist nature and as their brains get in trouble these nations go and build the banks out and so they take it and solve it and to be that was a bank take up on a public balance sheet and now the public balance sheet or the nation itself it's a solvent so when they go and have to dispose yes it's you don't truly have disparate market you have two partners trying to sell assets basically building

gets each other. so then he. says european central bank sees things very much to realize these things and they realize that if they allow all of these entities word to describe their assets in a small timeframe you'd have basically a fire sale so what they did was they gave away free money they lowered capital collateral requirements lowered interest rates basically pushed money through the system and they allowed most of the players who weren't absolutely gone already. basically almost everybody except for greece to postpone much of the asset sales basically kicking the can down the road and in doing it those assets that were put up for sale had too many buyers for the amount as said to me as a relation to the amount of sellers and so even though you had was in trouble and basically had to stop for a standing as it's you had. all the financial buyers in the world you know ahead of

involved nations. net worth individuals family offices etc of investment banks and they were all rushing to get a relatively small state assets so instead of getting a. distressed fire sale price in other words buying as it were you can be with fairly sure that you don't want to do very well into the future several years out you have as it were basically priced accordingly and there were real bargains and you expect you know when you have a fire so to have a real bargain you don't want to go to somebody who's out of the burning down he's trying to so you have you know the sofa and he says ok thirty five thousand dollars you know you know he has about fifteen minutes he doesn't have a lot of time but that's basically what we have so why do you think is why do you think why do you think this is a micro bubble for all the reasons you just explain because because that's what you've been calling a set of micro bubble is forming. well i call it a micro bubble because the said should be. prices set by the market instead they're

going by prices that are heavily manipulated by what i call the global central economic planning the central banks. interest rates in many of these nations have nowhere of no business being anywhere near zero this includes united states germany much of europe. you have unemployment that should be at about eleven point something to sit in the u.s. you have interest rates of a negative at times and there is zero you have nations whose bank systems are collapsing slipping back into recession and these interest rates in is there are a lot of them have credit downgrade the u.s. had its credit downgrade some of these nations you know trading at jump or below junk levels yeah yes so they're paying single digits low mid single digits in interest rates yeah makes no sense it makes no sense but in this way things are six to seven yet it reggie and there were no this nonsensical world market my question to you have i think you just get in here with these micro bubbles that you're

calling my question is how big do you think the bubble can get with the environment so bad in europe assuming that the e.c.b. can't keep going in and doing more things to prop up assets and and keep interest rates low as they've said they would it at one per cent how long do you think this can continue and how big you think it can get looking out. well there's a saying the market could be. irrational longer than you could be solvent so. it is hard to write it out but personally and for me i'm a little perspective this bubbles and its many bubble because it's not about which has become a big problem there are too many players who needed to leverage discord yes it's an interest rates have been very low for a very long amount of time and it's been a concerted global effort and it has not worked you know you see all these nations allegedly falling back into recession where the fact of the matter is they never left recession they simply had a massive stimulus that gave three appearance of economic progress in this june is

the stimulus even slows down you have a relapse but it really wasn't a lapse it's just reality sticking his head out so i call it a micro bubble because it's not going to which has become a true bubble you know once reality hits and market pricing hits and there has to you know it's simply fundamentals and then that's when the many bubble will burst you have all the players going to squash as it hit the market at that you're going to have a lot of players who don't want these assets and that's the time to buy ha that's the true fire sale regime middleton stay right there because i want to keep on this topic of bubbles we will have more with reggie middleton entrepreneurial and that's still ahead is a friendship bubble blowing up amid the record valuation facebook is targeting for its i.p.o. we'll have more with reggie middleton on that but first your closing market numbers .

we just put a picture of me when i was like nine years old on the truth. i think i am. i love dr mahathir has a plan for. how he was kind of the guest today. i'm very proud of the year has played. the odd. oh. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else here sees some other part of it and realize that everything is ok. i'm

charging welcomes a big picture of. what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one who is imbue it with a global missionary zeal where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our t. question more. all right switching gears from one bubble or micro bubble to possibly another we'll see let's talk about the bubble of interest surrounding the scheduled facebook

i.p.o. later this month look at this here's the coffee's lee j.p. morgan one of facebook's underwriters for the i.p.o. that's very cute now the company is expected to kick off the road show monday for its initial public offering which is scheduled later this month mid may now it sent an i.p.o. price range that values the company for as much as ninety six billion dollars that is a pretty penny these books operating income just for the perspective was one point seven billion dollars last year for two thousand and eleven quite a difference so the question is if it's worth it we're going to bring a regiment in because he has been following this so i'm really interested to get his perspective reggie let's bring you back and this ninety six billion dollars valuation for facebook do you think it's worth it or do you think this is just a pump and dump in the average investor is going to get the backwash that's left in these i.p.o. markets. well of course it's worth it i mean how can you say it's not worth it mark

zuckerberg because it is the multi-billionaire. it's worth it for months of wherever hanauer now whether it's worth it. now or there is worth it for anybody who would buy it from these underwriters of course now from our perspective no not in time ninety nine times earnings roughly is the high end of this and we're talking about a brand new company that's in business that has had several copies flame out calling against companies that are growing just as fast with faster with more experience management larger infrastructure capital more reach more products everything and i'm not saying that facebook won't make it but you know there's a lot going against them and you don't put in an entire. now of course a fast growing companies a lot of people say we can't go on p.e.i. with the start of the start of a facebook is not a start of it but no matter what metric e.u. price to sales price to earnings and value cash flow facebook is grossly over value

. on the rise of china push it on top of it even as a fast growth company if you take a look at the metrics that were published their growth is slowing down it's so throughout two thousand and eleven. it's actually a down trend and then you're going to buy an i.p.o. at nine. times p. e. or any other metric with earnings is long sales growth and then you have the corporate governance issue you have mark zuckerberg who apparently allegedly created facebook seems like a very bright guy. he could keep her facebook to it is now but he could chose fifty six percent of the boring stuff so here you have what can be considered a young guy you know inexperienced guy in his twenty's first time running a public company first time running a copy the first her morning a social networking and city of this magnitude of capability who controls fifty six percent of voting stop exactly what you're getting for your money. you know i make one hundred. thousand dollars and i say i want you to give me one hundred thousand

dollars you know for my thousand dollars of earnings and exchange for that i'm going to control want to have the company yeah that's what you're getting for your money yeah that doesn't seem like a very fair trade off so then my question for you reggie what is all of the interest in this about how much of a role does the lack of interest in other i.p.o.'s have to do with it and also the market ability of facebook for average people that say oh hey i like this company i love it i use it millions of people use it so i want to own it. well there are two things number one it's a very good story stocks remember story stocks from the dot com days lot of you know a lot of companies told very good stories from bikini dot com you know self-explanatory to a lot of the companies but what makes book facebook a very good story stock is even though it deals in the intangibles that internet company has a tangible story because almost everybody you know most some of the people you know actually use facebook to have a facebook account so the familiar with it they use it but most people you know use

facebook to set yourself how much money have you given facebook over the past year none reggie i am not even on facebook. and that makes you even worse most people don't get much more you know facebook. and. the fact that you don't facebook speaks volumes now outside of being a good story stock right which really helps they have some of the best salespeople in the industry goldman sachs morgan stanley j.p. morgan you know they're experts salespeople so you take a good story stop you give it to a very very good sales person and what you have you create for off. now froth and investment potential not necessarily same thing i'm sure there's going to be a big pop at i.p.o. ok after a pop you know it's going down you know when it goes down to the timing is you know not a trader but the fundamentals simply are not there with the broader thing as they're not at the prices that they're offering ok and with the frothy ness that you just

pointed to and the history which you alluded to i didn't realize that the key dot com was such a big hit thanks for that history but is this part of any bigger trend we've seen other tech i.p.o.'s in the last year linked in and also some others that are seeking me. well there is a churn i think most of the dot coms head for a few very rich especially considering the business model revenues profits etc. file for public i.p.o. i told myself cry because it was absolutely ludicrous you know easy going in a hundred percent of what it's worth easily. dropped to less than fifty percent was offered it simply because a business model was a sustainable it was not there but it had a dot com on it same thing many other dot com the it is it. basically the internet bubble is back and you know big time considering the fact that at least unless something happens you know you had general economic strength in growth right now

you have weakness globally and you have these stocks that are being pinched that you know we take this valuations again facebook is interesting story it has a chance from a speculative point of view it's worthwhile just nowhere near the offering price you know at the offering price is one of speculation you know to for five dollars two dollars i call one to the lotto one of facebook yet and you know i don't know what your chances are going any better. yet reggie before we go. get ready we got many plays of what we just have a minute left but i just want to ask you you think this is an internet bubble a tech bubble redux what would it take for the bubble to pop you say that there is no growth now unlike back in the day so what could the impact of that be. well i think that fundamental investors have been severely compromised and damaged by the central banks you know free liquidity. freely distributed liquidity

free money zero negative interest rates basically destroy market pricing we destroy market pricing for the metal analysis doesn't work now there's newbies who feel that fundamental analysis doesn't work in general but that's nonsense what fundamental analysis is counting money you open up a bank account you put ten dollars in you add two more dollars and from day front of fundamental analysis is you have twelve dollars in a bank account plus whatever could interest and that's what it is if you use free money and negative interest rates and look for free then you simply cannot count the money because now you have a negative interest rate you have things that simply don't happen in the normally functioning market that is unsustainable you know it's never never worked over the intermediate term so once market pricing returns these bubbles will go bust you would not be large facebook at nine times earnings because you know most people would want to buy it because you have to pay for their money they be accountable for the money well they have negative interest rates of free capital yeah then you

know it's your money's not my money i'm spending i don't care for those well it seems like that is going to end when the fed packs up and ships out and stops flooding the money with liquid market liquidity or keeping interest rates at zero locked away for that day but we'll keep talking about it right the middle ten thanks for being on the show he's entrepreneurial investor and has a bust blog. all right it's friday so let's wrap up with some viewer feedback we covered gold and silver manipulation with bill murphy of data this week which turned out to be very popular by the way but you tube user bam-bam twelve still had some questions let's take a look he said or she said i understand i understand fraud i do not understand gold

manipulation by devaluing gold they just don't devalue yours or mine they devalue their own and here she is talking about central banks why would they do that well yes that's true the u.s. for example which is considered kind of not the number one suspect for central bank involved manipulation the us yes it may have gold but it has a lot more dollars than gold and it's in the central banks best interest to keep the perception of the dollar strong relative to real things because as we all know without faith in the dollar as the global reserve currency the fed couldn't do its printing the u.s. government couldn't do all of its borrowing and remember them bernanke or to him gold is a money and the fed keeps gold reportedly the world's largest reserves of it because of tradition you know it's fall back on that anyway go back and watch our interview with mike maloney because we did cover this with him too and there were also some

good charts and graphs we use to break it down that may help you out and i'm also sure we're going to be covering this again because it's interesting and as i said a popular topic moving on tony capone at twenty below me is his twitter handle tweeted me today and said jobs numbers of one hundred fifteen thousand does this mean the fed has their ticket punched for q e three now i don't have. a crystal ball unfortunately i'd love one and i don't know what the fed will do i need to call dr bernanke after the show but make no mistake the fed is already manipulating prices across the economy regardless of if where when we see q e three the biggest vampire squid as we just heard from jim grant in an interview has that effect a lesson. with. have with the way to virtually every single price and go your way for a couple more years. now you can catch up on a whole thirty minutes with mr grant and our recent interview with him just go to our you tube site meanwhile ots metron says laura less coffee your shot know all

the time well out metron i'm happy to report i left my coffee over there but i don't know maybe i'm not shout loud enough because it's lloren moving on johnny's forty five responded to one of our shows this week writing wow i didn't hear about this on n.b.c. but i did get an update on dancing with the stars the biggest loser and the voice that along with some inaccurate weather reporting and twenty minutes of commercials showing how i should get disability and go on some prescription medication yep it's all fine here. well if you stick to my heart i hear yes that's what we're here for unfortunately that's all we're here for this week because that's all we have time for that is our show thank you so much for tuning in and do not forget to follow me on twitter at lauren lyster and give us feedback on the show it youtube dot com slash capital account and catch up on those interviews for what you don't understand those bars and you can also tune into the alona show tonight on r t at six pm that's in about an hour all beyond the show to get

a financial check up and for now from everyone here at capital account have a great weekend and a great night. we'll . admission free accreditation free transport charges free arrangements free risk free studio type free.

download free broadcast quality video for your media projects and free media to r.t. dot com. wealthy british style songs. on the title. market why not come to. find out what's really happening to the global economy with max concert for a no holds barred look at the global financial headlines tune in to kaiser report on our. download the official t. application to the phone on i pod touch from the i choose ops to. watch on t.v. life on the go. video on demand. is mine gold costs.