A lot of problems associated with that but thats 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 didnt work all the time 100 percent of the time bankers got their friends like jay powell lets 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 are yes but once theyre Risk Management tools starting in 1987 when the portfolio insurance crash the markets the fed came into the rescue and thats the fed puts well then weve seen since that any time that the bankers and all their huge amounts of derivatives whenever theres a problem there the fed comes to the rescue i. E. Theres a problem with distribution of risk in the supply chain of risk doesnt 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 its persistent within the markets and options and derivatives allow you to separate risk from reward and to trade it separately thats what the options volatility formula which was a nobel way. Prize winning formula is all about to split almost like youre splitting energy from matter or splitting risk from reward and so what bankers on wall street have been really good at doing is making sure that they dont have any risk and that their 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 thats how you have this wealth and income gap develop over 30 or 40 years because its the ability to make rewards with 0 risk has become very efficient for those in the banking business friends of wall street exciter a so this Current Crisis the covert 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 theyre protected friends do not have to take any losses and so they increase that derivative pile to an extraordinary levels thats 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 its theres a lot of complexity and theres so much complexity about even this latest stimulus package which looks like its a benevolent gift to the people but in fact theres trillions more in exotic instruments of stimulus package that reflects the exotic instruments of debt packages that are being bailed out so youll 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 lets 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. 00 people so showing you how dangerous certain areas of of new york are. If you see it the darker it is that its poor areas 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 theyre getting infected while the banking class right there in manhattan where you dont 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 thats gerrymandering so in Financial Markets financial gerrymandering is this risk trickery that im 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 its dumped into Pension FundsPension Funds or toxic waste dump of risk this year financial jerram enduring means that the returns are always going to be horrible and so yeah politically you see that happening quite starkly by that map youre showing you see the regions cut up and thats because of political jerram and bring in an attempt to exploit the Political Division thing to sustain the status quo well exactly at that map what its 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 weve 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 dont want to risk that so they take that through inflation through the quantitative easing through narrow 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 theyre taking the risk of all the power fall onto the Balance Sheet and that balance she is your Balance Sheet thats the ordinary americans Balance Sheet the 335000000. 00 who arent the elite they are the ones that are risking not only their currency and possibly a hyperinflation and the future and thats a political event when people lose faith in the actual currency so youre 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 thats 300 percent and so im ericas going to be 100 percent very soon so to get the 300 percent thats 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 in this and which also brought us in that age darwin in the his work and terms of evolution and. 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 its all as hues toward perfection and excellence that 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 turn on barrows 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 the whole hedge fund tune the Federal Reserve and theyre negotiating and theyre front running and theyre High Frequency trading and theyre 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 theyre less than human and then we know where that goes lets continue on this theme of the supply chain of risk because theres always risk. In the world in nature the antelope bounce in your cross the field has to get to you know her family or friends over there but the risk is Alliance Going to right thats the risk and thats why they develop thats why they can run so fast and jump thats 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 cant catch the answer low 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 lets 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 moodys is saying moodys 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 aint going to be any boomers in the economy having to work and subsidizes thats going to be on generations e especially theyre 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 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 doesnt disappear. Its 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. Billionaire i am going to take a break when i come back with more coming your way. This is a story of women and women with troubled histories and complex court cases you know some of us did really believe. Was out there but were not. In the person thats. A cheesiness and b. They are considered the most dangerous of criminals shes in a still. Probably off 23 hours of the day tell me that its not enough attention to the world of women on death row. The world is driven by shaped by our own person. Who dares thinks. We dare to ask. 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 im on the show today hes also the cofounder of market rebels and of course he is the star of c. And b. C its half time report john welcome here max great to be back with you feels like much more than a month since you and stacy and i were tone vais conference out in vegas that was a good time but just preceded all the bad times that were in right now i feel that we were just ahead of the way as it as it was crashing everywhere across the country and we got out of town you know vegas obviously is 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 point to talk about stocks bonds and macro and i want to talk a little bit about the regional difference between new york and chicago because its 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 dont 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 theyre gone just as the chicago traitors are gone because they couldnt figure out a safe way to keep several 100 people on the floor of either the chicago board of Options Exchange or the merc 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 lets 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 theyre gone theyre all up stairs and theyre having a really hard time treating from up stairs as most of us did max when i migrated upstairs 2004 so you know its been 16 years that ive 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 theres more volatility even more than there would have been otherwise during this drop so youre 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 im seeing exactly max instead of having hundreds of treaters in a period where they all hear the same information at the exact same 2nd now theyre all up stairs responding to whatever theyre looking at some of them are watching bloomberg or c 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 youre not seeing every order and since youre not seeing everywhere or youre 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 or 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 seventys early eightys 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 dont understand these days lets 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 thats 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 its exactly accurate i think that. Its true that a minority of people under. Stand about volatility and about Derivatives Trading max youre of course right about that i think its 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 theyve signed off on derivative agreements whether its futures or options and youre 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 or supply is down those 2 usually work in concert to push prices up or down when we got that youre 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 kelloggs 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 dont suffer when we have these big draw downs which we know virtually every year were going to see at least a 10 percent drawdown at some point even if its very sharp and quick and v. Shaped and every once in a while we get one like weve got right now max which we dont know how long this goes on but we know the volatilities up and the people that didnt 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 theres a whole many industry around this the books. That go by the name of trading wizards and others and it all goes back to Jesse Livermore<