What Will it Take to Make this Work? Wolf Richter on the Keiser Report

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“What was illegal is now legal.”

Here I’m with Max Keiser on the Keiser Report, tackling whether or not the US government should “manage” the economy, China’s reaction to Kyle Bass who famously shorted the yuan, the fate of San Francisco’s housing bubble, and the hype, promise, and reality of self-driving cars.

Here’s the first part of the interview. “These things can go on for a long time — until they can’t…” Read…  The US and the World: Wolf Richter on the Keiser Report




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  83 comments for “What Will it Take to Make this Work? Wolf Richter on the Keiser Report

  1. Neal Woods
    Sep 2, 2017 at 8:56 am

    Wolf, fine interview as always.

    You sometimes mention that certain transactions “destroy” money, such as here where you say that share buybacks aren’t investments in productive assets, which they indeed aren’t. But doesn’t the money transfer to the holder of the existing issue of stock when such purchases are made, whereupon the company’s treasury retires those shares? It would seem to me that the purchase amounts would remain in circulation after such buybacks.

    I also seem to recall your writing on Fed balance sheet normalization scenarios, where you claim the stimulative effect of QE will be reversed in the unwind. But does that account for the fact that the Fed’s profits distribute to the US Treasury after payment of a dividend to member banks? The QE unwind is set to be a multi-trillion-dollar revenue source for the federal government. Is your point actually that the distributions are going to be less stimulative than if the government instead took out debt to fill holes in the budget?

    • Sep 2, 2017 at 11:02 am

      Neal,

      Stock buybacks: they used to be illegal for a very good reason: they’re stock price manipulation. If companies want to “return” a portion of their profits to shareholders, they should do it via dividends. And they’re doing that – but they’re also buying back their shares for the sole purpose of manipulating the market into driving up their share price.

      Much of the share buybacks are funded with debt. So the shares are retired, but indebtedness grows, and the debt remains on the books. In this manner, companies hollow out their stockholder equity. See IBM, which now has negative tangible equity.

      So share buybacks provide no benefit to the company, its revenues, its growth, and its profits. All they do is lower the share count and thus increase the profit per share. And the company is left with less equity and more debt, no new sales and cash flow to service that additional debt.

      In your second paragraph, you wrote: “But does that account for the fact that the Fed’s profits distribute to the US Treasury after payment of a dividend to member banks? The QE unwind is set to be a multi-trillion-dollar revenue source for the federal government….”

      There are two things in this last sentence that make no sense:

      1. Your “multi-trillion” is way off. The Fed’s annual remittances to the Treasury in 2016 amount to $92 billion; and it paid $12 billion in interest to member banks on the reserves.

      In the process, the Fed has effectively reduced the cash flow to savers to near zero. These savers have $9 trillion at US banks. Cash flow from this $9 trillion has gone up in smoke and is not getting spent in the real economy. This has had a major negative effect on the economy and is in part responsible for the slow growth in recent years.

      2. “The QE unwind is set to be a … revenue source for the federal government.” How on earth did you come up with that conclusion???? This is out there in no-man’s land :-]

      • Bobo
        Sep 2, 2017 at 12:43 pm

        Wolf- it would be interesting to know which companies are the worst offenders, companies with flat or declining sales that bought back the most stock. Also, which companies changed their capital structure the most as a result of buybacks. My guess is that many of these companies will default during the next recession.

        • TJ Martin
          Sep 2, 2017 at 12:49 pm

          Dare I stick TESLA’s name into the mix ?

        • MC
          Sep 2, 2017 at 4:01 pm

          Worst offenders? Here is a 2016 review for S&P500 companies with how much each spent in share buybacks for the year:

          #10 Wal-Mart (WMT): $8.3 billion
          #9 Johnson & Johnson (JNJ): $8.9 billion
          #8 JP Morgan & Chase (JPM): $9.1 billion
          #7 Citigroup (C): $9.6 billion
          #6 McDonald’s (MCD): $11.1 billion
          #5 American international Group (AIG): $11.4 billion
          #4 Microsoft (MSFT): $15.5 billion
          #3 Allergan (AGN): $15.8 billion
          #2 General Electric (GE): $21.5 billion
          #1 Apple (AAPL): $33.7 billion

          As said these are just S&P500 companies for 2016. There have been other record buybacks in the past or from companies on other indexes: for example in 2013 Home Depot (HD) bought back a massive $17 billion of their own shares, which was worth 18-19% of its market capitalization at the time and this year JP Morgan has planned over $19 billion in buybacks.

          Buybacks are spreading worldwide, albeit stock markets outside of the US have a very long way to catch up.
          The Hang Seng has already broken its previous yearly record in July, with a single company (Cheung Kong Property Holdings) accounting for over 30% of total share buybacks in value: just like Apple accounts for a disproportionate chunk of the NYSE gains so far in 2017, so does Cheung Kong for the Hang Seng.
          In fact 52% of the gains in Hong Kong this year comes from just three companies, all of which are spending lavishly in buybacks.

        • MC
          Sep 3, 2017 at 5:46 am

          Tesla is not very enthusiastic about buybacks (they quietly terminated their car buyback program in July: not a peep from the fanboys) for one simple reason: it’s a cash burning machine which needs all the capital it can get and some, hence their buybacks are always overshadowed by massive share auctions to raise new capital.
          Tesla, a megacap whose shares are valued over $350, possibly by people who drunk far too much paint stripper in their youth, sold a huge $1.8 billion in unsecured bonds two weeks ago.
          Tesla is rated by S&P as B- meaning “highly speculative”. By contrast Apple is rated AA+ (investment grade, like General Electric and its ilk).
          Tesla sold junk bonds with eight years maturity in short, and it seems the bond markets aren’t buying the hype as they demanded a 5.3% yield, something unheard from a megacap Wall Street darling these days. It seems Uncle Ellon will have to issue more shares in the future…

      • TJ Martin
        Sep 2, 2017 at 12:56 pm

        Wolf – ” Stock buybacks they used to be illegal ”

        I’ve been saying that for the last five years to no avail in discussions / arguments with more so called financial and business experts than I care to count .

        So to put a sharp point on the ongoing arguments… in what year did stock buybacks become legal ?

      • IdahoPotato
        Sep 2, 2017 at 1:05 pm

        Also, dividends benefit ALL shareholders, buybacks benefit only the self-selected.

        Some companies like Berkshire Hathaway will by back their shares only if they are at fair value (Price to Book of 1.2 or lower). Most of the rest are like drunken sailors, now issuing debt in Euros at zero percent, knowing that the ECB will gobble it up, to buy back thieir overpriced shares.

        http://www.marketwatch.com/story/us-companies-are-selling-debt-in-euros-to-buy-back-shares-2016-05-31

      • Neal Woods
        Sep 2, 2017 at 2:40 pm

        Wolf,

        Completely agree on the destructiveness to a company’s future of funding buybacks with debt, though I’m still unsure the money “disappears” or is destroyed in the actual transactions (that is, they do not reduce the money supply). Ditto on the social harm from the Fed’s war on savers, which is a theater of the overall effort to dispossess nearly the entire population of wealth and independence from landlords, employers, and lenders.

        Why wouldn’t the rolloff of Treasurys and agency MBS spike the $92 billion annual figure? If the Fed will not be reinvesting principal payments as per its stated policy:

        https://www.federalreserve.gov/newsevents/pressreleases/monetary20170614c.htm

        wouldn’t these payments be remitted to the Treasury, net of expenses and dividends paid to member banks? How can the money just disappear in an unwind if its current use is to fund purchases on the open market? Thanks!

        • Sep 2, 2017 at 10:08 pm

          Neal,

          I see what you mean. I think there is a basic misunderstanding. Here’s how the Fed will reduce the size of its balance sheet and what the impact will be:

          When securities are redeemed at maturity, whoever holds them gets the money. The securities become void and disappear. This is what the Fed will be doing: When the Treasuries it holds mature, the US Treasury Department redeems them, paying the Fed the money for those securities that then become void and disappear. The Fed gets the money. If it doesn’t buy anything else with it, that money disappears too. Now both the Treasuries and the money have disappeared.

          Since the Treasury Dept doesn’t have the money to pay off maturing bonds (the US government runs a big deficit), it raises this money in advance by selling bonds. So the market lends the Treasury Department the money to redeem the old bonds. By redeeming the bonds that the Fed holds, the Treasury Dept gives this money to the Fed. At the Fed, this money disappears. In this manner, the Fed drains liquidity (money) from the market.

          This is the reverse of what happened during QE. Whatever QE accomplished, this will have the reverse effect.

          QE didn’t stimulate the economy but inflated asset prices. So reversing QE isn’t going to hit the real economy, but it’s going to hit asset prices.

      • Bob in Scottsdale
        Sep 3, 2017 at 12:29 am

        Regarding buy-backs, I have seen comments on other sites and here that never address what I think is an important aspect of the balance sheet impact. The debt issued has a superior claim on assets versus equity. Also, I would bet that the debt agreements include a conversion feature. Thus, in an adverse scenario common gets crushed, and in an upside scenario common gets diluted. Thoughts?

        • kam
          Sep 3, 2017 at 10:06 am

          Wolf
          ” it (the Treasury) raises this money in advance by selling bonds.”

          If new bonds are sold to buy back old bonds, where does the money get extinguished?
          Isn’t the only way to extinguish money is for the government to stop running deficits? The gap between the present and the future is filled with IOU’s matched with newly created money and/or it’s evil twin-credit?

        • Sep 3, 2017 at 10:26 am

          kam,

          The “money” gets extinguished by the Fed when the Fed receives to proceeds from the Treasury from those redeemed bonds and doesn’t reinvest the proceeds in other bonds.

          The Fed creates money (QE) and destroys money (QE unwind).

          The Treasury creates debt. It replaces maturing debt with new debt because the US has a perma-deficit. So the debt just grows.

      • d
        Sep 3, 2017 at 9:37 pm

        Neal need’s a lesson in HP HP brought back stock’s for years and used them as remuneration to the Executives who then sold them (frequently back to HP) at a higher price.

        After something like ten years of buybacks, there was more HP stock in circulation than at the beginning of the program.

        Borrowing to buy back stock, just like borrowing to pay dividends, management fees to hedge funds, or wages, is fundamentally, WRONG. and frequently in America involves fraudulent behaviors by Management elements.

        • Sarkis
          Sep 4, 2017 at 2:29 pm

          This all makes sense if you know MMT.

        • Sep 4, 2017 at 11:55 pm

          MMT is an economic religion that requires you to stop thinking in order for it to make sense.

      • fozzie
        Sep 4, 2017 at 4:07 pm

        “Tesla sold junk bonds with eight years maturity in short, and it seems the bond markets aren’t buying the hype as they demanded a 5.3% yield, something unheard from a megacap Wall Street darling these days.”

        I’d say 5.3% was still too low given the financials of the company and that it was unsecured.

      • Smart shareholders
        Sep 17, 2017 at 2:48 pm

        one of the dumbest replies i’ve seen. companies are run for their shareholders and if some of them want to be bought out by the rest with shareholders’ property i.e. company cash, what’s the problem? you may be good at debt analysis but you think shareholders have to be patsies. therefore, you can’t believe a shareholder-friendly policy like buybacks can exist.

        • Sep 17, 2017 at 5:04 pm

          Share buybacks that are funded with debt – as most of them are, even Apple’s – hollow out shareholder equity. Learn some basic accounting.

          IBM, queen of share buybacks, has negative tangible shareholder equity. This means, IBM has more in liabilities than tangible assets (assets minus goodwill … goodwill is an expense that has been parked temporarily on the balance sheet as an asset but will be expensed in the future). Therefore IBM is highly leveraged. It has to borrow money to fund payroll. Every dollar in cash on its balance sheet is borrowed cash. When the credit markets dry up for even a little, as they did during the Financial Crisis, companies like IBM, GE, and many others cannot even make payroll.

          During the Financial Crisis, they got bailed out by the Fed with numbers special short-term loan program that total around $15 trillion at the time but were all paid back later.

          Without the Fed’s bailouts, these companies would have filed chapter 11 bankruptcy, and their shareholders would have gotten zero.

          That’s why debt-funded share buybacks are bad for shareholders. It’s market manipulation that will eventually cost shareholders dearly when credit dries up.

        • d
          Sep 17, 2017 at 5:22 pm

          Another who needs to study HP.

          So many of these buyback programs as simply executive hidden remuneration programs and frequently asset stripping operations by PE Entities.

          Buy back stock, pass it to Executives/PE, at Option rate or as bonuses.

          Executive/PE sells it back to the company at higher rate. Repeat until company fails with huge debts’s, most of which has been created through buy backs by PE, then PE will be major debtors in the restructure so retain control, Regular shareholder looses, EVERYTHING.

          Only in America, can FRAUD, like that, be legal.

    • roddy6667
      Sep 2, 2017 at 10:44 pm

      They borrow the money to buy back the shares. The balance sheet remains unchanged, but the scoreboard in the casino called Wall Street is showing a gain. If they buy back shares with cash, it probably would have been a better use of funds to invest in the company or retire debt. Look at the stock price of any company that has bought back shares. Most of the time the effect is only temporary, a huge wast of money. Unless, of course, you had exercised your stock options and made millions on the pump-and-dump.

      • d
        Sep 3, 2017 at 9:41 pm

        “Unless, of course, you had exercised your stock options and made millions on the pump-and-dump.”

        This is one of the major Fraudlent features of Buybacks. Many times the shares are recycled back into the market in this way instead of being cancelled

  2. penfold dangermouse
    Sep 2, 2017 at 9:00 am

    off topic, but as that clip was a potluck news review—one estimate that 52% of the flooding in Harris County was outside of the 500-year floodplain, 66% outside of the 100-year floodplain.

    presumably lots of people with no flood insurance and Perhaps a big gap between paid claims and actual damages? Perhaps a lot of people just walking away from mortgages, car loans? let me shed a tear for the banks.

    https://californiawaterblog.com/2017/09/01/preliminary-analysis-of-hurricane-harvey-flooding-in-harris-county-texas/

    • alex in san jose
      Sep 2, 2017 at 7:42 pm

      penfold dangermouse – If I think in terms of I’m a Houstonian who had no flood insurance, house is now a pile of mud and rubble, my job is probably gone, everything’s gone, I’d walk.

      I mean I’d literally walk. Probably no car, can maybe come up with the money to take the Greyhound, I’d get away from there. Far, far away.

      When I lost everything in the 08 crash, I was in a super “lite” version of this. No diseased water up to my eyeballs and seeing a neighbor float by face down, of course, but I lose my apartment, car, income, everything but bare essentials, really. I possibly could have stayed here, but I ran, to a friend’s place in rural Arizona. (A large part of this decision was that I thought debtor’s prison was a thing, and I wanted them to have to at least work a bit to find me.)

      Of course flyover country like this is good for one thing (unless you want to go into crime) and that’s sitting on your ass and collecting Welfare. And that’s what I did. I was not able to get any kind of informal business going, not able to get any work, and it was just watch the TV (friend had a nice one) work out (he had weights) eat dolled-up ramen, and wait for the gov’t check (or the refill of the EBT card).

      It was a nice break because I’d been working *so* hard before I lost everything, but I could not see myself doing that forever, so I came back here to the Bay Area.

      But the only conclusion I can come to when your whole life’s been destroyed like has happened in Houston, is walk. Walk far. And there’s another storm coming into the area.

  3. Ishkabibble
    Sep 2, 2017 at 9:29 am

    If all we are capable of doing is begging the Elite to behave better, and typing comments on Wolf Street, we will suffer increasingly severe austerity until we, like cornered mice, desperately, mindlessly lash out not only at the Elite, but, eventually, even at our equally-desperate neighbors across the street and all over the world.

    During their first meeting, Morpheus asks Neo the most important question about their world of “The Matrix” — “Do you want to know what ‘it’ is?”

    We must all ask ourselves essentially the same question. What is “it” that keeps failing for the vast majority of people and preventing things from improving? The Elite and their MSM do NOT have the answer, and they’re NOT going to allow any discussion in their MSM about alternatives to the present fatally flawed economic system.

    I am here to tell you that “it” is NOT any president. “It” is NOT the Fed. “It” is NOT the constitution. And “it” is most definitely NOT an incorrectly adjusted interest rate.

    “It” resides between human ears.

    “It” is an inevitably-fatal, deeply-inculcated, religious-like belief in the infallibility of human greed — that all every single human being has to do is attempt to satisfy his\her insatiable greed and everything will turn out just fine for the collective whole of humanity.

    It won’t.

    Greed, my fellow humans, is NOT good. Why? Because “it” will, by “whatever it takes”, overcome any well-intended measure (from constitutions to Glass Stegalls to TARPs to QEs to NIRPs to fiat money to banning cash) that that same human mind can invent to attempt to control ‘it’. History has PROVEN with absolute certainty that this is true.

    What we all, as individuals, must somehow, some way come to recognize and accept as truth is something that we have been brainwashed by a capitalist system from Day 1 to believe is not true.

    Therefore, the one and only thing that will save humanity from itself (us from each other) is the EXACT OPPOSITE of greed, and that is to “Do unto others as you would have them do unto you.”

    For some reason I feel it necessary to say that I am an atheist.

    • IAV8
      Sep 2, 2017 at 9:56 am

      “Therefore, the one and only thing that will save humanity from itself (us from each other) is the EXACT OPPOSITE of greed……”

      Wealth and Poverty have existed since Adam and Eve abdicated the Garden.

      Poverty is a curable condition but your theory that it is cured by disavowing wealth is inane.

    • Petunia
      Sep 2, 2017 at 10:01 am

      The greed you discuss is not just in the economy and Wall Street, it is now firmly entrenched in every level of govt in America. That is the monster destroying our country.

      We can all see there is no rule of law for the well off, constitutional rights are for the well connected, election results don’t matter if they conflict with what the establishment desires.

      I agree that to discuss “the economy” with no regard to the forces that encourage and protect the truly guilty is a complete waste of time.

      • Dan Romig
        Sep 2, 2017 at 11:51 am

        Greed is a monster that’s found on Wall Street and government(s) in America.

        My definition of greed is not limited to, but defined in the manner of those who advocate ‘Progressive Taxes’. The idea that a person who succeeds and makes a million bucks a year should pay a higher percentage in federal (and state for those states with income tax) income tax than someone making fifty thousand a year is based on greed and jealousy.

        Our tax code is screwed up! We tax different types of income at different rates, and we financially punish those people who make a good income in the sense that Uncle Sam takes a higher percentage of their earnings compared to people who’re just getting by.

        I advocate a Modified Flat Tax whereby a living wage, say $24,000 per year, has no federal tax liability, but after that, all income from wages, capital gains, dividends and interest carried should be taxed at a flat 20%.

        If you believe in a progressive tax system, look in the mirror and you will see a greedy individual.

        • Binky
          Sep 2, 2017 at 1:41 pm

          Foolishness. More progressivism means less inequality means less likelihood for divergence in the people’s interests means more cohesive population and fewer pitchforks and torches episodes. It worked for a long time before and after religion lost its power. Your program just stokes the greedy to take everything faster and so grossly that it becomes Eloise VS. Morocco faster. Morlocks always eat.

        • Petunia
          Sep 2, 2017 at 1:45 pm

          Actually poor people pay a higher percentage of their income in taxes than the rich, always. Most of their income is siphoned off by the “richer” folks on purpose through deliberate taxation. The poor pay sales tax on everything they buy, on all utilities, and in states like Florida on rent.

          BTW, the fact that you think $24k a year is an acceptable basic income shows a disconnect and some greediness on your part. Why not cap income at the top? I think $10M or even $25M a year is plenty for anybody.

        • Dan Romig
          Sep 2, 2017 at 1:50 pm

          On the other hand, with today’s different tax rates based on type of income, billionaire Hedge Fund managers pay a lower rate than a public school superintendent making 200k per year, no?

        • Dan Romig
          Sep 2, 2017 at 1:54 pm

          Petunia, do you really advocate that no US citizen should be allowed income over 10 or 25 million bucks a year???

          24k a year certainly works in some geographical areas, but not others like San Fran. I merely use it as a baseline number for a federally tax exempt starting point.

        • Petunia
          Sep 2, 2017 at 3:16 pm

          Dan,

          The point I was trying to convey was that if you are going to cap income for a group of people, make sure it is not a big enough group to turn the table on you. You may think 24K is plenty for a poor person, and they may think that $1M is plenty for you. Think about it.

        • alex in san jose
          Sep 2, 2017 at 7:47 pm

          Dan Romig – I love that idea. The first $24k nontaxed then a flat 20% after that.

          What might work even better, if it’s feasible, is the first $24k untaxed and then a flat 10% tax, including on some things not taxed now.

          The reason I speak up for 10% is, throughout history, it’s been proven again and again that the average Joe up to the big guy, can always come up with 10% without feeling much pain, if any pain at all. This is why churches have always set tithes at 10%.

          It’s not scientific, just tried-and-true.

        • Crazy Horse
          Sep 8, 2017 at 4:36 pm

          Forget about tweaking the income tax code to somehow rid the society of its oligarchs. Most ultra-rich don’t have “income” anyway– at not the kind that gets taxed.

          When I become Leader I’ll convert the society to the Potlach system.

          Each year at Potlach Season (the old antiquated consumer holiday of Christmas) the richest 500 families in the Nation will be “asked” to give away half of all their worldly wealth— corporations, stocks, bonds, mistresses and homes in the Hamptons to a list of beneficiaries chosen by popular referendum. If they refuse or attempt to hide their wealth they will be taken out and shot.

          In return for their generosity the State organs of propaganda (AKA the MSM) will glorify their individual contributions to the nation with made-for-TV specials that will put the Kardasians to shame. Every church from Catholic to Snake Handler will sing their praises. The Giver Of The Year (chosen after a suitable billion dollar national campaign) will receive beatification from all the religions and Knighthood from the State.

          Think how much more satisfactory such a reward and recognition would be to an individual like Donald Trump than winning the Presidency and being plunged into the snake’s nest of conflict that it involves.

      • IdahoPotato
        Sep 2, 2017 at 1:14 pm

        Two words.

        Citizens United.

    • DANL
      Sep 2, 2017 at 10:04 am

      Nailed it..

    • economicminor
      Sep 2, 2017 at 10:43 am

      “Do unto others as you would have them do unto you.”

      Most people have cognitive dissonance and believe that the bible actually says do unto others BEFORE they can do unto you!

      Many in this country believe they are Christians yet the parables about Jesus are in extreme conflict with Capitalism as currently practiced.

      The human mind is amazing in its ability to justify the conflicts between beliefs, actions and consequences. Jesus said it was harder to get a camel thru the eye of a needle than for a rich man to get into heaven yet… In the USA it isn’t even enough to be rich, there is never enough money in the Ponzi Monopoly Capitalism game played here.

      It isn’t even about the quality of our lives. It is only about more money.

    • kam
      Sep 2, 2017 at 12:20 pm

      “It” is criminals. And they populate our government and the financial system. Generally they have been pretty good at hiding their tracks and obfuscating. Today they are getting really sloppy- in your face, “so whatcha gonna do about it, kid” sloppy.

    • Bobber
      Sep 2, 2017 at 3:15 pm

      Greed is good in some ways, bad in others. A sustainable society requires a balance between individual needs (i.e., greed) and societal needs. If this balance is lopsided in either direction, the system breaks down.

      Today, I agree the system is lopsided towards rewarding greed and corruption. This has already lead to massive wealth inequality and bad sentiment. It will get a lot worse from here, if not corrected.

      Progressive tax rates and the estate tax play an important role in maintaining the balance. They are vital tools to eliminate unhealthy concentration of wealth that destroys the rich and poor over time.

    • kitten lopez
      Sep 2, 2017 at 3:21 pm

      Ishkabibble, you don’t have to believe in their gods to know this is a godless, unsacred situation.

      and Romig, it is so sad to me that you find it unthinkable that Petunia would advocate a cap on how much power/money is concentrated into one individual and find it tolerable that people who make crumbs, their lives dedicated to serving others’ insatiable rentier dreams, be left to fend for themselves.

      just leaving the house on my way to the gym yesterday, i was bombarded by a few close instances of neighbors getting savagely evicted and i ended up sobbing while stretching on the massage table, and an elderly white gentleman i’d blown off as a small talker with a southern accent, he immediately said, “this system is a cruel system. things have never been this bad. but capitalism has got to go.”

      and i forgot my tears and was more in shock that he had the BALLS to call out the inhumanity of this system, when Alex in San Jose is SOOOO right about even homeless championing capitalism.

      my father is a veteran from the Korean war, and on his own, he’ll go give things to homeless and he says the veterans will have an american flag on their carts. the very country they fought for and were forgotten by.

      it’s seems hard to impossible to have to teach people they are worth living well and clean simply because they are alive. forget teaching the ones making money on your back.

      people with a lot of money in america think they deserved everything they got and they say they work hard.

      to riff off Petunia saying no one budgets money better than po’ folks: nobody works harder just to eat than po’ folks. nobody.

      there’s a lot of blood in anyone’s $25 million. what sucks is i’m finding that there’s a lot of blood in making a simple dollar now.

      i don’t go to church, either, but i worry every day for my soul and all our souls. i’ve been around enough rich folks that i know how lonely it is to be the only one who can afford the steak when everyone else is ordering water and pouring ketchup on the free soup crackers. they end up buying their friends. we already knew about the wives, didn’t we?

      i worry for ALL our souls. not just because i don’t wanna eat even my crackers and ketchup alone, but that’s also what’s become of san francisco now that no one looks up. real life sucks here now.

      we’re all alone. on our own. we can’t even believe in each other anymore.

      yeah. i’m really sad.

      all this for …WHAT?

      you don’t have to believe in ANY gods to know this shit is wholly unsacred. ALL this shit. there is no single “it.” everything’s dying for what???

      cheap crap??? power to be an asshole?

      really?

      yeah… we need some new stories and fast.

      and i’m certainly not the one to write ’em. i don’t even believe in my own neighbors to fight a thing.

      life is plenty complicated. nothing is binary. even though americans swear it’s gotta be or we won’t believe in god. too complicated. no attention spans.

      x

      • kam
        Sep 3, 2017 at 10:16 am

        “capitalism has got to go.”

        No. Cronyism disguised as Free Market Capitalism has to go.
        And Cronyism is the foundation of Central Banks and dirty Government. Nearly all our billionaires wouldn’t exist without the favoritism they get over their competitors from their friends in Government.

        • kitten lopez
          Sep 3, 2017 at 5:01 pm

          no, CAPITALISM has got to go. it’s all about extracting wealth out of anything that moves or exists.

          please don’t correct me. i’m censored enough as it is, sir.

          thank you.

    • aldo
      Sep 2, 2017 at 5:33 pm

      thanks Ishkabibble!

      i am a believer & agree the problem is within each of us…

      greed seems to be a flavor of fear that does not understand the true source of all things… it’s not the Fed/BOJ/ECB/etc. nor is it fiat or gold/silver nor is it government in any form, but rather the same God that created all…

      & possibly God is waiting for humanity to exercise the gift of free will to accept this truth & live, or to deny it and suffer as we are… killing one another & ourselves at the direction of a few for paper/metal/oil/land/control…

      as an inventor by occupation, i am ever amazed at how the only thing that has changed through time is our understanding of the world around us & how to harness that understanding hopefully to make life better for many… everything else remains the same… i believe we are being drawn to a more perfect world, if we do not destroy ourselves in the process…

      so possibly we will collectively wake-up and stop allowing money or control in any form to determine our values and remember that truely respecting one another is a better path… then again we do seem to like to disagree over much to do about nothing:)

    • hidflect
      Sep 8, 2017 at 10:57 pm

      Hear, hear. In fact, people just venting on the internet probably disables more action than encourages it. As General Arthur McArthur said, ‘Councils of war breed timidity and defeatism”. People feel sated once they’ve vented their rage. I’ve been on forums since 1997 and not one issue ranted against has ever been successfully prevented (except the coronation of Empress Hillary).

  4. Gershon
    Sep 2, 2017 at 9:44 am

    How will Yellen go on pretending inflation is under the Fed’s “target” of 2% when fuel prices are spiking?

    http://www.scmp.com/business/global-economy/article/2109423/us-petrol-prices-spike-two-year-highs-after-harvey-disrupts

    • Frederick
      Sep 2, 2017 at 12:16 pm

      Temporary spikes won’t be counted of course And aren’t energy costs excluded from the core inflation data due to volitility anyway

    • kam
      Sep 2, 2017 at 12:24 pm

      All the necessities have been spiking in price- food and shelter, and while clothing could be claimed to be stagnant or falling, the quality is so poor that it has no life span compared to years gone by. Shoe quality is pathetic until you get into the $ hundreds.

      Economics/statistics has been captured by the criminals. Cold is warm. Sour is sweet. Day is night. All part of the plan of confusion.

      • alex in san jose
        Sep 2, 2017 at 7:55 pm

        No kidding on the shoes. Thank goodness there were so many pairs of Doc Martens sold in the 80s that there are still tons of them around in the consignment shops.

        I even scored a pair of 10 or 12 hole boots, new-in-box, for $20 recently. Gotta get those worn in for winter.

        Another good winter boot/shoe is US Army “Cold And Water Resistant” boots. Get yourself a pair, for $50 or so, and you’ll thank me.

        • d
          Sep 3, 2017 at 10:10 pm

          In the Philippines, they will make them to measure, 100% leather, 100% hand made, 100% repairable, made to be resoled. For less than $100

  5. akiddy111
    Sep 2, 2017 at 11:32 am

    I watched your interview a minute ago.

    A couple of evenings ago, i watched a recording of a July 2017 interview that Jeremy Grantham gave to Charlie Rose. Grantham is relatively bullish on emerging markets. He also made the comment that China saves 50% of it’s GDP. It blew me away that he said that. Charlie rose knows his way around financial market data to some extent. I was hoping Rose wold probe Grantham on that comment.

    Grantham said that this time is really different.

    He also knows that bad news does not sell as well as good news. And besides, $40B has left GMO’s offices since 2013. A powerful incentive to stop making doom and gloom forecasts.

    • Frederick
      Sep 2, 2017 at 12:21 pm

      I’m bullish on emerging markets myself I just got back from a business trip to Warsaw and their building seems to have picked up quite a bit I live in Turkey and things still seem to be booming And people rarely use mortgages to buy properties and when they do it’s relatively short term Interest rates on mortgages are quoted in per month rates Very high

    • kam
      Sep 2, 2017 at 12:32 pm

      When someone tells me that China “saves” 50% of it’s GDP it begs a question
      .
      1. Why does China have an every increasing, exponentially growing debt when there are supposed to be $5 Trillion in saving, each and every year.

      Unless, of course, Chinese numbers are all lies.

      • Frederick
        Sep 3, 2017 at 12:52 am

        There’s a story on Zerohedge about the Chinese plan to roll out a gold backed Yuan for the oil trade Take a gander folks This may be a game changer if true I may have to dump more of my dollars Monday morning for gold

    • Sep 2, 2017 at 9:43 pm

      “… China saves 50% of GDP” is one of those numbers we need to understand what they mean.

      It’s a figure the World Bank publishes, called “gross domestic savings as % of GDP,” or gross national savings as % of GDP. It’s also published by CIA World Fact Book, which defines it as:

      “Gross national saving is derived by deducting final consumption expenditure from Gross national disposable income, and consists of personal saving, plus business saving, plus government saving, but excludes foreign saving. The figures are presented as a percent of GDP. A negative number indicates that the economy as a whole is spending more income than it produces, thus drawing down national wealth (dissaving).”

      For China, this rate is 47% (not 50%), for the US it’s 17%

      Note that Surinam’s is 57%. Ireland’s is 32%, and it went through a horrendous debt and financial crisis. Nepal’s is 43%. Papua New Guinea 38%…

      I don’t think this rate is a meaningful indicator that “this time it’s really different.”

      https://www.cia.gov/library/publications/the-world-factbook/rankorder/2260rank.html

  6. tony
    Sep 2, 2017 at 11:35 am

    You know any time i see an ad for any business with a cross in it i stay away from that business i have never seen more evil people they use god to justify any bad business practice.

    • kam
      Sep 2, 2017 at 12:28 pm

      tony
      A very high percentage of crooks claim to be religious. I guess carrying the “I can get forgiveness” card, while you are screwing your fellow man, is a pretty powerful partner in crime.

      • Frederick
        Sep 3, 2017 at 12:53 am

        Joel Ostein comes to mind immediately as he’s being crucified lately on social media

        • alex in san jose
          Sep 3, 2017 at 3:10 am

          Osteen.

        • Frederick
          Sep 7, 2017 at 11:11 am

          No Ostein

  7. Citizen AllenM
    Sep 2, 2017 at 2:18 pm

    The rich are fools. So it will only go down when they piss off enough of the bottom 90%.

    And the day is coming. I have to laugh at the local politicians who want to cut the cop pensions because they might have to raise taxes.

    LoL- guess they missed the message where they deferred paying those pensions to get those short term tax cuts.

    Our rich think every problem can be solved with more of somebody else’s money.

    Now, all that Chinese stash house money is going to be unwound one of these days, and then what? Crap shacks in California, Vancouver, etc might find real prices again- and it sure won’t be higher.

    The really funny part is once again, everyone is ready for another big run of inflation, and we will get deflation. Asset prices no longer reflect reality, and indeed no longer represent a real portion of incomes, simply asset speculation. And the folks on the bottom have less and less of a stake, and that means they support this mess less and less.

    And now comes Trump with change on his heels- he rides the tiger and has no clue as to what to actually accomplish.

    Sucker.

    The rich should get their butts out of here, this place is going to come unglued, and they are thinking the cops are going to save them? Har.

    The more we break our community down, the more exposed the top of the pyramid will be to change- and it won’t be what they expect. Stability would be to control immigration, shut it down, raise up some tariffs and cut the export of our debt. And push money through the bottom 90% of this country through higher income.

    Without that solution, the game will be leveling, and that means chopping the top off, baaaby.

    Because we be English, and levelers to the core.

    • Petunia
      Sep 3, 2017 at 9:26 am

      I think we are closer to 1932 than we are to 2032.

  8. Drango
    Sep 2, 2017 at 2:39 pm

    As you say in the video, shorting China’s currency can be a money loser. And in the short term, the Yuan has strengthened against the dollar. But much of that strength is a result of China switching to a “basket” of currencies, for the sole purpose of hiding its dollar problem. The problem hasn’t gone away, and it always seems to return with a vengeance, costing China ever more to fend off. Someday China isn’t going to be able to get the dollars it needs, and some lucky currency traders could end up very rich indeed.

  9. Gershon
    Sep 2, 2017 at 4:13 pm

    Will Bitcoin be the first central bank-driven asset bubble to implode?

    https://www.coindesk.com/bitcoin-drops-5000-crypto-markets-see-13-billion-sell-off/

    • MC
      Sep 3, 2017 at 1:57 am

      Cryptocurrencies are the latest financial mania from Asia and, just like the Shenzhen Small Caps back in 2015, they are purely speculative in nature, regardless of what some people say.
      The big difference is governments won’t intervene when there are big swings one way or the other, or at least that’s the theory: even the mighty Chinese government reversed course on their planned cooling of the real estate market when people started beating on their pans last year.

      Cryptocurrencies have their reason of being, but are a niche product which, due to the big jumps in value, are attracting a lot of people merely looking to make a quick profit: buy high and sell even higher.
      Again: Shenzhen 2015, when an IPO was considered a failure if it hadn’t gained at very least 50% during the first week.

      • Gershon
        Sep 3, 2017 at 7:13 am

        The tax man will be the death of Bitcoin and all other cryptocurrencies, since the IRS is not about to let these speculators (let’s call them what they are) book huge profits that go untaxed. In addition, central banks would like to think they have a monopoly on creating fiat currency backed by nothing.

  10. alex in san jose
    Sep 2, 2017 at 7:33 pm

    LOL Wolf you “look” like a Wolf Richter.

    I mean … at least to lots of Asians around here, I “look” like I know a lot about computers. And I never fail to disappoint them.

    And in other news …. I’ve spent the hot hours yesterday cramming on the book “Start A Small Business In California” by the Nolo Press and … you’ll all just have to be in suspense (tumbleweed rolls by) for a while before I bring my product out. I’m looking at a few to several months. Because reasons. But don’t worry, I’m working on it… behind the scenes (deafening yawns).

    • kitten lopez
      Sep 2, 2017 at 10:35 pm

      no yawns. the world is verrrrry different now and there is a lot less room for error for most of us nowadays. i feel it. humility has taken all the place of ALL my former swagger.

      best of luck to you, my brother.

      i’m trying to come up with my own mostly off-line ideas and use my ability to get attention. i’m trying a few different things to see which clicks into place for the kind of life i want. i found a gentleman at the gym i might use as a living model in the world as well as “agent” to set me up with sports players who need one-of-a-kind casual or workout wear that NO ONE ELSE has anywhere.

      trying to make up my own system that doesn’t currently exist. you’re the same kind of scrapper, so good luck, brother.

      • alex in san jose
        Sep 3, 2017 at 12:09 am

        Kitten – I’m a great believer in the possibility of an individual with a drill press, a sewing machine, leatherworking tools, what-have-you, to make things that can be sold, here in the US, in a small shop or in their garage to start or in a “maker space” like TechShop, and can compete with the cheap-o junk that’s sold for outrageous prices.

        Wal-Mart doesn’t sell cheap sub-$10 sneakers any more. They sell $39.95 and up cheaply made sneakers.

        My daily shoe when out and about are my 1980s low-quarter Doc Martens which were made in a workshop in England. The original Doc Marten sole was invented during or right after WWII as a shoe that’s comfortable for shop workers. Early on, they were popular with housewives. They don’t take computers and cleanrooms to make. Someone working in their garage could learn to make something like Docs.

        People are willing to pay a lot for a product that works. Hell, they’re paying a lot, often, for products that don’t work!

        And here’s an old saying i just made up: Robots will give us a workless future the same way computers gave us a paperless office.

        • kitten lopez
          Sep 3, 2017 at 10:49 am

          Whoa… that’s GOOD. yes, i’m seeing the same frustration and rage here at home and in the gym about the inability to even FIND shoes or T-SHIRTS that fit, or fit CONSISTENTLY! that’s a big one.

          i’ll probably end up making clothes mostly for men because they like long term classics now that women have been trained to chase trends. men love quality and little details that pop, and i’m attracted to making things for such folks who’d APPRECIATE it.

          i don’t know if you were using doc martens as an example or a hint at your new venture– i don’t THINK it’s shoes/boots–BUT maybe it IS??? which would be amazing even to ME when i used to not care because i was playing “girl” and buying shoes i never wore. i end up in my Timbs even when working out now because i had lifts put in for my bad leg.

          James can’t find shoes online to fit him, and brooks were consistently his go-to, but they change fit. and he swore off the internet and can’t find anything in PERSON here in SF!

          he’s not a freak like i am with my lifts, so i’m seeing people getting used to things fitting poorly just like we’re getting used to the new state of work as hell and a constant hustle.

          as an artist i had to find a REASON behind what i make and i used to hate custom things my grandmother made because i wanted STORE stuff! sewing seemed like po’ folks ways.

          i didn’t know it was MAGIC. a way to create yourself and each other, give swagger from feeling good in flattering, well-fitting clothing—which is a form of love and protection to me. i needed my art to not just be masturbatory for me.

          so i seem to being getting unnecessarily poetic, but i’m NOT: i think if you DID do your own garage boot you’d have a TON of people on a waiting list.

          i’d be one!

          i also need to be my parents’ daughter and use my swagger, terror, sweat and audacity to try and make the world a little better and so i wanna BUILD something.

          your idea is exciting to me because then i do have more hope that we artists are beautifully feral still, and while the dust hasn’t stopped settling on where we’ve all been scattered to since the early 2000s to now… i SEE green shoots in your post you just wrote back to me and that’s why i love this site of Wolfs’ because i’m crying NOW as i write this:

          thank you for allowing me a glimpse into your new “schemes and plots”! i’ve been wondering where the fighters are now that the freaks have been relegated to the middle of nowhere in america and are depressed with their heads in the toilets.

          i hope you are making shoes/boots.

          i agree with all that you’re saying. that’s why i keep looking for ways we’ll all gather in our “greyness.” i hate feeling dis-empowered. and i wanna teach the next generation how to live well under the rocks where it’s more fun. the field negroes always had more FUN. they knew we were in it TOGETHER and there was no point shuckin’ and jivin’ to get into The Big House where you’d just be sleeping right at massa’s feet holding his chamber pot.

          i really needed that post, Alex.

          yes, Wolf. many of us WILL meet one day. it seems inevitable to me. i wanna create a monthly meet up or party one day for artisans. a party with my favorite DJ. that’s a whole OTHER magical story. i have love affairs without sexing anyone. that’s also my life under the rocks.

          the internet is more and more for my email and Wolf and the first ten free nytimes articles a month so i can see where everyone ELSE is going in biz/fashion so i can do the opposite.

          happy sunday. thanks, Alex. i needed that. i really did. sometimes Wolfstreet bangs my head into the cement for too long. then i get a bouquet of “it’s gonna be OKAY!” on how to FIGHT all the death and mediocrity and satanism and i shake it off and am in the game again.

        • kitten lopez
          Sep 3, 2017 at 10:57 am

          p.s. i love your story of Doc Martens–it gives punk back some of the cred that got taken away when i learned vivienne westwood and malcom mclaren were just turning the punk ethos into just another buyable style to follow teddy boys and such. ugh.

          you’re telling me the seeds for true rebellion are in the making of the fucking doc marten’s. BEAUTIFUL. thank you for THAT.

        • kitten lopez
          Sep 3, 2017 at 11:25 am

          by the way, if you ARE doing shoes/boots, we MUST MUST MUST collaborate. i’m doing ALL that i can to share the attention i get when putting my stuff out there. i like to fluff others up so it looks more like a party of “what the fuck is THIS?” than “look at ME!” / “look at ME” is too much constant work. like all the new levels of social media etiquette and b.s.

          before i die i MUST be involved in making THIGH HIGH boots. right now i’m planning some kinda quilted thigh high SPATS for sneakers.

          and i know there aren’t a whole lotta shoe makers left in america because i had a crazy girl i met who made mine in arizona for $1600 when i had the cash, and she was always trying to teach people to make shoes or apprentice people. but she was crazy and never sold it well.

          man… if you made boots for people nowadays? it’d be like magic grounding boots to stomp and tip toe through america’s future.

        • alex in san jose
          Sep 3, 2017 at 10:24 pm

          Kitten – Sorry to say it, but boots/shoes are not in the plans right now.

  11. R2D2
    Sep 2, 2017 at 10:36 pm

    Great interview Wolf; but watch out, or you’ll find yourself interviewing on Fox 😈😈😈.

    • Frederick
      Sep 3, 2017 at 12:55 am

      Or god forbid CNN with that OTHER Wolf You know the hen house one with all the facial fur and the big teeth

    • MC
      Sep 3, 2017 at 1:41 am

      Wolves eat foxes for breakfast. ;-)

  12. KiwiinCanada
    Sep 3, 2017 at 12:05 pm

    Is it possible these share buybacks are leveraging up corporations in order to remunerate key insiders and are perhaps partially defensive in that if these insiders don’t do it someone else will? However once the insiders have finished turning increased corporate debt into personal wealth and essentially bailed out, the corporate entity may find itself with a debt problem. The low interest rate environment has encouraged these practices which if the Fed is serious about normalizing interest rates is likely to make the debt burden of these entities more problematic. The stock price is juiced up but the entity is more fragile which will become apparent during the next economic downturn. Given how widespread these practices are there may be a systemic issue here.

  13. Gershon
    Sep 4, 2017 at 10:25 am

    Gold is to central bankers what crosses are to vampires. I can only imagine the hissing and demonic shrieks emanating from Yellen, her flying monkeys, and the metals manipulators at the bullion banks as gold, silver, and platinum group metals continue to surge despite their strenuous efforts to suppress the price through blatant manipulation using fictitious 2 AM paper gold and silver dumps. It’s Game Over for the central bankers when the great mass of sheeple wake up and contrast soaring precious metals to the debauched fiat currencies conjured up out of thin air by Yellen & Co.

    http://www.kitco.com/market/

    • d
      Sep 4, 2017 at 2:49 pm

      “Gold is to central bankers what crosses are to vampires. I can only imagine the hissing and demonic shrieks emanating from Yellen, her flying monkeys, and the metals manipulators at the bullion banks as gold, silver, and platinum group metals continue to surge”

      You dont understand, they want it to surge, then gold, in particular becomes to expensive for ordinary people to handle.

      Thats the strange thing with gold currently so many groups want it up for completely different reasons,

      $ US 18 an OZ (or less) for silver rounds, change is not to hard.

      1300 + for the same weight gold round FFF useless in anything but major drug transactions.

      • Frederick
        Sep 7, 2017 at 11:14 am

        NO I’m ordinary and I’m buying all the dips And there’s always Silver( poor mans gold) which goes along for the ride when gold surges

  14. mean chicken
    Sep 5, 2017 at 12:12 am

    Buybacks – Aren’t these at best, indicative that management doesn’t have any idea of how to invest in and grow the business?

    • d
      Sep 5, 2017 at 6:02 am

      No,

      Depending on who the shares are brought from and if they are cancelled or if not cancelled, what they are used for.

      The Buyback programs of HP and Berkshire are two opposite examples of buyback programs 1 is good for shareholders, and used to amass stock for further acquisitions.

      At HP and those like it, it is VERY bad for shareholders as the program is used to hollow-out/strip the company, of its liquid assets. Making the overpriced shares, in reality, worthless.

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