ahead in the kaiser report. welcome to the guys the report. max kaiser. where is the fear fear is one of the most profitable emotions to stock market operators throughout history owned that fear and you have your own virtual printing press not explain all this is to see her max we have fear related headlines in the show today and the first one is vix e.t.f. continue downward spiral the vix is the volatility index of course and what first let's actually look at a chart here this is over the past three years as you've seen the vix volatility fear index is the klein ing declining declining and a lot of it has to do by the way with whether or not ben bernanke he is going to

continue to print money and reduce volatility in their minds or not invest years appear to be fearless as witnessed by the new equity market records in the s. and p. five hundred and dow jones industrial average investors likely are in continued risk on mode due to unchanged fed policy as outlined by chairman bernanke so as long as the fed continues to waffle over q e and went to taper off of q.e. the vix index the vix e.t.s. will likely continue to crash as any fed easing is better than fear well this is all very interesting because as you know our friend mitch fyrst on the he's written extensively about the vix because the vix index is manipulated down it's not a free floating index that the along with every other market whether it's the forex market or the. the library market or the energy markets the vix trading is

purely manipulated so in a way it's the government through the open market committee monetary committee buying vix contracts to manipulate the price is in a sense performing a mass of the bottom e. america and the world instead of sticking a knitting needle into. the eyeball and piercing the acceptable lobe they are when it being the vix index to simulate a state of fearlessness this is simulated fearlessness well that's exactly what this topic of the show is about is that if you control the fear. even when people should be fearful and you can make sure they're not if it benefits you then you are in a very profitable situation because either they're overvaluing are under valuing the price if you can confuse the price signal to make it cheaper for you to either

buyer seller an asset or cheaper for you to control monetary policy the vix index should be an analog index and by this i mean that the volume and the total contract outstanding should be roughly commensurate with the size of the market itself but over the past five years we've seen the size of this market compound in size exponentially which indicates a complete and utter rampant market manipulation hence my theory that you've got the government using their manipulative abilities in the markets to take a giant knitting needle of market manipulation and jam it into the occipital lobe of america performing a mass in the bottom e now as long as the twinkies are flowing in the donuts or hot blazed nobody gives a flying frick you know that's ok just give me the drugs give me the don't it stick a little laden middle in my i don't care because i'm american and bring bid well i might add by the way you know that gold prices have also fallen in line with the vix the client and so those two are very related in terms of fear and maybe that's

what they're controlling as well as really the price of the dollar the price of gold so now with the vix they're saying that it was because that fed easing is better than fear so they believe the people participating in this vix market believe the fed will continue easing the other headline of oil market apparently they don't believe he's going to continue easing w t i crude declines for a second day before bernanke testimony so this was in the day before bernanke you testified or the day of actually bet ben bernanke you testifying to congress and and then to the sun up west texas intermediate drought for a second day. as the dollar gained before federal reserve chairman ben s. bernanke testified to congress undermining the appeal of commodities as a protection against inflation so people are investors in this oil market we're thinking that he's going to reduce inflation stop printing paper and therefore oil

was not the place to be it's not taped her it's a tape worm this guy bernanke is a parasite and when he lets the quantitative easing into the system it's like drinking a nine gallon drum of pepto bismo or something it's meant to enough the thais the pain of being involved in an economy that's run by charlatans and parasites if you drink enough pepto biz ball which is quantitative easing like a little pink slime member pink slime they outlawed pink slime they should outlaw quantitative reading for the same reason it's a simulation it's a simulation for an economic policy but it's not actually substantive there's nothing there there it's just all smoke and mirrors there's ben bernanke e the charlatan in chief who while you know the reason why one has diarrhea is to get rid of all the bacteria in there that needs to be out so if the pepto abysmal stops the bad stuff from coming out from being injected then i don't think it's a good policy. i mean you know diarrhea would be acid prices would be mark to

market according to their actual resale value on any reasonable exchange so these are banking industry is technically insolvent if he stopped a quantitative easing you'd have massive american financial buried in the form of every major bank in america citigroup bank of america j.p. morgan goldman sachs would become instantly insolvent the the blockages in the intestinal tract of america's finance would be liquefied and it would be expelled by the global economy as a whole the oil market is saying you. yes yes we believe that this is inflationary we don't believe the pepto bismo talk of ben bernanke so called warming at the time that they wrote this west texas intermediate w t i have declined to one hundred five dollars from one hundred nine so they're saying look this is proof that ben bernanke is going to take care of the inflationary threat

but of course if you look at this three month chart of w t i i think we should rename it w t f one. because this is the price it has been rising obviously partly because of the ever increasing money supply growth but also because of the constant you know controlling the fear the fear that there's going to be another war another war we increase profits for friends in saudi arabia our friends in cutter our friends in kuwait our friends in dubai you make a good point that the only time america or any country by the measure is indebted to the extent that america is in debt now sixteen seventeen trillion dollars in debt officially seventy eight trillion dollars on officially is because of war during wartime that's why i say this isn't about wars and a war on terrorists and a war on drugs it's not a war on anything it's suicide it's a guy who essentially puts on this suicide vest and is blowing himself up and the

country that is supposed to be serving as a result people are buying oil because they know a suicide bomber when they see one and this is a suicide banker then banker suicide banker been inky speaking of fear continuing on this whole line of the war in terror which is also added a premium to the price of oil the case for abolishing the eight s. this is the department of homeland security which was created post nine eleven and the first year of its budget was two thousand and two the budget was twenty billion dollars last year sixty billion dollars so businessweek is saying that deal. h.s. has helped create institutional inertia its very existence suggests the domestic response to the threat of terror is of equal weight with defense transport health labor or for war in affairs it keeps large jess on a range of contractors all of whom have an interest in hyping the threat of terror

to ensure the money keeps flowing oh that's right so the economy and of course that is totally fear based and in order to keep the vix manipulated down to a level people are saying i don't have fear because of the price of fear has been cheap they then pour money into the department of homeland security and they say that well the reason there's no reason to be fair falls because there haven't been any of these attacks even though statistically you have a greater chance of being you know eaten to death by ants on the top of mount fuji than being dying in a terrorist attack that statistically doesn't matter what the facts on the ground are but let's spend sixty billion dollars in department of homeland security was blown up let's blow another wad of cash on some unusual sorghum a zation why not because they're just printing the money anyway that's inflation right there well actually the odds of an american being killed by terrorism either home or abroad so that includes somalia yemen iraq afghanistan is about one in twenty million your chances of dying in your odds of dying in an airplane crash are

one in eleven million your odds of dying in a car crash are one in five thousand so to put into context we spend trillions or sixty billion dollars on one agency device to stop car crashes no right i mean you don't need more than one seatbelt the department of homeland security they're putting out thirty seatbelts you spent your entire trip another sheet over another so you. have a greater chance of dying from a sharknado then you do from some point in your person in the plane that we had in two thousand and eleven a once in a blue moon event which by the way this highly suspect considered by the way right . doesn't know what a sharknado i don't know who started out it was my to extreme all the time i had a saying i know the vix index is cheap so must not be too bad i shouldn't be afraid because the vix is so cheap why should i be afraid of the sharknado. so it also notes the article notes that you know the department of homeland security is one of the least efficient in terms of dispersing the money they send it all over the

place without asking any questions and they highlight for example a place called north pole alaska which received five hundred fifty seven thousand four hundred yards closer to doris i don't know if you stood close to them a little so i think those own. look at out of blow people up with exploding christmas presents and with those over they don't spend enough money in the north pole to get to drive to center closed so they conclude that beyond the waste of money and over regulation the expansion of the homeland security state has created unnecessary fear among a population that should be able to trust its government to send accurate signals about risk it's not about loss of fear it's about a population in a coma i mean if your populations in a coma and there are so invested by cheap drugs booze and cheap cigarettes and cheap policies from cheap carpetbaggers were make and making hay there in washington d.c. it's not because you're less afraid it's because technically you're brain dead well

finally smith and wesson holding corp up two hundred eight percent and surging to all time high it is extremely rare for a company to experience such an incredible surge in demand for its products that it is unable to produce enough units to keep pace but that is exactly what is happening with swiss and wesson in the last few years so that last year they had a forty two point six percent increase in that sales now the article points out that some of the gains have been driven by a hotly contested political environment over america's second amendment right to bear arms rational or irrational regardless of what side of the fence you are on this is a political battle. that is having a profound effect on gun sales and investment well that is the fact that in light of recent decisions in the political system it's now legal to go kill your neighbor yes why not killing a neighbor is having an argument it's legal that it killed the stand your ground zero what you stole my barbecue set. understanding my grown it's legal all right

stacy ever thank so much. for thank you max i could have a whole lot more. sacred laboratory to mccurry was able to build a most sophisticated robot which will unfortunately doesn't sound anything tunes mission to teach music creation why it should care about humans. this is why you should care only on the. zesty what happened i don't know but if you're killed. piers later is when i got arrested for. a crime i did not do. we have numerous cases where police officers lie about polygraph results.

people to the police officers don't beat people anymore i mean it just doesn't happen really. in the course of interrogation why because there's been this is like no because the psychological techniques are more effective in obtaining confessions than physical abuse they were they could do what they wanted they could say what they wanted and there was no evidence of what they did or what they said. apple for example much of the planet. non in the united states so i don't see why the american senators would be so concerned about it paying or not paying taxes because ultimately it's not going to get any share of that and that's happening already and of course we're drunken hear about how do you share the taxes provided there are taxes a problem to there's no think there share because we improve these rigi where these

companies don't break tux. bunkum back to the kaiser report i'm max kaiser time now to go to san francisco and speak with walt rector of testosterone pit dot com wolf regular welcome back to the kaiser report thanks max well listen a choice back on right now wolf roger tell sir what is happening in the real estate investment trust market first but first explain exactly what a real estate investment trust is how big this market is really invest real estate investment trust is a company that functions like a fund and it issues equities or stocks sporadically multiplies that equity by borrowing usually overnight in the short term market near syria interest

rates and then ends up buying large amounts of mortgage mortgage backed securities with it usually in the united states those would be government backed mortgages from fannie mae and freddie mac. are cheney may and they're getting a unique tax treatment if they pay ninety percent of their income in terms of dividends then they don't have to pay income taxes on the income tax or their responsibility of the stockholder now there's been a massive unwinding right as interest rates have ticked up recently these highly leveraged also investment trusts have seen some selling pressure correct. right and there's two things that happen one as you said their interest rates are rising in the mortgage market as the fed has threatened to but has not yet actually done it tapering mortgage backed their purchases of mortgage backed securities so rates

have responded to increasing by over a percentage point since early may and that has cost the value of these mortgage backed securities to drop so reid's have gotten. margin calls and they had to do was forced to sell mortgage backed securities at lower prices and therefore contributed even to the decline in the value of mortgages so you had a lot of margin pressure going on and that put additional pressure on on mortgages mortgage backed securities and rates even more so you had a little bit of a negative feedback loop there right now wolf let's go back to the two thousand and seven two thousand and eight period you had the sub prime crisis which led to a bursting of the sub prime bubble which led to the bursting of the financial markets as we as we knew them at that time and we lost a couple of banks lehman brothers bear stearns it was the worst financial crisis in decades credit and it's all tied to principle

a the unwinding for the meltdown in the securitized real estate market so now what you're describing to me now is pretty much what everyone feared would happen because the response of two thousand and eight from bernanke in his predecessor was to simply reinflate the real estate bubble to unsustainable levels so is it fair to say that route of point now where the bubble has been reinflated and now this new real estate bubble is bursting wealth even the fed is worried about that and the fed has actually pinpointed reads as one of the major reasons for jailing the purchases because the. we're getting out of hand these streets are very large they have grown at enormous rates and even though they're not as large as citibank or bank of america they can still do severe damage to the financial system if they if they blow up and so yes there really is

a bubble that has recently been cost is something that the fed is looking at and they're worried about the street so we're very specific about the streets all right so well if you have a situation here where artificially cheap rates engineered by the fed as a way to balance bankers a real estate developer of the fire economy which is the finance insurance and real estate economy it's just a question of whack a mole so yeah the sub prime market blew up yeah millions of americans lost their homes and the hedge fund market take over the equity from homes for millions tens of millions of americans the largest wealth confiscation in the black community in america ever since slave days but now it just popped up in this region market so is there any point to this the american economy other than blowing bubbles for the benefit of a few deranged bankers. well i don't see any particular point in it you mentioned in one of your. shows the tsunami of debt and that's exactly what we're having here

the reach of benefiting at this point from the tsunami of. debt which means building up debt and generated a lot of wealth for those inside so there you have to remember that reads a living off of fees so for example american agency american catholic. it's just a fun doesn't have any employees but takes one point two five percent of its assets in terms of fees for the holders and so that's if it has one hundred billion in assets that's one point two five billion per year that it sets out in fees so yeah there are beneficiaries of this and all the fun last night these fees are they won't be paid back if any of these rates go bankrupt you know they're gone they're in the pocket of some people and at the same time they said very high risk that

some of these regions reads will fail you know they have one hundred billion in assets they have ninety billion in debt and this debt is high risk stuff it's overnight barring short term investing it in long term instruments so you have a duration risk there is a very very risky investments with that pay hike the evidence and so other people look at the mess a cure but they're by no means secure right so the hedge fund industry engineers' low interest rates to finance their speculation talking about the two thousand and seven two thousand and eight period they inflate there's a massive bubble you have the sub prime mortgage crisis and people like andrew and mazola countrywide involved in massive fraud all the major banks wells fargo one ball of berkshire hathaway's banking properties involved in massive fraud maybe. oh the bubble of bursts then i want to lose their home and they reenter the

market as ranters but now they're paying rent to the hedge fund community then now owns the majority of all these properties that went bust but now something very securitized them into rates and the bond markets going against them the roots are going to blow up the people are going to lose their homes again but there has runs make another fee right they've never not made a fee correct. yeah they are always getting their fee so are all the security dealers that that supply them with to issue their security so it is a wall street is a man so that it's that's what it's all about and the risks are borne by others so in this case by investors by homeowners who have down the line so in two thousand and seven two thousand and eighty two up this time around the fed is trying to keep it from blowing up again so it's talking about tapering and it's going to taper later this year most likely to keep the thing from blowing up but

it's already risen to massive proportions you mentioned the headphones buying private equity funds buying homes here in the united states that's at the sea. huge number of homes are bought by the they're trying to run him out they can't run him out there no vacant they went off. for sale it's to their for rent list and so no they're no longer appear on the one list that we look at which is him and tore it for sale and they're now on the list of nobody looks at which is inventory for it and so we have created a huge bubble through that process and of course when it blows up or back to where we were in two thousand and seven two thousand and eight. for a second because for thirty years the trend of interest rates was down ever sence the volcker days back in the race. in years when they came in and they got rid of they are they managed to get that fifteen percent ten year rate down it's been

going down for thirty years it appears as though in the last six months interest rates of hit a secular bottom and we're now entering into a secular move higher interest rates do agree with that number one and number two doesn't that mean that any hope of tapering is is not really the issue so much as what is the fed going to do in the face of a secular bear market and bonds that there's not really that they've lost control wall because i'm saying they don't have an option to taper or not taper they have a major catastrophe brewing what are your thoughts. well they they're pretty smart people and so they know that they have created a bunch of bubbles and they're worried about them they're worried about the banking system blowing up there representing the banking system and they don't want to blow up again so they're i think they're they're really interested in putting a lid on this short term rates will remain here all the fed can't

control those the fed controls long term rates by purchasing assets bonds mortgage backed securities etc and when they taper those when they actually taper those those long term rates will likely go up further towards some kind of natural level and a more natural level if there is such a thing left these days and so you will have a larger gap between short term rates between us euro and long term rates long term rates determine what mortgages. will be priced at and that will determine what people can afford in terms of houses so rising mortgage rates will put tremendous pressure on the housing market in the united states right that sure they can attempt to keep short rates cheaper but on that ten year bond which is the key market for a. mortgages and all other interest sensitive products it's on the way up and that means that all the collateral on these banks' balance sheets is impaired so where

is the fed going to go and that's it's almost as if let me given a description of how i see this and you tell me if i'm right or wrong with this description it seems as though saw at some point over the past five years the u.s. economy in the global economy effectively capsized so that everybody that was above water is now underwater and just like that movie the poseidon adventure people who think they're escaping are actually moving deeper into the belly of the beast so the policies by the fed are actually the absolute opposite of what they should be doing to get this ship of state right side up again they don't know they don't understand that they have capsized the ship won't rector what are your thoughts your thoughts it's a very good description. i think that the fed has backed itself into a horrible corner and they actually know that and so we have a lot of confusing we have a costly really affect top trying to prepare the market for what the fed thinks has

to come in. some kind of return to sustainable rates and and just add that we're all dead. confident that we've had it turn the markets upside down so it's clear that this is not going to be an easy thing it's clearly a good score to be a lot of bloodletting and at some point the fed may decide that it can't really move forward i mean if it can turn around on a on a dime and can say where we're going to continue our purchases where me q before they can do that at any any point in time requirements of what that does to the real economy i mean there are worried about wall street all right well further out of time thanks so much for being on the kaiser report thank you max. all right that's going to do it for this edition of the kaiser report with me max geyser and stacey ebert i'd like to thank our guests wolf rector of testosterone pit dot com if you'd like to get in touch tweet us at kaiser report and. bio.

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