hello and welcome to crossfire where all things are considered on peter lavelle how best to describe the events being played out in the financial markets david versus goliath the rise of populist finance or the corruption of the financial system being exposed again one thing is for sure there is a strong demand to democratize the financial world the little guy demands to also participate well big finance and government allow them. to discuss these issues and more i'm joined by my guest john timoney in washington he is director of the center for economic freedom at freedom works in chicago we have not horowitz he is the chief strategist of butler trading and in jamaica we crossed image firesign he's a portfolio manager and author of planet our jim acosta grills in effect that means you can jump in anytime you want and i always appreciate it is going to top for us

to end in chicago this game stop story fascinates a lot of people but for a lot of very different reasons one i think for the popular media it's about grievance redress is some kind of populist finance for others it shows the inadequacies and actually kind of loopholes that are in the financial world and it's become very politicized and extremely emotional because we know that game stop isn't worth it when its stock is still reflecting right now it just simply not true however it got there for very different reasons and that's why i think you know there's so much people particularly people. suffered in 2008 and afterwards there's a lot of grievance here so this is kind of like a perfect storm isn't it go ahead one more years a perfect storm and this is this is the true definition of our shorts we use which is the that. puking of those that were short this stock based on the fact that it

had no value and it probably has less value today certainly at these levels but this brought up by this is trying to bring down the big shorts they were holding on and this is almost a model out of the 11 must play book which is the main force people that sure he is now but he is that however and a car wreck horrible prices making dramatic losses exposing what happens with some of these hedge funds and they can take advantage of these markets and push them around while now it's just the little guys were right it was a very bad start now pushing around because they're starting to build these this momentum of many traders pushing together and or saying these bigger guys cover and and this is a very common thing at the end of the day the game stop a probably down to 0 and then in the meantime the hedge funds roll laws billions of dollars trying to fight this market because they got trapped and they got run out

by the little guys came ok mitchell wait all of this follow up on that they got trapped but it was a trap that they said for themselves so you shouldn't feel sorry for these guys whatsoever is that true well yeah you shouldn't feel sorry for anybody who runs a short position because these are you got to differentiate between novice investors and professional investors so if they lose money because they go short that's their problem quite frankly where i disagree is i think the problems that were caused were in the market dislocations and valuations valuations are in a bizarre level you have distrust of the media you've got government propagandizing everything the media has i think 60 percent of the people distrust the media and the narrative os as far as the short selling goes though you know i don't know what kind of and they were but i can tell you one thing being in the biz is for 40 years i wrote a book called plant ponzi about the corruption and the lack. enforcement of existing

s.e.c. in government regulations as they pertain to the markets even alan greenspan said after the credit crisis we don't need new regulations we need enforcement of existing regulations you have jennifer yellen who is the fed she spent 20 years on the federal reserve now the treasury secretary she caused these problems she caused these problems the central banks cause these valuation problems the valuation of tesla $800000000000.00 is served the company makes no profits and this market is headed towards a disaster look i don't have i don't have a dog in this fight quite frankly i've been managing money for 40 years and i understand for an institutional side i don't deal with individuals but i understand that and what i would bet anybody on this panel anybody is that professional investors went on reddit and they front run brands so they bought those shares before it induced other people to buy those shares and made a bucket load of money which is illegal it's collusion and the f.c.c.

if they have any teeth to get their heads out of our asses and go and find out who made money and actually prosecute them because it's clues and it's organized it's as manipulation against everything free market stand for. john the of the of the counter argument is that this is exactly what the hedge funds do all of the time the only reason mike where we're talking about it is because it was a. small group of investors that banded together that are not professional enough that there is a human interesting distinction professional to it i mean at the end of the day it's money ok and if you're professional be run professional is just about money here. how do you address that because it a lot of people encounter is that they have headphones you know that you know you never even we never be talking about this event at a company's per share price went down we're all talking about it because one went up go ahead john well is just overdone infotainment if people into print run into can convince a bunch of novices vestry. pilot has stopped they do it all the time as for the

argument that the fed as it did this that's laughable that's the case what happened in japan japan's had 0 rates for how many decades worth the stock market there were the stock market in europe despite the fact that the central bank there has been trying to allegedly goose it for all this time u.s. shares are abnormally high b is largely because of 5 to 7 companies if you take out microsoft and apple and google equity returns aren't that great over the past year more broadly this notion that there is war or 2 sides against each other markets misunderstands what markets are markets or a combination of bulls and bears and the passions of the bulls who wildly go into a stock car or blunted by the pessimism of bears who think the stocks go and down so this notion that a bunch of small investors ganged up on hedge funds on the way to some victory for the little guy is just so ridiculous and how we know it will be ridiculous she is when we see subsequent losses from the same wall street bets crowd that got lucky

one time and i'll wager when it's all over with i think one thing that todd. the 1st one for me got right is that there's probably or probably was a large institutional investor a hole in g.m. the shares the whole time and the idea that this was just small people just isn't serious and again we'll see that the next time they try to do a turn to explain to our viewers i don't have maybe s 3 in this because this is a mission that people are very emotional about what is the value of these hedge funds because a lot of people say hedge funds they can generate huge incomes by dumping on companies by destroying value and that at the end of the day hedge funds don't create any value except for while so how do you respond to that go ahead well i think that is basically correct i mean ahead to get special arrangements they've got special tax breaks believe it or not which is which is hard to live today but at the end of the day they can create because. they have so much capital but you've

seen them also step down as bill ackman did trying to lay out there of a life when he felt it was all revalue are other companies like that so there's no or sherm's or guarantees but they are and special situations and certainly they go with what meg said earlier they do get the advantage when janet yellen is done and created a lot of this crap that happens in these markets and hopefully somebody will step in here because i want to know myself what is their true front running in these markets because certainly if you have enough power behind you know as a floor trader on the floor in general or 25 out of my 43 years of trading and i've seen how the big banks and others can manipulate and front run these markets by creating a false narrative to begin with and then letting the markets ron in the direction they're trying to get him or saying a little investor they get stuck up their ass versus a drawing and having a profitable trade because they're trying to follow along with the big lie that has

much more power that will actually do the wrong thing i guess what their position wants to be to get the right position on to trap the individual small investors you know image you know there's a lot of calls today to look at reddit and look at these update and robinhood but i mean if we're going to look at them should we look at how the. how hedge funds reform as well i mean it shouldn't be a i mean we keep talking about a level playing field here if you can to go after these people and the people that front run it apparently should we look at how all of this short selling actually works and if it does it really at the end of the day and make any kind of value because a lot of people that they just destroys companies it destroys lives destroys jobs as it were just something we have to live with go ahead mitch i think that's an important point to make as you see toothless regulation i mean this is what you need to address there are existing laws and regulations as to what you can and can't do in short selling. the evolution in capitalism we should be able i'm self

now to make an argument look i'm not really in equities that i'm a derivatives guy so what caused the up in tesla and the other stuff was derivative products in options and f.c.c. doesn't even look at that so you have to see as a look at any any of the other ancillary exchanges and the impacts that they have add on to say that the central banks are providing hundreds of trillions in liquidity across the globe as an impact at ridiculous valuations to the point where as a specious comment and ridiculous tranquil so you know as far as the hedge fund we had. when you have a large edge on one position you're talking about peter is difficult and i think a lot of people at collins solves a bunch of equity traders a hedge fund that it was from a hedge fund which is an industry that i've been involved in intricately for 40 years is going to have many different positions we've created tens of thousands of jobs by investing in real estate projects all over the world i've invested in clean

energy projects wind farms so you know if you can't group one size fits all with a hedge fund is diversify or alternative asset class investment vehicle and you years just right instruments not just equity to offset other positions and having your existing portfolio it's not a bet it's not they're not just going out and you know that's damp but you can offset your liabilities by out buying other assets that will heads in it if one asset class goes down this is the risk parity trade where people trade bonds against stock markets but that trade is blown up it's a lot more complicated it's not as simple as everybody thinks the politicians don't understand how the markets more than it's it gets not to a point where this is just being politicized and people are trying to make points and they don't know what they're talking about whatsoever i mean what my point in fact is nancy oh it's ok for example she front working ramey

visa i.p.o. by buying shares for her own account while she was sitting on a committee that determined the policy you know setting and she knew that they were going to pass it was she made a profit on that she also holds tesla options now the rest is exempt from insider trading should let me know if anybody on this panel and i solved it that some and you can present so you know you need not one rule for the and another for me you need one more on me as i am it really look let me get john here before we go to break me isn't that really just a point joe i mean that again that's kind of the top line story for a lot of people there is there is. certain rules and regulations for some and there are some for others here 30 seconds before we go to the break go ahead oh well couple of things for one short sellers of her work they're willing to take the biggest risk of all the markets even the most often market source work against them the idea that there's rules for hedge funds that are better than others he explained then why most hedge funds fail explain why wall street markets are so

rigged why most wall street had to be bailed out and she 1000 eeks markets are a difficult game incredibly difficult what hedge funds do is not just going to jump in here we're going to go do it and we're going to go to a short break an apparition or break we'll continue our discussion on some head bunch but hedge funds stay with our to. do that the volatility sneer that it's had a really crucial area. to take his case with but. that without a supposed home you notice that i stay so that. you know none of it is to put in a bull episodes didn't go to see if you. think the sneer during your force wave

would be near my stubbornness today if not thoughts about spirit i pity do a buzz more than a 6 but i'm intending no. stadia. shows to stress a ski schumann's for you to post it to a post and sort of moved it to willow's rest of. the story because they were bogus .

welcome back to crossfire where all things are considered i'm peter labelle curmudgeon we're talking about democratizing the financial system. let's go back to john and watch them sorry i had to interrupt you before we went to the break there but the image in a cup maybe kind of give a more balanced assessment of what hedge funds do is something i used to work in equity to i guess we all and one form or another been in this line of business here i mean look at hedge funds and also can caution investors about over valuations because companies are always going to top themselves up it's one of the problems i think with finance in the last 30 years that it's more about a story about a company instead of it's about valuation so i mean why does hedge funds have such a bad rap in the in the public eye. it is as as as michel louis headphones do all

sorts of different things all sorts of forms of investing why do they have such a bad rap why don't well companies have a bad rap there are certain industries that the media members choose to vilify who knows why this is particularly true as hedge funds because they do essential work an economy can't function without pricing honesty hedge funds don't necessarily better perform up markets they don't necessarily better for down markets that benefit from bringing pricing reality through to what lacks in terms of short sellers there's been this desire of the last week or so to say short sellers profit from astroid companies oh really does anyone still wish that blockbuster was ramsey which borders books was still rush how net 0 in each choice of the globe dot com short sellers put out to pasture businesses that are not meeting the needs of customers or shareholders alike thank goodness for them if we didn't have them the

economy would be exponentially weaker. but going back to hedge funds i think there's a desire right now to say well they're all powerful and they get special deals if that's true why is that long term capital still around white bear stearns some would argue operate in some ways as a hedge fund why did it need a bailout why did goldman sachs need a bailout the reality is that is a very difficult business for anyone to be and that's why there is so much money in the hedge fund billionaire as the cliche is a direct consequence of the basic truth than just about every hedge fund either fails or does so poorly that we're even talk about ok so it's a story is not complete here todd let me let me go t. i mean all the way going back to george w. bush we heard about you know getting the little guy in the market you know democratizing finance here and these reddit guys really took it to heart it seems and i can i still make a strong connection maybe you all can correct me here but i think you know in

looking. some of the bulletin boards of these people that were involved in this 2008 and had a very huge impact on them and i and i'm i'm agreeing with all of you here i mean this game stuff it's more about grievance it's about revenge and targeting people that you believe that have hurt you and your friends and families and maybe you know you know own financial condition here so but i mean where where is that or dumb is there room for democracy in the financial markets here because there is the perception in correct me if i'm wrong and the reason why we're doing this program isn't stacked against the small investor go ahead. they get stacked against us mob vester in general but i think i want to address them the johns the real quickly the bottom line the reason bear stearns lammers needed help is they were leveraged 4 to one using derivatives it's got hired to use that time to leverage when when you start to get a tech you've already got the banks failing then the reason we've got lots of

problem this country but the rules are not always fair i mean what is it that is an investor i'm not going to get bailed out if i go broke but they're trying to bail out the big banks because they were over invested or over leverage of these markets so that is one of the problems that have appeared in these markets on a regular basis is that right now you're laying the banks lend you've taken over our restrictions and they're going to have nothing but money how can we possibly have housing sales going so crazy and that just has a do with them and markets you make it so much cash available as such a low rate you can create these narratives in these markets and start the forced panic or chase markets around as the other as the beggar money sets and waits but the reason they bail them out is because they were over leveraged and they were gambling in these markets taking her normas risks with other people's money not their own well mitch and me but has that been fixed to your satisfaction here be.

because you know there's this i watch i guess a c. a b. c. is the only time i watch them and years because of this story right now and it's there's such a bias it's there's such an overt bias about protecting the poor hedge funds and i think john's absolutely right i mean if you want to go in that line of business and stuff and tumble if you win you win but you know there's most likely you're going to lose but you never get better narrative in this means because kind of media coverage here i mean if there's going to be regulation and they were everyone said we need light touch light touch but regulate whom ahead so a couple things here that you know look the book that i wrote about the credit crisis is because i was sitting at the epicenter of it when an app monday and one of the engines. he says you know that exploded we work in cement being knowledge of dozens managed the city back when we had months mosher to there was generally so much credit and much leverage i was advising you couple of the

different governments and i advise that all of these insolvent scale not bail them out too big too big to fail too big to bear all too big to jail is do big job exist in my work and that's the mantra that we should be putting forth alan greenspan him out after the crisis and said there was nothing that soran on behalf of market participants that we didn't prosecute you we don't need new laws or regulations you need for some of the existing records it's now the money printing orgy of money printing it demonstrated in japan their economies the morose for 35 years and it's flatlined the money printing around the world has ended up in too much liquidity sloshing around in crazy valuations so we have $35.00 or 40 percent of the companies or zombie companies will never make money but when you like giving another drink to an alcoholic when you give insolvent companies more money what does it do it creates more debt on z. assets real debt yes. let's explode the debt remains and this is the problem we

have today you know joe and janet yellen was keeps getting promoted promoted promoted but she's and and all of the central bankers are responsible for this mask when it blows up it's not a matter of if it's a matter of when and it's going to end badly for the retail people who are going to end up catching the or end of the stick because the professional investors even on these run ups are going to make money while i'm sitting out i don't play these little little games that short selling is a market mechanism that should be allowed and you know less as you see wants to enforce all the rules equally which they don't i mean you know look i must use touted he's actually gone out and talked about the regulators being if you know he's made profanities with his tweets and he encouraged the run out in this game stock by tweeting about it but also you have to you have to realize this when he said his company was ready for a buyout now $420.00 of funding is secured they did nothing to him they slapped his

wrists and that's why his company today as a ridiculous valuation he wants and short selling because tesla is a prime candidate for short ok good. job do you think we could. pull dollars in here a $100000000000.00 made in the year. ok let me let me go to john in washington do you think we could see this game stopping happen again with another stock or a series of stocks i mean is this a preamble to what could happen in the future sure it can things can happen all the time i just think to presume that this is going to be the norm going forward which is what the people on reddit presume is laughable of it the idea that a bunch of retail investors can move stocks because they've been together misunderstands what moves stocks in the 1st place and misunderstands how investors value stocks in the 1st place so i think there's so overdone excitement that's going to be quickly brought down more broadly i think it needs to be stressed yet

again it keeps coming up at the professional investors will come out of this. really well and the small investor will be wiped out well again let's go back to 2000 out that's not about why the bailouts for whether or not they're going to go bad i think the bailouts reprehensible back in 2008 well this notion that professional investors somehow walk away from this every time with their pockets full of money defies basic common sense and defies basic logic and then to say well you know the fed did it again if it's so easy for central banks to goose stock markets please explain to me why japan is still half what it was in 1989 why is europe's stock market rally and when the e.c.b. is doing the same thing the fed has been trying to do what we keep believing now is that the u.s. people can fight about valuations all they want but the reason for the big rallies in the u.s. and this is true every time is for very few companies that markets have

a high opinion show if it was just the fed explain what happened to exxon mobil most valuable company in the world 2014 where is it now g.e. was the most valuable company the world in 2000 where is it now what we're seeing is certain companies that investors think highly of going up. in the ones they dislike going down the notion this is a fed thing misunderstands basically johnny b. clear and sort of being that's the point of the program go ahead i mean if we don't we're 1st of all we don't have a true free market system which is the very answer to one of the things g.o.f. i mean you give a lot of breaks and this whole my friend thing situation not allowing a recession's to happen not allowing the system to fail and then rebuild itself is that is this your answer to all of your questions we do not have a true free market system anymore we are more involved in when the have my amount of bailouts that we can get it goes they get i mention the banks the banks have

unlimited amounts of power to print money because that's what they're doing at the same time when they're lending so we keep adding to the money supply which creates more of these problems allows the attack i'm certain as a cook of a companies and push them higher and destroy the other ones the fundamental changes obvious companies they're not worth what they were before so now our job they had a new group of companies but at the end of the day it's about the true free market system where asset classes really priced themselves and alan greenspan was the 1st of the master bubble bellers that we have and that is more going to continue development as long as the federal reserve is in bio and printing money these markets are going to continue just so far just because of the fact that there's no place else to go they've destroyed the overall regular system allows normal regular investors and you couldn't you hear it in other parts of the world keep disproving your narrative i'm not at this bet is that you know you. think they're awful i

believe recessions are beautiful well what you're saying is disproved by what central banks are trying to round the world time and time again and it hasn't worked lou we greet we believe in recessions they're healthy we believe in free markets it's not always a free world we have a free market here. what are your resume mean to destroy israel all right gentlemen i have to jump in here we're not going to resolve this but these are all very important questions i want to thank my guests in washington chicago and in beautiful jamaica i want to take our viewers for watching us here argues the next time remember.

that i would have attacked another man i am not out of luck though that that cut out of the knot of the money that they put in and that had happened to me. this was a good time to. try to move. that up wasn't going to be not why not. why exxon and the old people we believe just the o.p.'s. bottom up i can say i don't want them up with johnny but i already at the moment i want to tell them all the how do it all because there is a lot of them on the way it could not be old enough to want to the people i don't want to put out a lot more party without all the muslim brotherhood. back

guys or financial survival guys liquid assets not those that you can burn in zigzags quite easily. to keep in mind though as it would mean to a place. for. secret prisons and not usually what comes to mind when thinking about. to europe however even the most prosperous can be deceived. there were to view houses were. located and the only people had access to the story investigators covered the darkest dealings of the secret services but i mean. for. crying for justice on.

this hour's headlines story from. giving it a shot western countries changed. the vaccine after a leading medical journal publishes a study about its efficacy. meanwhile despite away evolve criticism the president of the european commission refuses to apologize for the slow seemed rollouts. the u.s. officially extend a major nuclear arms reduction treaty for another follow years. it's a positive step towards international.