it chris martenson is website which is pretty peak prosperity dot com and you can hear him talk about it now on our show because david column is here he's the betty are miller professor of chemistry at cornell university and author of the year in review out for two thousand and twelve today so first thanks for being on the show it's my pleasure second let's talk about why you as an organic chemistry professor or are known for writing a financial economic investment year in review that's out today why does anybody care about your views on this subject. it's an excellent question actually. i'm pretty good at distilling complexity down to simplicity so i take a weed whacker to these complex markets we have and it's a hobby of mine and and at the end of each year i summarize what i see. and and i i try to find the plotline within the noise so there's huge numbers of offense that. occur during

a year but come up michael lewis' way i attempt to figure out where there's actually a theme occurring and where the most interesting one and it's sort of a wise guy so that is why the guy people always appreciate that before we get into what some of the main themes are for this year before do you think your investment track record as an individual investor just managing your retirement savings has anything to do with that because you've done pretty well on your own you know actually this year was a tough year for a hard ass goldman get over get batted around a bit but it did but i guess the selling point is that i did since january first of two thousand i've been able to accrue eleven percent a year and somehow that i guess that speaks volumes i think that ok i've always felt all right and we'll talk more about the last year and precious metals a little later but first i want to talk about student debt because you are a professor and this is an issue that you touch on in your report this year and many interesting ways and let's bring up you talk about the. both in student loans

which has far outpaced the growth of household debt excluding student loans and our viewers can see right there the huge difference now we've seen that number go from two hundred billion dollars in student loans to more than a trillion surpassing credit card debt some have called this a bubble which remains to be seen how that will pop because it's difficult to discharge student debt at the same time we've seen wages stagnate we've seen unemployment stay in the high single digits higher if you look at different numbers and we've seen college tuition costs continue to increase so you as a college professor for thirty three years have some interesting ideas about why college tuition costs continue to rise. there's a lot of layers of the sun and colleges have got more complicated they're much more interconnected there's interactions between the universities and the federal and state governments that didn't exist so if you go down to the local high school you'll see all sorts of things down there that you didn't see when your kid universities have those too and so what do you mean you know how does that

translate to higher tuition costs while it adds bureaucratic costs right there's a lot of people on the campus who do stuff that don't involve teaching and so that's expensive the student loan. complex which which which is happy to give students loans because they can't discharge them this is a demographic who's happy to borrow money and not realize what they're doing and they're borrowing larger amounts because the parents are all broke now their parents are the boomers who got us in this mess in the first place the guaranteed payer virtually guarantees an inflationary price tag and then. i think i think they're going to be better consumers going forward to better consumers and you said that the libertarian in use as coffee and m two are when people are taking out student loans but you also say that this is a demographic that they're prefrontal cortex is not fully developed which means they've got impaired judgment potentially physiologically so. you actually have

some creative ideas about how student loans could could possibly be structured in more of a venture capitalist way what is that i don't know how to fix our current problem because on the one hand i'm not a big fan of debt jubilees which which basically is for giving it i know why they put in the backstop to prevent students from going bankrupt at twenty two but it's also anathema to the us system to leave someone in debt servitude for the what could be the rest their life and with these huge spiking interest rates and and and penalties and so there are kids who are in a hopeless situation going forward i have some thoughts and i don't know if they're new i would like to see for example a system where the where the where the loans are given based on some percentage of earned salary going forward and if if if for example the schools too expensive for the kids who are not earning enough for the or or for the tuitions too high then those are bad investments and some of the free market can sort it out i personally

would love to take a slice of an mit. and at the right price i would happily buy into a percentage of these mit kids salaries writer cornell yeah that's interesting but then does that mean that if you are going into say being an engineer you're likely to get a loan but if you want to go to school for theater you're maybe going to be out of luck i wouldn't refine it that much. i would like to bury that because for one thing kids change too i was a bio major i was going to going to go to med school or a bad school and then up going to chemistry and so what they say freshman year is meaningless. what i'd like to see is the traunch across all of all of the school what i would do is i would for schools to provide a better product to provide students who are more quipped to succeed to actually get a job and i am one that the school goes under yeah well yeah well yeah you could argue that. some universities may be too big to fail because they're not held to

standards of any kind of company long as the kids keep borrowing the same business and that brings me to another of your analyses which when you look at the earnings of young adults with bachelor's degrees they're not keeping up with the cost of a four year institution which we have right there and you can see that discrepancy between two wish and earnings now you are not in the camp that says college is a waste you know people shouldn't go you have a more nuanced view that sounds to me a little bit like a cost benefit analysis when students there are thinking about whether or not to go in school is that fair. not all schools are created equal not all majors are created equal and all kids are created equal and so. the parents is if your kid's not doing well in school what to take time off and it sounds like i'm telling the parents are in charge but offer them some parents or in the way of a sabbatical for the kids save your ammo until the kids showing some signs of using that education i think i think kids going forward are going to have to have to take

school seriously and it's an expensive way to hold a kid until they mature. you're better off my for my youngest son thomas he he took a year off went to aspen worked in a hotel for a year and he's done fantastically now and my older son did an extra and shipped the seas are great you know parents should encourage their kids to take off their phrase they won't come back i said to my younger son yeah you don't come back i'm going to kill you so while there that's a there's a way to kind of enforce the same incentives there before i get more into other aspects because i wanted to start with student debt because your professor what do you think is kind of the biggest theme or the biggest difference there are major takeaway from your of your year in review this year versus say last year. my year reviews are a little bit of a misnomer in that it's a combination of of of looking at what happened in the year again with this idea of telling a narrative so a lot of stuff gets left on the cutting room floor so also i i get something that i

that i feel passionate about i just start talking about it and. i pick a fight with the raw fire over quite a bit yeah you know let's talk about the roth ira you have a major gripe with the roth ira what is it and why did i hear two well what are they the first one is that the original ira is a very forward looking thing and they said that the government basically says if you want to put the money away tax free and accrue a tax exempt at the end future generations will get the revenue and we'll get our cut but it will be later and by governments don't do that very often right that's a pretty good pretty pretty far sighted thing the roth which was put into place while we were attempting to balance the budget i'm not sure that's a coincidence says give us the revenue now in fact roll it over from regular we really want revenue now and we'll worry about future generations later right so it's a it's it's government taking their cut at the front that's my minor and you think

that the roth ira was forgotten you know that precedent question i can't rule it out yet but the big gripe is actually i think the taxation on the roth is being missed but i've been all over the web i can't find an analysis that makes sense to me and why this year that why why why it's important this year. because i finally figured it out ah ha ha ha i got rave that that's a good read i've been bothering me yeah yeah well despite the fact. bother you when you think bonds are a bubble you are still bullish precious metals even though you said that last year they haven't been so hot for you and you say that precious metals equities have been a widow maker of the last year and so why are you still bullish. i got an argument with want to wall street's finest one nine he said he said he said i think precious metals are overpriced so i said i can one up you on that i haven't a clue how to price what i can do is i can evaluate the competence of central bankers and i think this is. all i want to know they're there doing things that

would make romans blush right this is. momentary problem so you continue to be bullish based on the follies of central bankers and your money that they're going to keep printing i'm going to keep holding ok we're going to go to break when we come back there's so much more i want to get into more on the year in review with professor david column of cornell university also still ahead we received some strong responses to our cargo c.e.o. interview this week i'll respond to your comments both good and bad today's viewer feedback but first your closing market numbers.

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ok one of the things we often hear throughout the year is the impact of topical news on markets on the economy let's just look at a couple. dimes sandy is still taking its toll on the economy mortgage applications falling last week even with rates still well below four percent the fiscal cliff is finally getting some love it's an economic storm of our own making that could trigger another recession. and that fear of cliff is really consuming that the minds of people consuming the news but how relevant really is it to the economy and to markets let's ask our gas because he is very critical of how much it matters in his your view so david column this kind of day to day topical news is that white

noise or is it really what's driving markets in your view. right even big events or white noise you look at market behavior when war starts serious wars and they flutter for a while and then they seem to dust themselves off and move on so then what does matter because you talk about the markets being broken you talk a lot about high frequency trading. i think that i think the debt loads that we're facing right now are going to drag on us for enormous freedom so that is what you think is it has the biggest bearing on what markets or the economy are about everything you know the markets economy so they talk about the resilient consumer and the central bankers are always trying to get people to spend more and people shouldn't be spending more they should be spending wow so resilient consumer shouldn't be resilient they should be hunkering down and getting their balance sheets in order right because they're still indebted which brings me to another one of the charts from your report where you show personal consumption versus

compensation and so what we see is that people are consuming more than they earn to a greater extent over the years and one thing you point to one reason why you write about accelerated depreciation what role is that playing on that's a pet peeve yeah accelerated depreciation is is i think it's being missed by the inflation hawks around the world and that is that the example i use in the in the review is i talk about a blender that was forty years old the bloke broke and i replaced it with a blunder which which you know the inflation guys say this is cheap because it's got more buttons we should account for that but the new blunder lasted two years and so the fact america if you want to compare the price of the two blunders you have to multiply the new one times twenty and you realize one thing so i think that's killing the consumers to. i have a house full of goods that are in a perpetual state of replacement so that there are none of them are durable nothing we buy is durable and so we're in a vortex so you're in for a tax where you have to keep consuming just to replace the things that are breaking yeah yeah yeah maybe even the ones that are when you look at a lining up for

a new i phone yeah so then another area debt we hear so much about how corporations are not sitting on record amounts of debt that are sitting on record amounts of cash is a common refrain we have heard over the last year let's play a little bit of it corporate c.e.o.'s are simply sitting on their hands you're seeing u.s. corporations with more money on their balance sheet than they've had in years but the fact is i know you in your report actually disagree with this notion why well a couple of reasons why there's a very simple calculation you can do if you go to the dow thirty and you you you add up all their debt and up all their cash there are five hundred billion in the hole so this idea that the corporations are flush with cash this is now maybe five hundred billions a low level of debt but but but the idea that they're sitting there with mountains of cash in the bank now what they have are credit lines and that five hundred billion includes a major chunk for j.p. morgan which i think there's people who question whether that was

a valid chunk of cash or the shenanigans they play with their accounting rules speaking of shenanigans you do talk about banking shenanigans in your review for anybody that needs a review we have some clips if we do have those handy let's roll on. misuse of customer money by a brokerage firm m.f. global was. on the hill today no market for manipulation scandal grows hundreds of trillions of contracts are tied to a lot of bore short term interest rates the former head of failed brokerage firm p f g best pleaded not guilty to lying to regulators the big. c. they laundered money for drug cartels. so what is the takeaway for you looking at the last year looking ahead from the shenanigans the takeaway is that organized crime did an i.p.o. . that you know the. scandal they talk about how h.s.b.c. was affiliated with organized crime and i look at the cycle that they are organized

crime best i can tell there and when it when a company gets caught doing things right laundering drug money it's not small potatoes and one of the world and they did find a quantity of the wrong numbers is usually about five percent of the profits they made off the illegal activity that's a small surcharge right so then what do you think is the takeaway is this organized crime has done an i.p.o. and is just continuing to bamboozle people that are investing are people that are customers or do you think this is going to change directions next year as we do see at least a little bit of more incremental coming from the d.o.j. and some of these settlements but maybe at least i don't see to use the you know to i see no ten you see the lack of teeth continuing i've seen your guest come on and supposedly have teeth and i'm not naming names but i disagree with. william if you guess that would make that claim so i think that our our our viewers could read

between the lines let's talk about municipal debt because this is one that meredith whitney of course made her claim back in two thousand and ten that two thousand and eleven is when we would see these disastrous state and city. budgets really come to a head and a debt come to a head and see a bunch of defaults now we didn't see those. you said that as the mayans taught us when you make predictions you don't predict what and when which is her pitfall here is what kate long who covers municipal debt she writes about reporters said recently about the reality of new news we'll take a listen. so generally it's a strong bright picture but there are these kind of dark spots that are isolated but it doesn't equal what meredith whitney believes was a massive wave of defaults for for the mare for the country ok so then i know you're very bearish in your year of reviews so maybe you want to pick the what or the when and tell me what your. this one i'm some want to

take on but i do know that meredith whitney predicted that this year would be it and the fact that we got to the end of one year is is of is is not data to me everything takes longer than you think it's going to take and i don't know why she said this year because we can just keep putting it off for a long time but but there are there are an ample examples of cities that are just broken their states that are that are have their pension plans that are forty percent underfunded and you know i did the math and i point out the thirty you have to pay thirty thousand dollars per taxpayer in the contrary to bring the state pension plans up to speed so there's just there's problems everywhere and there's still people who are overpaid and still so i could be wrong kate could be right but i'm betting on america you're betting on america ok and then quickly before we go i guess just to sum it all up what do you think is your biggest concern moving into two thousand and thirteen because you are kind of a perma there and the thing you're most excited about. i'm excited about natural gas is still you give it away you have cooties are still cheap and and here's

a sector that are born everyone seems uninterested in and at the same time in the same mouthful say this is this is the energy that's going to fuel the future of the united states so i'm buying the equities right that's pretty simple ok and i don't i go in while the least exciting thing to me is it appears as though there's no mechanism to pull the fingers of the banking system in the people who are doing these benefits off of politics i can't see any mechanism to get them because you know if you try to stop the flow of capital into politics they'll just be met with more capital to fight the fight and i don't see how we get out of this until you know admin burke nineteenth century predicted the french revolution you know no one believed them. well we'll have to see how this plays out heading into two thousand and thirteen but i thoroughly appreciate you being here and sharing your views thanks so much you're well.

ok it's friday let's wrap up with your feedback earlier this week we interviewed the main man behind the gold antitrust action committee here's just one issue we covered. the law authorizes the united states exchange stabilization fund to trade secretly in the gold market and any other market that the treasury secretary decides he wants to get into because we don't know if. and to that richard pal on facebook said i hope you air this comment on your feedback on friday's show which we are with got as bill murphy and chris powell warn you have this what on earth are you talking about look when chris was explaining about the treasury's exchange stabilization fund and why the u.s.

government is able to manipulate gold silver and all markets as they choose this is why those me because max kaiser has been saying this for years j.p. morgan and u.s. governments over manipulation of the treasuries e.s.f. etc as i watch other shows on our t.'s network i would suggest you do you'll learn an ocean full of financial info from the brilliant max kaiser now of course i agree with you you can learn an ocean full of financial info from max kaiser we respect his program so much another option though in terms of learning about the treasury's exchange stabilization fund so that i don't look so confused if perhaps watching this show on say august seventh two thousand while the legal basis of the e.s.f. is the gold reserve act of one nine hundred thirty four which you just talked about frisell as amended in the late seventy's the act provides the in part the department of the treasury has a stabilization fund consistent with the obligations of the government in the international monetary system to fund an orderly exchange arrangements in an orderly system of exchange rates the secretary with the approval of the president

may deal in gold there you have it foreign exchange and other instruments of credit and securities. that was when we had chris murphy on from gap last time i don't think i looked as confused when i was explaining what it was you couldn't see me but if you go look at that now this week we tried something a little different we interviewed the c.e.o. of a company that we thought was interesting and we did a story in the field somewhere and their reviews were mixed nordic patriots said i think it's wrong for capital account to interview the c.e.o. from car to go and to show the logo of the company it makes the show look like a promotional platform for private companies rather than one about financial issues keep your eyes on the ball please meanwhile shiloh's said love the new business segment you've gotta keep making the show better and better big fan always so you know you can't win them all it's important to try new things sometimes they're ahead sometimes a miss but we figure anything is better than being stagnant so you've got to take

some risks and hopefully it works on the end and on the note of some of the ridiculous taxicab regulations i profiled in that episode i liked kurt howland's reaction he said the complete deregulation of taxi services is the answer of course certification agencies will rise as people demand a way to know that prices are fair and people who need a quick second job can put in a meter and go when when i definitely hear you i mean i think that something could happen where there are some certified cows where people can choose if they want to know that they're safe and maybe some people can do the wild wild west thing and go with an unregulated driver but interesting thoughts based my ace tweeted me this week and asked myself and our producer has everyone forgotten about student loans no we haven't we just covered them so i hope you watch today's show and steve two three two three z.x. remarked on our you tube channel thank congratulations for getting twenty thousand subscribers on you tube they're just getting more and more popular basho on r t thank you that's very sweet and byron five said lauren and dimitri you guys are the best thanks for all of your awesome work and thanks to all of the capital account

staff and crew happy holidays thank you happy holidays to all of you our viewers who we respect and appreciate. so much with that we should tell you we are off next week through new year's day we're going take a little break but we will see you in the new year with live new shows and we can't wait until we do that for now that's it for our show thank you so much for watching be sure to come back in the new year in the meantime you can follow me on twitter at war unless your you can like our facebook page there it is you can give us feedback catch any shows you missed it you tube dot com slash capital account you can catch us on h d n hulu and you can have a great night. the government no longer represents the. people we're going to take.

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