about your sudden passing i've only just learned you worry yourself and taken your last wrong turn. your out caught up to you as we all knew it would i tell you i'm sorry suddenly i could so i write these last words and hopes to put to rest just things that i never got off my chest. i remember when we first met my life turned on each breath. but then my feelings started to change you talked about war like it was again still some more fond of you those that didn't like to question our arc and i secretly promised to never be like it said one does not leave a funeral the same as one enters the mind gets consumed with death this one differs his fate because there were no other takers. to claim that mainstream media has met its maker.

welcome back to the kaiser report imax keyser time now to return to our guest dave column he's a professor at cornell university who writes a yearly your review of pick prosperity in zero hedge we'll get to that a moment dave welcome back jamie thanks for having me back for a second segment today leave me at the curb caught well dave we were chatting you have an interesting resume if combined you're interested in science organic chemistry or hard science you're also well known for your observations in the economics failed something of a soft science like psychology or sociology so my first question has to do when these two worlds collide for example going back to the long term capital management crisis you had a bunch of quantz you know mathematicians of smart guys who took

a very hard science approach to money management that they had figured out risk and they were absolutely going to beat the risk you know and they went to deliver these outsized returns and then of course they blew up spectacularly because they didn't understand the psychology of markets is that a fair characterization of what your thoughts on the. well you know in the long term capital management guys fall into the category of loosely actually just wrote a chunk of this harsh law word that basically says any time a certain thing becomes popular it no longer is useful it's more specific than that but i use it that was these guys i think got a good idea and then they leverage it up so much they became the market at some level and same thing happened with united remove the old janice tax funds where they were owning you know thirty percent of women so they could liquidate their their positions if they wanted to and so actually i think this year the topic is

your is to talk about how indexing is now become an example of good hearts lollie says the argument i'm going to make this year is that it was a great idea that now it's too bob you want to become a bad idea potential or eight now when i was working on wall street in the eighty's we had something called portfolio insurance where it's meant that people could buy stocks with reckless abandon and have very little downside because the portfolios were insured and then you had the crash of one nine hundred eighty seven when that whole model broke down and they're about that for a while the current market is trading in above twenty three thousand on the dow there is a belief out there that risk management is very robust and that we can't won't see any significant downside anytime soon what are your thoughts there . yeah that's a crock. so great stories coming out of guys like jesse feld and getting steve bragman who i didn't know until this year. you look at some like the triple q.

or the russell two thousand and they have reported price earnings ratios of twenty twenty five and you know wow ok for growth companies that's not a bad price. what bradman points out what others have pointed out is that the way they get to an average of twenty three is they take any stock above forty and they rounded down to forty any any stock with an earnings. that are negative they rounded to forty and then bragman does this great mattresses if you take the whole market cap it all the earnings of the triple q. you get at eighty seven which means which means that you're being lied to so that's a pretty bad valuation if you use various tobin's q and you know market to g.d.p. prices g.d.p. is a point that were approximately two fold over ballot you know in my opinion and if we regressed to the mean that will cause damage that will destroy pensions and all the strong retirements if we were rushed through the mean which my understanding of

mass says you've got to spend half your time below the mean it'll be it'll be a come to jesus moment firm most investors refresh my memory a cripple kill again as that's the of the tech in next hundred hundred big tech stocks and the p.c. gets reported by the parent company whose name escapes me right now but but so they basically commit what looks like from a physical science perspective was fraud they're just making it up as they go once again dave we have a problem with the federal reserve bank that is allowing corp the so borrow at virtually no money whatsoever and make this is acquisitions or buy back their own stock and boost earnings artificially a practice i used to be illegal for obvious reasons that's now been illegal. and the mergers and acquisitions are a bit out of control so a company like amazon can buy a whole thing and it's a creative they cost as zero for funds

a zero it goes immediately to the bottom line they pay the market cap of the company goes up more than the acquisition price so you've got this inversion of the capitalist tenants where the risk seems to be borne by entirely by one segment of society and then you've got folks like jeff bezos is it has no exposure to risk whatsoever is printing money essentially at this point and becoming an out of control all accomplice to your thoughts. well you know for those like trivia it turns out the share buybacks were enabled dramatically back by a decision made in eighty four that excluded buybacks from a rule and said you're not allowed to manipulate share price but you can buy back shares and so the so now you know executives who snare and the year bonuses by buying back shares what the average investor seems to not understand is that while you are buying back shares you're usually riding the balance sheet and be people see some low p. e.

which is a stupidly simple number and it's a blunt ended tool that i no longer use actually in what they don't notice is that there's you know thirty forty billion dollars of debt lurking on the balance sheet and so it's kind of a leveraged buyout by the creditors and some point the creditors not the whole company and they're in the it's a basically financial engineering to make everything look good the to keep your job as the c.e.o. and so. this will come to an end right earnings are actually going down when you strip out the effects of share repurchases so those p. e. ratios are wildly understated so now dave you do annual wrap up for the markets and do a bit of an al look for the for the next year i think last year you were pretty positive on gold a negative on stocks if i'm correct i have that correct. that that was not necessarily a great timing on that what's that what's your current failing. my current feeling

is that people who are pessimistic near the end of a market cycle look like idiots and the closer you get to the end the harder it is on those who are passing us. i absolutely passed this to and in zero nine was warranted if if if if you look at the valuations in zero nine we regress to but not through the mean and that's thanks to an estimated twenty to thirty trillion dollars of backstop by central banks and i've asked many many smart people did anyone predict that level of intervention a lot of people predicted the crisis no one saw that level of intervention coming and. right now i think we bears will be cat called to the point and sanity until all were right now and then ironically once we're right it will be so much blood in the street that. they be able to gloat because because it will be

an unseemly mess that's an interesting number there they have you saying that the fed backstop twenty to thirty trillion meaning that the initial tarp bailout money of seven out or billion that we were told kind of expansive it went between twenty and thirty trillion to bail out the bankers depending on how you account for the reason that's an interesting number is that the social tax network or the tax justice network and they have k. published a study recently that suggested there's between twenty and thirty trillion dollars held offshore not being taxed. and for this reason you have all and it's all coming out the scandals of the paradise papers the panama papers so in other words how can we really even begin to offer numbers like g.d.p. inflation growth employment when two times america's g.d.p.

is held offshore invisible untaxed controlled by these banks and there's a whole parallel universe out there of money that that no one's really paying any attention to except those that are benefiting wildly from having untaxed wealth appreciate in the spectacular games again on tax day. well you know if you look at america if you call it america's g.d.p. the question i would ask is if it is a an american don a sly old company but did all the manufacturing and all the employment all the production is off show or does it really matter that it's an american based company i would argue that whatever country is doing providing the goods and services and making the products that's the country that's benefiting from it so i'm a little reluctant to consider those multinationals as american right i'm fairpoint companies can have their taxes applied in one country they can have their labor

outsourced to another country they can have their marketing in a third country and we know about all this kind of machinations that go on in corporations to absolutely game the global markets in a way that is only available to transnationals multinationals are not available to the individual but i'm talking about hidden thirty potentially thirty trillion dollars cash of wealth that is not being taxed that is being managed by the likes of h.s.b.c. barclays goldman sachs j.p. morgan on behalf of a approximately two hundred thousand people that are making a mockery of the global economy and especially stoking an insurrection stoking violence by laughing in the face of these groups around the world that they've stolen from dave. well you know i agree. and i think that again the central bank interventions cause this disparity if you look at compensation for the high tech it is compared to the the average schmuck in the

factory that those numbers who soared and it's some point you end up in a lot of meat cake moment i think and that's part of the underlying anger on college campuses as part of n.t. feds part of it is part of it's part of all the mishaps that we're seeing who knows are being blamed some of the shooting out and i hear that such so what we're seeing is this is a system that is being shaken dangerously by an increasing sense on the part of the proletariat. that that that is that fair now now there's always been people down the chain that there were paid a lot but i think the sense of fairness is does move around and i think right now there's a real sense of unfairness and it doesn't matter if it's true the perception of unfairness will cause it's going forward there which is why trying to president

right everyone said screw it. i'm voting against the system or it was a bipartisan throw the bums out moment for electing trump right now and talk about trauma talk about the fed looks like he'll be in a position to point up to five f.l. i'm say such a banking member soon how do you see that playing out we've got about twenty seconds he'll blow out in what way will kill kill put a bunch of money predators in the fat out ok sauced out jones forty thousand a list all right dave thanks so much for being on the kaiser report thank you all. all right well that's going to do it for this edition of the cause report with me max kaiser states air would like to thank our guest dave hall is a professor at cornell he's got great videos on you tube check him out if you want to catch us on you tube ourselves as kaiser report into next time.

here's what people have been saying about redacted in the night is yours that you pull along awesome the only show i go out of my way to find you know what it is that really packs a punch oh yeah it is the john oliver of r t america is doing the same we are apparently better than blue that you see people you never heard of love jack tonight president of the world bank they. were going to. send us an e-mail. they all. tell. oh. yes well this is how the.

feel you thank you thank you thank you thank you thank you thank you you think you thank you thank you.

good. luck. on finding anything going on in here. does she don't consume don't tell you that in talking to her the whole jellyfish deal in the thing i'm done forcing in that are equal in its insistence on the way it was a stance me going on in. this i don't need then suddenly i'm doing a deal with that to those off putting as a sign as a seed i sowed us it all took to sitting on.

just russia's actions which threaten the international order on which we all go to ted the british prime minister calls on europe to unite against the so-called russian threat in a speech her critics say is designed to draw fire from a struggling corrected negotiate. after pressure from the u.s. justice department. to war. conflicts intensify between iran and saudi arabia. a military solution.