whew hew. max kaiser this is the kaiser report you know we've been saying about during this crisis the question us always been ken jay powell over there at the federal reserve and other central bankers inflate to reflate or to pump up. quick enough to hurt any downdraft in the stock market i know economically about it's got a lot of problems associated with that but that's the big question stacey it is all about this one issue that you and i particularly you have been talking about for years to be an options trader and what is options trading all about but managing

risk right well that was a tool developed to manage risk but when that didn't work all the time 100 percent of the time bankers got their friends like jay powell let's look at this tweet from you are you ready for monday jay powell goes but. i get my spanish comes in handy there to know how to roll those r.'s but once they're risk management tools starting in 1971 the portfolio insurance crash the markets the fed came into the rescue and that's the fed puts well then we've seen since that any time that the bankers and all their huge amounts of derivatives whenever there's a problem there the fed comes to the rescue i.e. there's a problem with distribution of risk and the supply chain of risk doesn't go away the risk is still there but it just keeps on getting deferred either into the future or to some group of suckers like you know pension funds risk cannot be

created or destroyed it's persistent within the markets and options and derivatives allow you to separate risk from reward and to trade it separately that's what the options volatility formula which was a nobel. prize winning formula is all about to split almost like you're putting energy for matter you're splitting risk from reward and so what bankers on wall street have been really good at doing is making sure that they don't have any risk and that that risk somehow always manages to end up in pension accounts or in the labor markets where labor never seems to make decent wages and they get the reward . and that's how you have this wealth and income gap develop over 30 or 40 years because it's the ability to make rewards with 0 risk has become very efficient for those in the banking business friends of wall street except for a so this current crisis the copen $1000.00 crash we had this enormous drawdown

trillions of trillions of dollars of market value evaporated on one day the question was can the vat and central banks do another risk trick to make sure that they're protected friends do not have to take any losses and so they increase that derivative pile to an extraordinary levels that's where you see the evidence of this risk trickery is in the way to rivet of market and you can quantify that and get an understanding of exactly how big this market is and at the moment it looks like they are being successful in making sure that the wall street folks will not be bearing in any of the negative consequences of this cove in $1000.00 crisis you could always tell when a con is happening when it's there's a lot of complexity and there's so much complexity about even this latest stimulus package which looks like it's a benevolent gift to the people but in fact there's trillions more in exotic

instruments of stimulus package that reflects the exotic instruments of debt packages that are being bailed out so you'll never be able to understand that but in terms of simple numbers where you can find the fraud where you can see the con happening is in certain numbers and in terms of risk being to furred let's look at what happened in the meat space and this is a remarkable chart from new york city this is a chart of new york city and the cases per 1100000 people so showing you how dangerous certain areas of of new york are. if you see it the darker it is that it's poor air is the bronx queens this is a elmhurst area which is in the news around the world with the worst hospitals there overrun rikers island brooklyn around j.f.k. and staten island these are where all the working class lives those people having to work those people who are essential to the economy have been deemed essential

the food delivery services supermarket workers pharmacy workers all the sort of people they're getting infected while the bank in class right there in manhattan where you don't see any of very low level of cases relative to the rest politically speaking the term is gerrymandering so gerrymandering is when you have political subdivisions created within a state or a region to allow for political manipulation and for the interests of the moneyed class to be protected and the interests of the poor to be continuously exploited that's gerrymandering so in financial markets financial gerrymandering is this risk trickery that i'm speaking about and so like a pension fund is in the poor neighborhood because it has no way to protect itself from derivative risk reassignment into their pension accounts and that and that reward is kept by the hedge funds and it's dumped into pension funds pension funds

or toxic waste dump of risk this year financial jerram enduring means that the returns are always going to be horrible and so you have politically you see that happening quite starkly by that map you're showing you see the regions cut up and that's because of political jerram entering in an attempt to exploit the political division thing to sustain the status quo well exactly at that map what it's saying and in the meat space is reflected in our financial space and in particular the monetary an economic risks that are being offloaded on. to the ordinary person since 2000 but especially 2008 and then now this crash what we've seen is the interventions from the fed have taken any of the like little risk that the bankers are taking themselves for their bonuses and their profit margins and like j.p. morgan stressing out over whether or not to pay

a dividend and can they stop paying their dividend they don't want to risk that so they take that through inflation through the quantitative easing through narrow up through all these policies of taking their packages of risk all their derivative packages off the balance sheet of the banks and now hedge funds and private equity and now they also might the fed might be starting to buy. muni bonds and so they're taking the risk of all the power fall onto the balance sheet and that balance she is your balance sheet that's the ordinary americans balance sheet the $335000000.00 who aren't the elite they are the ones that are risking not only their currency and possibly a hyperinflation and the future and that's a political event when people lose faith in the actual currency so you're seeing that offloading of risk to the opposite of you know that map shows exactly the people taking risk in the economy and in the monetary system the leader in all this

would be japan right they took their debt to g.d.p. passed 100 percent of g.d.p. past 200 percent there i think that's 300 percent and so i'm erica's going to be at 100 percent very soon so to get to 300 percent that's another 405060 trillion in debt which i fully expect to do look the free market capitalism has its roots in the work of out of smith and the enlightenment and this and what's also brought us in that age darwin in the his work and terms of evolution. and natural selection and this was echoed by show mr i believe with his idea of creative destruction that there is a churn in nature and in economics where it's all as hues toward perfection and excellence and survival and that is when you snap that connection

and by rewarding the freaks and rewarding the colonial masters america now has become the colonial empire of hedge funds that have colonized america and this goes completely against anything anyone could interpret from the constitution and they they derive their power from the federal reserve bank which is the successor to the bank of england and the bank of england the card of ben franklin was the number one reason america staged the american revolution to get away from the bank of england because that was the sponsor of colonialism now we have the fed which is the sponsor of the new american colony alyssum of hedge funds citadel one of the biggest had funds they then they're not embarrassed by hiring ben bernanke you former fed chairman to come over there and during this ballot process bernanke he is a direct colonial connection to a monopolist oligarch a whole hedge fund to the federal reserve and they're negotiating and they're front

running and they're high frequency trading and they're trading derivatives and they are interfering like a jerram mannering ghetto blaster booster political hack to undermine our law by standing in a so we have this and merging under class well of people living out there and zombie land and the next step will be to vilify them and to scapegoat them and to say that they're less than human and then we know where that goes let's continue on this theme of the supply chain of risk because there's always risk. in the world in nature the antelope bouncing across the field has to get to you know her family or friends over there but the risk is alliance going to right that's the risk and that's why they develop that's why they can run so fast and jump that's like their evolutionary defense against a lion attacking them and ripping them to pieces but here we have

a system which is so stale now because there is no risk for it the lion has a risk as well the lion has the risk of possibly starving to death because the antelope is way too fast for and it can't catch the answer lobe so you know there is there supposed to be a distribution of risk and each member develops a defense mechanism they have deferred all the risk that they should have been taking and because they were handsomely rewarded for taking risk on your behalf so let's look at what the cost is going to be of the so far $6.00 trillion there is now a face for they can add more chileans to future liabilities and here is what moody's is saying moody's says expects u.s. federal debt to rise to around 93 percent of g.d.p. in 202079 percent last year and 2019 and continue its upward path to about 120 percent by 2030 by 2030 there ain't going to be any boomers in the economy having to work and subsidizes that's going to be on generations

e especially they're going to be emerging into this graduating from university into that economy laden with this debt to pay off all that risk taken by the likes of jamie dimon lloyd blankfein every single hedge fund now and and and private equity guy on wall street yes it will be a permanent weight on the economy for. the subsequent generations who will have to live under the enormous cloud of having debt 2 to 300 percent of g.d.p. making it virtually impossible to compete we can only marginally survive as you said risk doesn't disappear. it's just been rolled over into the future you cannot create or destroy risk you can only move it around and if you can move it around successfully you become a billionaire i am going to take a break when i come back much more coming your way.

when alone being in peace is a knowing thought it sunk in for them they don't know if. the symbol of peace we've got 2 weeks time will tell me. something.

that's. very uncertain. welcome the baby had a fever of 38 so point 30 we're hoping that's. all. i don't trust medical authority at all ever and the reason for that is i had this horrible autoimmune disorder growing up and it turns out it was completely alleviated with very drastic dietary measures and i went to a number of doctors to discuss what happened to me and i was basically laughed at like diet has nothing to do with our immune disorders so my suggestion to people

who have health issues they can't figure out if they're going to see a medical professional and they've been going for 10 years and they're still in the same place they should probably. really take it upon themselves to start testing things out testing out diet testing out exercise and try and figure out things on their own. welcome back to the kaiser report on max keyser time now to go to chicago and talk with jon najarian old friend the happy that i'm on the show today he's also the co-founder of market rebels and of course he is the star of c. and b. c it's half time report john welcome here max great to be back with you feels like much more than a month since you and stacey and i were tone vai's conference out in vegas that was

a good time but it just preceded all the bad times that we're in right now i feel that we were just ahead of the wave as it as it was crashing everywhere across the country and we got out of town you know because obviously it's pretty hard hit by all this and you know i wanted to have you explain a little bit to folks you know we talk about trading a lot we talk about big coin to talk about stocks and bonds and macro and i want to talk a little bit about the regional difference between new york and chicago because it's a very important to financial centers in america and they feed off each other sometimes sometimes they are competing with each other but how do you see that relationship chicago versus new york john in all deference to the friends of mine on the new york stock exchange they don't have traders on the floor for the most part those folks are very good at what they do but they are brokers not traders on the new york floor and of course they're gone just as the chicago traitors are gone

because they couldn't figure out a safe way to keep several 100 people on the floor of either the chicago board of options exchange or the merck slash board of trade so they basically shuttered the floors and everything went to either global banks in the case of the commodities exchanges or. on any of the myriad of electronic exchanges for the cboe and the rest of the derivatives exchanges so the big difference i think max is there used to be about let's say give or take 250 people left on the floor of the c b o e now they call it see both global markets but they were in the fix s. and p. $500.00 and the triple a q now they're gone they're all up stairs and they're having a really hard time treating from up stairs as most of us did max when

i migrated upstairs 2004 so you know it's been 16 years that i've been up stairs all those traders that are used to still being on the floor. they are trying to survive in a brave new world and having a very hard time doing it and because of that there's more volatility even more than there would have been otherwise during this drop so you're saying that there are key role of market making on the floor by traders with their ear to the market who are looking at actual trades as they take place in the absence of that with the migration of more trading up stairs as you call it and more reliance maybe i computer trading the volatility is increasing so you you are positing there that there is a vital role for humans to play in these markets and maybe a migration to purely electronic markets we lose something is that correct. that is

what i'm seeing exactly max instead of having hundreds of treaters in a period where they all hear the same information that the exact same 2nd now they're all up stairs responding to whatever they're looking at some of them are watching bloomberg or see n.b.c. or fox news some of them are just on squat boxes you know who hollers we used to call max where people are just giving them color if you will for orders you're not seeing every order and since you're not seeing everywhere or you're backing off your bids and offers are much wider and i posited back then before it happened that this would increase volatility in and of itself and certainly it has since the i think it was 17 tr so of march in the derivatives market and in the options market it was the beginning of a momentous occasion in the whole history of securities in that the options

volatility formula from the late seventy's early eighty's you had the ability to separate risk from reward and separate risk as an as an entirely separate asset class and this is what people don't understand these days let's talk about the wealth and income gap a lot of it has to do with the fact that the top 110th of one percent knows how to trade peer risk to hedge themselves and to profit from volatility whereas the vast majority of people are tends to be where their risk ends up going classic toxic risk dump being a pension fund that's passively managed and just ends up accumulating a lot of risk that comes from the sharpies and the pros who know how to trade risk is that what you think about that statement i think it's exactly accurate i think that. it's true that a minority of people under. stand about volatility and about derivatives trading

max you're of course right about that i think it's out of the $120000000.00 securities accounts in the u.s. only about 6 or $8000000.00 of them even are papered up meaning that they've signed off on derivative agreements whether it's futures or options and you're right options and futures are risk transfer vehicles so if somebody wants to basically bet on corn having a banner year this year because demand is up more supply is down those 2 usually work in concert to push prices up or down when we got that you're transferring the risk of that farmer in this case of corn over to a speculator or over to a big producer of the end product like kellogg's or general mills or whatever and

the same sort of thing who works in stocks there are some folks who are not comfortable with the sort of ups and downs that we see in the stock market and so they try to set a floor by owning some of that protection if you will some of that volatility so that they don't suffer when we have these big draw downs which we know virtually every year we're going to see at least a 10 percent drawdown at some point even if it's very sharp and quick and v. shaped and every once in a while we get one like we've got right now max which we don't know how long this goes on but we know the volatilities up and the people that didn't have protection just to your point exactly are the ones left holding the bag in american finance there is that myth of the lone trader that guy who sticks to is model or has nerves of steel and becomes quite wealthy there's a whole many in a stray around this the books. that go by the name of trading wizards and others

and it all goes back to jesse livermore and confessions of a stock operator is probably the 1st book really outlining how to be a professional trader as you say there's a difference between a traitor and an end bester my question is here we are in 2020 the volatility is intense markets seem to be disconnected in many ways as you've just described that trading signals and market signals seem to be throwing off a lot of noise versus signal but the question is do the laws and rules that jesse live or laid out the twenty's and early thirty's do they still apply can you still do is still have room in america for the i think the phrase in chicago is all you need to be rich is a pencil and a pad of paper you know indicating all you need it is to get down there on the floor of the exchange and you had 5 nerves of steel you can you can be quite quite

wealthy is that still working is a still alive the time frame has changed it used to be max when because i know you started off and that you were a driven of strader is well when we were down on the floor you know that we were as immediate as it got because there was no direct interaction into the pit back then the best you could do is hand signal something into a pit and people would react to it that was immediate as it became and even that was no guaranteed fill now if you point and click on a price you can have that purchase the problem is that there are a lot of computers that are making those prices and taking those prices and they do both of those at light speed literally as close to the speed of light as the internet or as a direct connection to a data center start market you know whether it's malala in new jersey or new.

jersey or wherever the c.m.e. has their data center all of that is happening literally just this far from the speed of light so if you're trying to point and click and take that market or make a market for one of those you loose because they are trading and making moves in thousands of a 2nd much faster than a human being can so my timeframe and virtually every trader i know max has had to move out their time frame to be maybe 10 seconds 30 seconds you know somewhere much longer into the future which means of course that against those machines you're taking much more risk so the machines became the market makers and we tried to be the market takers and then we have to wait just like you said with paper i've got to sit here and you know sort of figure out the levels i want to buy and sell

at and then if we get there try to execute at that level knowing that i can't depend on the market on the screen i have to have my own levels that i'm entering because what i see on the screen is already gone well my understanding is that goldman sachs is actually working on a way to trade faster than the speed of light so that they could go backwards in time and still many times clients in the past. well if anybody could do it goldman could right now let's talk in you know mentioned about the proximity of technology to the prices and the way heard about this during a lot of talk when high frequency trading was in the news and high frequency trading relies on proximity of servers to these exchanges they actually park a computer server next to the exchange to get a fraction of a millisecond advantage i could stand that these guys are siphoning capital out of the markets like somebody with siphon gas out of a neighbor's car and that they're destructive low. blankfein argued with charlie

rose once that they're no they're adding liquidity and they're there for key to the function of the market how do you say that they're both right but. when blankfein says what they're doing is adding liquidity those h f t's high frequency traders the algorithms and so forth they're adding liquidity in microseconds again liquidity that you and i can't access max because literally by the time you would see it by the time your eyes sees it it's already at a different price like i say they're adding liquidity but at this only at the same speed of the people that are responding to it and you and i can't respond to 1000th of a 2nd so when fines right there reading liquidity but it's also right that whoever is doing this has siphoned off billions of dollars every single week this is the

problem that that is i think your analogy is spot on that it's just like somebody stuffs a hose into your car and is just steal one off you know some small percent hopefully not the whole tank but they're stealing gas every single minute of every single day john i got to cut it off there fascinating thanks so much for coming on the show thank you max love you the love it is mitchell buddy all right well that's going to do it for this edition of the kaiser report with me max kaiser and stacy everett want to thank our guest john that jared out there in chicago and he say about the san bay's halftime report all the time when they're up and running well or on twitter if you're trying to catch us the kaiser report tonight signed by a. lead

. join me every thursday on the alec simon show and i'll be speaking to guests of the world of politics or business i'm showbusiness i'll see if.

this is a ridiculous situation right the whole world i'm crazy that's what it seems like and i'm supposed to be at work right now that was actually looking forward to traveling the world began making films because i've been stuck on maternity leave for the past so 8 or 9 months now and i was looking forward to that have been so cold and clean all day long but i got my mother in law to move to moscow to replace me while i work there she is and now instead of.