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max kaiser here with cassar part hey you know before george zorro's became vilified as a globalist and market manipulator and election writer he wrote a lot of interesting books and of course. jim rogers of the quantum fund which was one of the best performing hedge funds ever kind of invented the modern that's fun and he's got a lot of things to say if you look at his old work and we're going to get into a stacy herbert we're going to talk about reflexivity because i think it's quite important in this day and age and in fact just so you know george soros versus warren buffett 2 different source of investors one speculator one is value investor and they've both and this is a downtown josh brown compare them in 2013 there annualized returns are 20 percent

per year for the past few decades and both born in 1930 said they have similar returns in 2 different ways some of the best thing but george soros did write long ago about reflexivity and it's quite important to looking at the markets today because i want to point out that according to wikipedia reflexivity refers to a circular relationship between cause and effect especially as embedded in human belief structures as an anthropologist for example goes into remote tribe in the amazon the observer affects the observed so the fact that this anthropologist this guy or this gal from new york city goes into the amazon to a tribe who's never seen somebody from new york they act differently than they would have perhaps if it were somebody else from another tribe in the amazon so what you observe might not know you've influenced their behavior so you can actually observe their behavior with economics how george soros explained reflexivity reflexivity refers to the self reinforcing in effect of market

sentiment whereby. rising prices attract buyers whose actions drive prices higher until the process becomes unsustainable george soros saw all this fact as incompatible with equilibrium theory and we'll get into that in a bit but i know you study because when i 1st met you 17 years ago you were talking about this you were talking about george soros and reflexivity can describe it as smoking your own belly button lint you describe that you are 1 being reinforced in your beliefs by the manifestation of your actions to take further actions which then gave you more to believe in i mean minsky call this a minsky moment where you know stocks are high because stocks are high people are buying stocks because they're high and they're high when they're buying stocks that are high basically on their own delusion about their importance in that moment of getting stocks the place when he talks about is

a repudiation of the equilibrium theory this is an important idea because there's this idea of efficient market that markets are efficient all information known about stocks and bonds are in the current price that's the efficient market fairy if there was such thing as an efficient market then either george soros or warren buffett could compound money at 20 percent for 20 or 30 years because that would be impossible if markets were efficient and all information was known in the price reflected all that information so clearly markets are not if not efficient and this idea of reflexivity it's a bit of a quantum mechanics entering into the finance space you know this like schrodinger's cat as a quantum fund operator right now and that's very. scientific in that way but it nevertheless it does have a huge impact and i do think that we are seeing that in markets today people are looking at stock markets and assuming you know they hated the dow jones when it was at 9500 you know 1011 years ago after the 2008 financial crisis remember it was too high of 9500 it's going to go to 3000 well here we are near 29000. and people are

saying well it's got to go to 50000 they love it at this price because somebody famously wrote in a book people are predictably unpredictable i believe is the title right and you know in terms of equilibrium theory in equilibrium theory prices in the long run at equilibrium reflect the underlying economic fundamentals which are unaffected by prices remember in the last episode where i showed you that the s. and p. $500.00 is way outpacing the actual growth of the economy that shouldn't happen in equilibrium theory and yet this is what the economists working at the fed will keep on telling you that this is all equilibrium the prices are you know as they should be and reflect the underlying fundamentals but what soros pointed out reflexivity asserts that prices do in fact influence the fundamentals and that these newly influenced set of fundamentals then proceed to change expectation thus influence in prices the process continues in a self reinforcing pattern because the pattern is self reinforcing markets tend

towards a disequilibrium and that's why we have boom and bust boom bust and they get bigger and bigger over the last 20 years since 1992000 says he wrote that there's been the emergence of ai artificial intelligence and there the emergence of ai journalism so a lot of the financial press and forbes already has this digitally assisted editorial content that they produce where machines are reading prices and then they generate stories those stories are then picked up by trading algorithms on wall street and 90 percent of the volume on wall street is by robot so the robots are reading the output of the robots and they're changing prices on the exchanges which are then we'll go back to the editorial robots who write about those new prices so robots are trading based on the editorial robots who are then impacted by the price changes generated by robots so that's a new chapter in this reflexivity story the observer changes the observed so warren

buffett issues and annual newsletter for shareholders and berkshire hathaway everybody. in the world reason i think it's every february right and he observed a few years ago if you recall that most investors would be better off in a passive index fund just stop treating in and out stop trying to be like soros just that that's how you lose money just do a passive index fund and everybody listen to him thus changing the dynamics of the market i that's why he has 120000000000 in cash but now this is what has emerged a new risk to the market caused by these sort of observations that everybody would just be better off and a passive index fund perhaps that would be ok if it was just a few people following his advice but when the entire market follow a set of his advice we're nearing a future where 3 index fund companies control corporate america the largest asset manager in the world black rock with ice shares has 7 trillion dollars under

management then guard has $5.00 trillion and state street with s p d r manages $2.00 trillion these companies hold 80 percent of all indexed funds as we've covered just recently more more of our of the markets are just passive investors so back in 1907 before the crash you had the emergence of what's called portfolio insurance yes now when i was a stockbroker at the time so i know this quite well so the amount of this portfolio insurance product was sold in many multiples of what was actually supposed to be insured the underlying stocks and when that became clear you had the crash of $87.00 now it currently with these passive investor funds and also e.t.f. exchange traded funds if you have an exchange traded fund that supposed to cover the mining sector and an exchange traded fund the supposed to cover let's say north american stocks they would both own the the same stock but they don't actually own the shares of the same stock they just own the they just referenced the number of where that stock is trading without owning the stock so you've got now many many

multiples of these e.t.f. than index funds that are right. for in sing stocks but don't own the stocks so if there is a down stick in the actual stock price it's magnified $102030.00 times because you've got it impacts in a highly leveraged manner this whole facade this whole ponzi scheme of index an e.t.f. better owning 2030 times more of equity than actually exists in the actual stock exchange so remember back in the 26007 to 2009 period when the whole global financial system fell apart and we had something like 7000 banks in america and now we have like 4000 but 3 or 4 huge ones right j.p. morgan citibank goldman sachs bank of america they own like the vast majority of the funds there are too big to fail so again here you have even more concentration 3 own all these funds for the majority of the ordinary american obviously george soros and warren buffet's or it's. operate differently in the market but in terms

of what they own here you see a good summary of the various risks resulting from passive funds increasing ownership of the largest firms blackrock vanguard and state street combined own 18 percent of apple's shares up from 7 percent at the end of 2009 so they're owning more and more of the largest companies and the largest companies like apple or microsoft become bigger and bigger percentage of the s. and p. 500 and they become too big to fail these 3 funds are too big to fail member one the money markets were too big to fail back in 2008 so what are the extraordinary measures that like for example that are happening in the repo market we don't know what the causes could it be connected to this it could be just as valid as any hedge fund or or any bank going under as well we don't know. because we're supposed to read the market but because of all this reflexivity we don't know who drive what came 1st the chicken or the fed in the case of apple because you have so much

concentration in these funds. as you point out the market rate is reflects the concentration of apple in the index so these passive index funds are required to have the allocation that represents the market so they buy more apple shares but they do so concurrently across multiple e.t.s. and they do so without actually having the shares on their books they don't take delivery of those shares they don't have those shares they just reference that number as something that they would own so it's exactly the problem of issuing claims against an asset too many claims against that asset it's like the broadway show the producers right the idea was the oversold the play he sold tickets to the play and then he purposefully did a horrible play because he figured everyone would not go and cancel the tickets and they would just take all that money upfront well it was a smash hit then people came to the theater with their tickets but they had no seats for the 6 e.t.f.

market currently is the exact same they have many many of these funds they claim they own apple shares but they own but they don't so if in fact they want to all simultaneously collect their shares they couldn't blackrock really close examination on this of course black rock is much bigger than most european economies if you look over in europe there is a lot of controversy about black rock having so much of a dominant position in places like ireland spain france i think france just they had some protesters stormed the offices of black rock only in the past week or 2 so this is the reality of the amount of power they're getting as this article here and that in bloomberg points out and then finally in terms of this reflexivity of course it's warren buffett value investor who came up with that that number of 100 percent as soon as stock market equals 100 percent of g.d.p. that's perhaps bubble territory that's why he has 120000000000 in cash just sitting there well we've never had it so good global equities now worth $88.00 trillion

dollars the highest value in. mystery and it equals 100 percent of world g.d.p. so again that reflexivity of the prices we're going to start you're going to see i don't know how fast it's going to go but you're going to see more and more people chasing this price higher because they the observer and the observed right and a lot of people do cash in some of those gains and increases g.d.p. and then it'll look like the stocks are not quite sure to get out a percent of g.d.p. they go up again that's another reflexivity it's all real reflectivity is at the heart of everything because we live in a simulation. even real and not of it's real this shows not area i'm not even here i'm all around. i think we have to go to the break and when we come back we won't be here just your holograms don't go away.

but we've also discovered that there are genes in our bodies that protect us from aging we call these longevity genes and there's a set of genes that we work on in my lab at harvard called the sort to and and for those to work effectively to slow aging and prevent us from getting diseases they need a molecule called. welcome back to the kaiser report imax kaiser it's time now to continue our conversation on they've got. gold sorts on dot com and welcome back thank you you know you got i got to ask you a quick question hair i used to hear all the time particularly when i was working on wall street this phrase the no of switzerland or the gnomes of switzerland are you anonymous for someone. no one knows and no tool

someone was trying to tell if you people do very well because you know right now i think that go is the best insurance against physical gold is the best insurance against the wrists i see in the world and that's what i decided to already back in 2000 too many for our own money we started with and a few people we had bison in the bench and we opened it up. so as you know only. a wall says go and so there's just a minuscule amount and very very few people who are actually even good looking at gold are considering using gold as insurance. for you know i wouldn't call most of the normal home all i'm saying is that the few people who are interested in

preserving well some of those we are trying to help and you know it's a real pleasure to meet people who are actually free thinkers because most of the investors in the world just think about the stock market's going up and of course. period for a long long time you know i wrote an article or somebody called alfred and he invested through his family when he was born in the stock market or even 945 and today by just keep it he's staying in the market the whole time never selling no going through big corrections barely 405060 percent he's still just using his savings and that was sending his today 16000000 don't as he hasn't ever worried about had to read any company report he just invested in the index and no skills so it's you know it's been an easy game i think that game is over now and therefore you know we are trying to help if you will to actually protect against what i see

coming so now last discussion we were talking about something you gave us a data point that i wanted to cover because a lot of times market turns on data that people like yourself spot who are in these markets are studying them very closely you're talking about the m. a c. day the moving average convergence and divergence i think is down versus the golf at this could be a fascinating data point and i think it could be revealing some interesting transair it could. get a lot of more into as far as they got so this is a trending indicator it is not you know it's obviously that there is a delay in this because the turn only happens our offer something has turned it doesn't walk off and buy it but it's a very long term trending indicator and as i said that on a quarterly chart of the of the dow against go that's been going out since 2010 so it's got been going up for 9 years and it just turned the end of

2019 and that is a very very strong indication it doesn't tell you that the market's in a crash tomorrow because actually is is we talk about a quarter inch off the trend is not the trend has not changed from up to down. and those are these are long term trends that are a lot are likely to play out with now. a market in dow and the dow or in old stocks let's say all stock markets in the world will be the same again is real money going to go and that's not surprising because you know all the old stocks as we've talked about in previously all stocks have just gone up because of brendan money and massive injection by central banks massive massive credit expansion so the fact that we're now going to see a turn. against real money i'm not surprised now because as you rightly said gold

has outperformed every single asset market in the 2000 buses 2009 stocks have out with form gold and because so we so we had a very big fall of the dow by about while it fell about the dow gold ratio fell from its high sell by and deep sand between 200-2011 then we see in a correction now to just over 20 of the racial. and i know that correction is finished and that correction still only took the market up i took the down to 50 percent of the form so is still on it only recovered 50 percent of the falls in 2000 so the goal still dow is still down 50 percent right now against goals as 2000 and now comes the next leg and this next leg down of the dow against go well bishes and as i said our being there we are going to go down at least $2.00 to

$1.00 to $1.00 we are around 18 now and that ratio $18.00 to $1.00 down divided by by go and i think we are going to go at least one that would be a 95 percent from now and i see that coming i think is inevitable. due to what has happened in markets and always liquidity will fade into the created and in the last 10 years or so right while another negative indicator might be taking a look at warren buffett sparks he's now 128000000000 in cash which i think is the highest cash level he's ever had he. not jumping in at these high prices at the moment which you would you say that supports the theory that maybe stocks are better high warren buffett i don't know i'm sure you know some gold today i don't know if you know and still rebut you know you remember last time in the ninety's he went into silver and when the market went up dramatically he still managed through hedging and trading in and he's he still managed to lose all still work since i

don't care that was going up so i think he you know he should put that 120 or 1000000000 into precious metals instead because if i'm right about the destruction of paper money in coming years and the massive money printing we will see then of course that cash will be not be worth some something so why don't you give him a call and we will help him yeah i think that's a great idea and i'm sorry i was gonna have lunch with them but i decided to cancel at the last minute. like just the sun now rhodium actually is up 56 times higher than gold at the moment this is a runaway commodity it's absolutely burning the barn down in terms of price appreciation i mean that should also be a harbinger in the precious about all. sector right i mean there's a precious metal it's absolutely skyrocketing and that could be a leading precious battle in this next ball phase and what do you think yes because that is an industrial metal rather than money. that goes it is so it

has to use to and of course that use with all the electronics know which is going still going to do well the future and probably will do well but you know it's a liquid it is very bad indeed smaller metals and the you know you come with gold you can lift the phone and have sold the whole position or buy in same way within seconds. the road you know it's a lot more difficult so anyone who wants to preserve well i would stick to go primarily and then some silver i wouldn't go into these my minor metals because and there also you know there are very few people who control those metals so therefore it's not an absolutely clean market and you're not going to get you know the margins between buying and selling on spread is going to be very big and so there are only a few dealers who control that so i'd prefer to stick to the high liquid metals

that you can trade any time of the day with just that. telephone call will if you seconds and you sell your position or more more so than the other one is more speculative but certainly people are specialists in that area there will be a lot of other metals i'm sure and lots of them will certainly do well so that in them is very very oversold in relation to gold and silver and probably will form in the next few years and i mean anyone who wants to pursue well more than that as i do it will cause you well also by holding precious metals i think gold and silver will will serve your purpose you don't need to go into other metals i believe last year there were reports that the refiners and switzerland there is a huge backlog and refiners and switzerland is that still the case is that the story in switzerland where refining and what they have inherited i think updates on that we are in daily touch with there on the refiners because we buy all our metals

from the refunds even new fresh go or still were also so that was a falls rumor. that there was a shortage last year there was never a shortage there were never so that was some money and i know one or 2 people who did it also but i'm not going to mention names but that was someone who just did that to his own purpose so that refiners whenever short of metals. in the autumn of 2019 they had a more quiet market they never had for many years so was actually and that was in spite of the fact that e.t.f. had been buying gold and cetera because we know an e.t.f. buy a go they don't actually take physical gold they get is just the bullion banks that move a bit of gold from the from the central banks over to the e.t.f. sorts of agel who sold 2 times and 3 times over and that you don't know so there

was no increase in physical gold a month from the refiners at all when when these e.t.s. were increasing their loans so again to ask you a question that there were there was never no backlogs from that major refiners last year ok well thanks for clearing that up finally a question about satchel banks central banks have been. very have acquired a. record 50 years time and yet this seemed to get out my staple are talking about it it seems like an important bit of news around the world and what are your thoughts on that yes but the interesting thing is you know the paper reports and bags of buying gold is like everybody in the every cent of bank in the world is buy gold but you know the the fed is not i think all bankers. go the bank in germany is not buying gold so the central banks that were buying gold all are ones who are understand what's happening in the world so it's all so

you're talking about china you're talking about russia you're talking about turkey . poland bored to beatles and hungry but is that it was mainly east and central banks more goal rather than west and still that was enough for the gold in montauk cars and the banks going up substantially last year and of course then you had banks like the bank and on the banks that actually created gold also last year we. they are them clearly seeing what's happening but the ones who are really seeing it is for examples russia they know that the dollar is going to collapse. and of course china doesn't reveal its troops. of gold holding and they only revealing around 2000 tons but they probably in my view 20000 tons that they have gathered all very long period of time so they're not revealing it but you know these countries russia and china they see that the dollar days are

counted and i grew up with that totally i think we are at some point it should happen this year and i think it will that we're going to see the dollar collapse and that would be very serious for the world then a very serious with the united states ok thanks for being on the kaiser report thank you max good to speak to you thanks very much and that's going to do it for this edition of the concert for with me max kaiser and stacy herbert i'd like to thank our guests vonn grier's of gold switzerland if you'd like to get in touch tweet us excise a report until next time. this is a story about what happens auster a stray bullet kills a young girl in the streets. what happens to her family. or. the other daughter is. what happens to the

community the public was screaming for a scapegoat the police needed a scapegoat so why not choose a 19 year old black kid with a criminal record who better to than him and what happens in court. shot after shot as far. as i feel. we don't know this is true. and in this trial unfortunately you. will still not know. in the united states presidential candidates debate the future of the u.s. and the world. max kaiser and stacy herbert dig into the burning questions of this election cycle one topic every week. tax student debt trade was

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this is boom bust broadcasting around the world and covering all angles of business and the impact on you i've been small and i'm french born washington here's what we have coming up but when i took office 3 years ago america's economy was in a rather dismal state president donald trump of the world economic forum and how the power of the american economy will dissect his comments in davos plus following it's looking for billions in loans to keep afloat as 737 max crisis continues we'll tell you what that means for boeing's largest competitor and self korea is considering changing the way it classifies cryptocurrency for tax purposes and it could be a very big deal a lot.