Category Archives: Max Keiser Blog

The first rule of capitalism: bad firms like RBS should be left to go bankrupt and criminals should go to jail

Crimes committed: why are no bankers in jail?
Crimes committed: Why are no bankers in jail?
By Mitchell Feierstein Author of Planet Ponzi

How nice of you: that gift you just made to charity. No one asked you if you wanted to make the gift. No one asked you which charities you’d want to support. But still. You made it. So thanks. Well done.

 If you’re confused – if, by chance, you don’t remember authorising anyone to pick your pocket to give to charity – then welcome to the world of financial services. Here’s how it works. Greedy, irresponsible morons on huge salaries and inflated bonuses take RBS, one of Britain’s leading banks, and trash it to the point of insolvency. Continue reading →

WE ARE A NATION OF LIONS LED BY DONKEYS IN THIS ECONOMIC TRENCH WARFARE

A hundred years ago, a generation of men – many of them volunteers – fought an unprecedently bloody war for almost invisible gains. The men were heroes, but the generals commanding them were too often blunderers, too little conscious of the ever-mounting casualties. David Cameron is right to demand that our schoolchildren are reminded of the Great War and the vast sacrifices involved.

He’s right, but he’s also showing some chutzpah. History remembers those men as ‘lions led by donkeys’. Heroes betrayed by blundering and unimaginative leaders. We are not – thank God – at war on that scale now, but in economic terms we are deep in our own version of trench warfare and David Cameron has too little idea how to lead us out. Continue reading →

When Will Central Bankers and Politicians Learn: Stock Markets Have Nothing to Do With Prosperity on Main Street

QE has created the worlds biggest housing and equities bubbles in the UK markets

Last week, the Bank of England declared its intention to print another £50 billion. Hardly anyone noticed. That £50 billion will bring the Bank’s total money printing to around £425 billion, or about one quarter of British GDP. No one cares. Yesterday, the U.S. Federal Reserve announced its own plans for another round of “quantitative easing” — a euphemistic term for “destroying the currency.” Not to be left out, the ECB has announced plans for unlimited bond buying (though Germany has, thank goodness, set some limits.) Given that the bonds the ECB wants to buy are issued by increasingly bankrupt Mediterranean governments, the ECB too is doing what it can to wreck the currency it’s charged to protect.

Continue reading →

LIBOR “Fixings” Vs. Bernanke’s Great Interest Rate Manipulation

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“The Subprime mortgage problem is contained” - Bernanke, 2007

“I am 100% confident the Fed can control inflation” – Bernanke, 2010

Two news items to consider ahead of the Federal Reserve’s next manipulation of US interest rates. One, Ben Bernanke, Chairman of the Federal Reserve, decided on Operation Twist, a policy whereby the Fed sells short-dated government paper in order to buy the longer-dated sort. It sounds boring but it involves $267 billion, so it’s kind of consequential all the same. Oh, and traders warned that the disappearance of the Fed’s holdings of short-dated government paper could gum up those markets, thereby causing costs greater than any likely benefit. But still, mere reality doesn’t deter Bernanke, who asserts, “We are prepared to do what’s necessary. We are prepared to provide support for the economy. Additional asset purchases would be among the things that we would certainly consider if we need to take additional measures to strengthen the economy.”

So: once again, a further $267 billion of your money is being put at risk on a complex long-dated debt operation of dubious benefit, while the leader of that operation comments that much more money might be needed down the road. That’s news item one. Continue reading →

Nationalise the potentially insolvent RBS? Or Let them fail, you decide… It’s your money!

Solution? Business secretary Vince Cable has said he wants to nationalise the 18pc of RBS that isn't already owned by the taxpayer

Solution? Business secretary Vince Cable has said he wants to nationalise the 18pc of RBS that isn’t already owned by the taxpayer

Vince Cable wants to nationalise RBS. You can see his logic. The taxpayer owns 82% of the firm already. Nationalisation is hardly such a radical idea; it’s more the logical completion of a process.

It’s true that full nationalisation was never the advertised outcome. We were promised that these part-nationalised banks would be rapidly strengthened and restored to full private ownership.There were even muttered suggestions that the government could end up making a profit on its stake. Continue reading →

How to lose 75% of shareholders money while making over 100 Million….

Shareholders lost 75% in the past five years under Diamond. He made over 100 Million at Barclays.

Hogging the headlines: In recent years, financial news has dominated the front pages – more recently the scandal at Barclays

You know, there would have been a time when a financial contributor for the Keiser report was restricted to the little stuff. Share tips, muttering about monetary policy, that sort of thing.

Not any more. Over the last few years, there’s been no breaking news like finance news. No war, no election, no natural disaster has long been able to displace finance from the front pages. This new emphasis makes perfect sense. When your job is threatened, your pension demolished, your child’s prospects seriously impaired, you need to know why these things are happening. The answers all revolve around matters financial. Continue reading →

Why a decline of “the Facebook” shares by 47% proves you can never trust a bank

Before the Farcebook IPO, I wrote on my blog that Facebook was heading for a ridiculous valuation when it was launched on the stockmarket. That wasn’t because I think it’s a bad company – pretty clearly a company that makes a billion dollars in profits after only a few years of life is a remarkable creation. I have only respect for Mark Zuckerberg, its creator.

But it’s not Zuckerberg who gets to choose the company’s valuation. It’s the banks he retains to manage the transaction. I wrote that the firm was being ‘vastly and obviously overvalued at the levels currently being discussed.’

Unfortunately, I’m being proved right at sickening speed. The firm had its IPO (Initial Public Offering) on 18 May – that is, the date when its shares first began to trade on the market. Since the IPO date, the firm has lost 47% of its value, in comparison with the intraday high of $45 per share. Friday’s close was $23.70. Continue reading →

Hey, There’s a Worm in the Apple (Inc.)

Back in April, I wrote a piece about Apple Inc. I suggested that the company’s stock price was a little frothy. I suggested caution was in order. At time of writing that piece, the company’s stock price was at about $635, just a shade off its high.

I got crucified for that piece. Virtually everyone commenting said that my comparisons were inappropriate, that I couldn’t possibly own the company’s products, that I didn’t understand the company’s value-drivers. The consensus of opinion was that investors should continue to add, with caution, to their portfolios. Since that discussion, the company’s stock price dropped around $100 in a matter of weeks, before recovering some of the lost ground since.

And my view hasn’t changed. For the sake of absolute clarity, let me repeat what I said last time. I love this company. I love its products. I own the lot: iPhone, MacBook Pro, iPad, iPod. This company is so good that they could come up with pretty much any three letter word, stick an i in front of it, and I’d be in the line to buy it, whatever it was. If Apple produced a cheese grater, it would be the best cheese grater in the world.

But you need to put those things to one side when considering your stock portfolio. You need to operate with reason, not adoration.

First, let’s consider the general background to this stock. It’s up almost 8,000 percent since December 1995. If you look at the most recent trading data, you can see the price has gone parabolic. On a curve that points upwards at infinity. And simple market experience tells me that these things never last. The dotcom boom didn’t. The housing boom didn’t. This Apple boom won’t either. Markets are apt to vicious corrections and overcorrections. They happen most of all when the parabola looks most enticing.

And then again, think of the economic background. Europe is rapidly approaching a debt meltdown. We’re approaching our own fiscal cliff. No matter who comes into office this winter, we’re about to enter a period of much needed fiscal austerity which will surely threaten the U.S. economy with renewed recession. (Or worse: I think an extended depression the most likely outcome.) At times like these, equity ratings should be cautious, not bullish. Apple’s rating is still sunnily optimistic.

It’s also worth thinking of the fragility of our financial markets generally. The federal government currently borrows ten-year money at 1.42 percent. Our government debt is rapidly approaching the levels last seen at the end of World War II. We have no plan for regaining control over the budget. The Fed has exhausted every tool of monetary policy and has, indeed, risked creating a huge inflationary problem down the road.

The truth is that 1.42 percent is an insanely low yield for a borrower in the shape that the government is in today. Sooner or later, the government bond market will correct (it would do so much faster if the Fed stood back) and there will be an inevitable rebound on to equities.

So much for the general argument. The specifics on Apple are no more cheering. Analysts expected third quarter revenues to come in at $37 billion; they came in at $35 billion. The miss on earnings was even worse: analysts had penciled in $10.36 a share, and the outcome was more than a dollar per share worse than that at $9.32.

Sales of iPods fell. Sales of Macs were flat. Sales of iPhones were up on the year, but sharply down on the prior quarter. Sales of tablets were excellent, but the competitive background is changing fast. The new iPhone is great, but it’s not a game-changer the way the first one was. It’s kind of like the Rocky films. Rocky 15 just won’t lift the heart the way the very first one did.

Now at this point, I should probably reiterate what I said at the start. I love this company’s products. I think the company that Jobs built is the most impressive American company to have emerged since the days of Ford and General Electric. But those judgments are different from judgments about valuation. The results just announced are not the results of a gravity-defying company, but of one governed by the same laws of competition that everyone else faces too.

People haven’t got bored of smart phones or of anything else that Apple makes. But sometimes, as an investor, you have to stand back and ask, really? And the question here is really twofold. One, can Apple’s top line growth continue when its markets are becoming relentlessly competitive? Two, can Apple’s near 40 percent operating margin persist when every big electronics and Internet company on the planet is out to steal the firm’s lunch?

The correct answer to both questions is no. I go on believing that Apple is as good as a company can get. I love its products. But Apple’s boosters have forgotten the laws of competition, which say that you can run ahead of the pack for a while, but not for ever. The economic and financial background is heinous. Apple’s ascent has been parabolic. And the firm now has a raft of competitors which are starting to look lean, sharp and switched on. The stock has fallen a further 6 percent since the company announced its results, but the fall has a good way further to go yet.

Mitch Feierstein is CEO of Glacier Environmental Fund and author of Planet Ponzi: How bankers and politicians stole your future

Too big to fail, too big to bail: Spain and Italy are too indebted for even Germany to rescue, so let’s just end the Euro currency!!

Another day, another faux bailout. Recently, European finance ministers agreed to let the Spanish banks get the first €30 billion slice of their bank bailout.

Those same finance ministers are also set to approve a year’s delay in the deadline given to Spain for reaching a budget deficit of 3% of GDP. That won’t, of course, be the last bailout for Spain and, please note, a budget deficit of 3% is still pushing debt ever upwards in acountry whose economy is getting smaller not bigger.

Unsurprisingly, government bond markets have once again been wildly unimpressed. Spanish bond yields briefly touched 7.76% , before falling back. Given that Spanish debt (according to the misleading official figures) is around 7.7% of GDP and rising fast, interest rates at this level mean that about 6 cents in every euro are going to pay the interest on that debt.

The costs of euro collapse will be huge, but those costs are coming anyway. And they only get bigger the longer you defer the moment of truth

Put another way, Spaniards have to work about three weeks a year, simply to pay off the interest they owe on the national debt. No wonder their economy is failing under the weight of that burden. No wonder unemployment is so extravagantly high.

It’s time to end this massive Ponzi Scheme. If the problem is too much debt, you don’t solve the problem by extending more debt. If the problem is banks with irresponsibly reckless lending practices, the solution is not to “gift” them more money. If the problem is a wildly uncontrolled money supply, you don’t solve that problem by printing money until the presses are smoking hot.

A Ponzi Scheme is any merry-go-round fraud where you have to keep pulling new idiots into your scheme to keep things going. It’s the economics of the chain-letter. People can sometimes make money, but only if the supply of idiots is big enough. These things always collapse – and collapse disastrously – in the end.

We’re near that point now. Spain can’t receive a Greek-style bailout: all the EU rescue funds combined don’t have the resources to do it. Even if Germany decided to do all it could, the scale of these debts would simply overwhelm Germany’s (already very indebted) economy. In any case, if the fairies came and Spain were rescued, the pressure on Italy would soon become almost overwhelming. And though France hasn’t been hitting the headlines recently, it has higher debt than Spain, a history of deficits and a huge banking sector with vast exposure to Spain, Italy and Greece.

So why not let’s just call it a day? For Spain. For Italy. For the single currency failure know as the Euro. For this whole misconceived and duplicitous Ponzi Scheme. The costs of euro collapse will be huge, but those costs are coming anyway. And they only get bigger the longer you defer the moment of truth.

David Cameron wants to hold a referendum on Europe sometime after the next election. But he’d better get on with it. Europe, in its current form, doesn’t have that long to live.

Mitch Feierstein is CEO of Glacier Environmental Fund and author of Planet Ponzi: How bankers and politicians stole your future