CW 829 FBF - The New Game on Wall Street with "Ranting Andy" Hoffman

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Happy New Year everybody. This isn't our first show of 2012, but you know, we're still kind of thinking about the New year and our goals for the New year and I hope you've got yours mapped out. We've got several prediction shows coming up. We plan to have Gerald Celente on. I just recorded one yesterday for the Holistic Survival show which was quite interesting with Linda Sherman and we may actually play that on Creating wealth, time permitting because there were some interesting forecasts in there. But you can also listen to any of my other shows, the American Monetary association show, the Holistic Survival show, the Solomon Success show, a whole bunch of them. I've got 15 different shows out there, so take advantage of all of them until your heart's content. But yeah, we'll have some good forecast shows on and we'll be doing that probably well into February to talk about what to expect in 2012 and beyond. And we have our annual forecast coming out real soon here. Just putting the final touches on it where we're talking about our real estate forecast, or I should say our income property forecast in many markets around the US More markets than the rather limited Case Shiller index covers. So I think you'll like that. Last weekend we had a fantastic creating wealth boot camp in Phoenix. I was going to say here in Phoenix, but I'm in the air now on the way to one of our markets. So I'm not in Phoenix, but it was a fantastic event. And then we did a tour the next day. And thank you to all of you who came out. And again, just love hearing from our clients and hearing their stories and their successes and their challenges. And one of my jobs and our jobs at my various companies is to really learn from our clients and bring that knowledge to you, our listeners and our other clients so that we can expand the knowledge pool and just be better investors and create a more secure financial future for ourselves. Well, it's interesting when you look at the stock market, I was looking at an AP News article that talks about it's interesting. It's by Bernard Condon and It was published December 30th and it just said something interesting. It said on Friday, The Standard and Poor's the S&P 500 index closed at 12,057.60. That's exactly 0.04 below where it started the year in 2011. If you fell asleep on January 1st and woke up today on December 30th, 2011, at the end of the year, you'd think that nothing happened, says Jack Albin, chief investment officer at Harris Private Bank. But it's been an up and down year. It's been crazy. You know, that's really true. And I tell you, if you're investing in pooled assets, traded assets, stocks, bonds, mutual funds, you've spent the last 10 years treading water. And even before that, you have not been treated well. It seems as though the only people on Wall street who get rich are the insiders, as we all know very, very well. And we'll talk about that today. That's the topic of today's show. But further on that before I got a few more things to mention about foreclosure trends, short sales and deeds in lieu of foreclosures and such. It's interesting because I do own a few stocks. I've been getting out of the stock market more and more. I don't know why I was in it in the first place. I never seemed to make any money in it. But I have this one account where I bought some local Orange county banking stocks a couple years ago and I thought I had sort of an inside line on things. I don't mean to say insider information, but kind of an inside line on things. And it's amazing how people think that stocks, bonds and mutual funds are not management intensive assets. They are very management intensive assets if you own them. You know how your mailbox is just bombarded with annual reports, proxy voting things, all kinds of disclosure statements and all kinds of stuff that basically says you can't sue the companies you're investing in or the people that sold it to you, stuff nobody has time to read, nobody has time to pay attention to. And you basically relinquish your financial future to somebody else who certainly has a different agenda than you and I do as investors that want to secure our financial future. So one of these other things, I got a call and a bunch of letters from this group, this little brokerage that I had purchased these small bank stocks in Orange County, California, where I used to live. And I'm glad to say I don't anymore. I got a letter, the new firm that took over is asking me to sign papers. And then the guy calls me and says, because we inherited your account when we took over the firm, we need our management fees. And I what do you mean? I've lost more than half of my portfolio value. And he says, well, you have to either give me permission to liquidate more of your stock or you have to send me a check. And I'm like, talk about adding income. Insult to injury. It's just ridiculous. So forget about that. Invest in the most historically proven asset class. Do it correctly by following my 10 commandments of successful investing and you will be way ahead of the game. A couple thoughts on the real estate market in general, and those really stem from a couple of the newsletters that I was reading and articles that I was reading recently. This from Chris McLaughlin's newsletter. He teaches people how to do short sales and things like that. The website is shortsalesriches.com and it talks about how BofA has a short sale program that may expand. And this is unbelievable, folks. It just shows you what an upside down, backwards world we live in. But since we do live in that world and none of us are really in control of it and none of us are going to change it, then why not take advantage of it? The article says bank of America's cash back incentive, which tempted delinquent borrowers to do a short sale over a lengthy foreclosure, ended Dec. 12 with mixed reviews. The Florida only program offered between 5,000 and $20,000 in relocation expenses to qualified. Now that's an interesting word. My commentary here shouldn't be unqualified homeowners who agreed to vacate their homes through a short sale in lieu of the average two year foreclosure process. But as of early December, only about 3,000 of the 20,000 homeowners they solicited by the bank had expressed interest in the plan, which one real estate consultant said was unthinkable before the robo signing scandal heightened the foreclosure sales chaos. A year ago, banks weren't making offers like this. Now it's a complete reversal and they are proactively soliciting short sales, said Jack McCabe, chief executive for McCabe Research and Consulting in Deerfield Beach. They are offering unbelievable deals, he says. Well, that is true. Realtors say banks including Wells Fargo and JPMorgan Chase began offering cash incentives about six months ago to homeowners who agree to do short sales, with foreclosures taking an average of, get this folks, 749 days in Florida, according to a November Realty Track report. It's cheaper to pay off an owner than take them to court, realtors say. Bank of America spokeswoman Jomana Bowens said she couldn't comment on concerns unless they dealt with a specific case, but the company was pleased with homeowner response. She said that Florida was chosen to test the program because of the high number of foreclosures. If it's ultimately deemed successful, it could expand to other states. To qualify, homeowners had to submit their short sales for approval by December 12 and blah blah blah. They extended the deadline and so forth. Folks, that is just unbelievable. Another article, Realty Tract 2012. They say this will be the year of the Streamlined short sale. RealtyTrack is calling 2011 the year of foreclosure litigation, strategic default, failing foreclosure law firms and shadow inventory. It was also a year of infighting between regulators, underwater mortgages and the year when the mortgage Electronic electronic registration system. Remember folks, we did a show on that the MERS system face suits over everything from business model to its assignment procedures. Joel Cohn, staff writer for RealtyTrack's foreclosure news report, released a lengthy report on what this year brought for the mortgage, real estate and default servicing industries. So what did we learn in 2011? Cohn says that borrowers learn to lean on on strategic default. Get that? Borrowers learned to lean on strategic default, choosing to walk away from distressed or underwater loans instead of continuing to make payments on their mortgages. Other borrowers discovered the system is moving at a snail's pace, giving them more room to float by without making payments on their mortgages. As banks struggle to catch up from the 2010 Robo signing induced foreclosure moratorium, Cohn says borrowers learn to gain a strategic advantage from the delays. Cohn writes that armed with knowledge that the financial institutions are so far behind the eight ball in playing catch up with delayed foreclosures, homeowners have no motivation to move on. He added that there are documented cases of people who are simply staying in their homes without making a mortgage payment for as long as three years, for as long as three years, figuring they will stay until the bank gets around to foreclosing on them. In the meantime, they are living rent free. RealtyTrac data shows that the average was 336 days to complete the foreclosure. But get this, and I'll finish with this in just a moment here. That's on properties that that made it through the process in the third quarter of 2011 and that's up 180% from the first quarter of 2007, when it only took an average of 120 days. Cohen said the states with the longest foreclosure timeline include New York, where it takes an average of 986 days to foreclose New Jersey, where it takes an average of nine days to foreclose and Florida, where it can take up to 749 days to complete a foreclosure. I said a long time ago, listeners, that I felt that the reason consumer spending was up so much is that people are living without paying their mortgage and they're using that money to go spend and enjoy life more than they normally would. And you know, we've got an upcoming show. We'll have John Williams from Shadow Stats on the show and I've been trying to get him on the show for a long time. He's got a great website and he'll provide more insights into the Statistics behind the statistics in terms of the consumer price index, unemployment, foreclosures, so on and so forth. And that's Shadowstats, great website that I've enjoyed for many years. You know, I got an email recently on a property I'm still on the email list for all these Southern California Realtors, which is kind of interesting. This property was in Lakewood, California and I lived in Long beach for several years as a young adult and high school student, college student. And it's just interesting to see how terrible these deals are that they're touting as deals that investors should buy. This was a very old property. I don't remember the exact year, but if you you could see the picture, it's pretty much a little dump in Lakewood, California. Two bedrooms, two baths, tiny little house, only 1358 square feet, owner occupied. And they're saying that this house needs a 16 to $18,000 in estimated repairs. They're saying not sure if it's true. If it's so true, why wouldn't they just sell it at this price would be worth 300 to 3,310,000 after fix up and you can buy it today for 218. Now that on its surface to a naive investor would sound like a decent deal, wouldn't it? But first of all the rent to value ratio will be terrible. So the RV ratio will be awful on that property. And also this property being an old, old baby boomer era property, Post World War II property is $160 per square foot. Now at last weekend's Creating wealth boot camp that we held in Phoenix, we were showing properties that were right around $44 per square foot that were only six years old that had tremendous RV ratios, much better than this one. So again uninformed investors making big big mistakes out there. So stick with the Creating wealth show for the real information. And without further ado, here I am chatting away on the airplane here. People are starting to give me some odd looks here as I'm talking into this microphone. But let's get to our guest here. And again we've got some fantastic shows coming up for the new year and also we will shortly confirm our location and details for our Meet the Masters of the which we will probably have in early to mid March. Now have not confirmed a date for that yet. Several of you have already signed up and thank you so much for signing up in advance. And we will announce more about that here in the next couple of shows and look forward to seeing you at that event. And let's get to our guest, Ranting Andy as we talk about some of the fiascos and misdeeds on Wall street here. In just about 660 seconds. We'll be right back with that interview and be sure to visit jasonhartman.com check out the latest property offerings. Again, our St. Louis market, one of our newest markets, is booming. We have had people buying there like crazy. Fantastic cash flow and of course, many markets around the US but without further ado, let's get to our guest. We'll be back with him in less than 60 seconds. Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday. My pleasure to welcome Andy Hoffman to the show. He's the marketing director at Miles Franklin. He has a vast amount of Wall street experience and I think you'll find his story to be very interesting as we talk about the gold cartel endgame and lots of other Wall street shenanigans and shenanigans as they relate to Comex as well. Andy, welcome. How are you?

Great. Thanks for having me, Jason. And you're welcome to call me Ranting Andy if you'd like.

Ranting Andy okay, good. Well, I hope to hear some rants. Those will be exciting. You're coming to us from Denver today. And first of all, before we dig into some very, very interesting stuff today, tell us about your background on Wall street and why you left Wall Street.

Right. Well, I'm from New York. I had a 20 year career on Wall Street. I'm a CFA. I was a sell side analyst for seven or eight years, institutional investor, ranked the oilfield service sector. I also was a buy side trader and analyst at a hedge fund for three or four years. I worked at Canter Fitzgerald as a bond broker for three or four years. And you know, I've been around the street on every side of it basically. But around 2005, I was getting a bit disillusioned with all the scandal I saw around me, particularly at Salomon where we had a lot of scandals. And on top of that, I realized that as a research analyst, the investment bankers pretty much were telling you what to do. And I didn't like that one bit. So I found out about Precious Metals in 2002, immediately invested my whole portfolio in it and it stayed that way ever since. And when I left Wall street in 2005, I vowed to never come back. I've been working in industry for four or five years with junior mining companies and writing a blog under the moniker Ranting Andy, which has taken quite a Bit of a following. And a few months ago, I joined Miles Franklin, one of the largest bullion dealers in the country, to be my head of marketing. So I now write every day. I make presentations about gold and silver and help to educate people about how to protect themselves from what's coming.

So on Wall street, first of all, I want to just touch on that topic before we dig in here. You said that one of the reasons you left is you were just fed up with the scandals and the scams and every company you had worked for was either bankrupted, socialized. And I guess by that you mean government bailouts. Tell us a little elaborate on that, a little bit more if you would. Because I just saw the movie Margin Call a few weeks ago and.

Good movie.

Yeah, wasn't that great? Really good. Really? Listeners, go see Margin Call. Just a fantastic movie showing you the complete greed and corruption of Wall Street. It is. It's just disgusting. It really is.

Right. Well, the firms I worked for, again, I worked for Citigroup, which was, you know, it was bankrupted and nationalized. I worked for firms that were taken over by Wells, by Wachovia. I worked for Shears and Lehman Brothers. I worked for Merrill Lynch. I worked for pretty much any company that I dealt with. Either had scandals that was required to be taken over by someone else, or it was bankrupted or nationalized, as you say. And I worked so hard to find that it was really a handful of people at the top and that controlled everything and their causes were not good. I mean, I'm in business to make money, but I'm also in business to be beneficial to society. And Wall street is the absolute opposite. I've made a career for myself now in crusading against Wall Street.

I say to people that they should be a direct investor and they should have direct control over their money. And it is just unbelievable, frankly, what a good job Wall street has done at scre and getting people to believe that you should just walk into some advisor at Ameriprise or Merrill lynch or whatever company. It doesn't need to be those names. It could be any company and just give up. Relinquish the control of your money, your financial future, to these people that know nothing more about it than probably you do. I have friends have worked at those firms or currently work at those firms. And you ask them questions, they just know nothing. It's just simply about bringing money in and handing it over to the. And they have a morning call where they hear what's the pitch of the day? What should we tell people now, what's the gab? It's unbelievable. Their knowledge is so elementary, it amazes me.

Yes, and the morning call was a big part of my day as an analyst. But what you're talking about is actually the old Wall street game. The game where they tried to take the retail public's money, which ended basically at the time of the Internet bubble when the stock market crashed. That was when the whole public was in the stock market so that they could sell them deals with high fees and then high prices. And they all went down and they sold high and everyone else bought high. But that was the old game. The new game started in 1999 when the Glass Steagall act was repealed. It was repealed because of lobbying by Wall street to the government. And as a result of that they've now been given free reign to do whatever they want. After Glass Steagall. What you saw was the big game of derivatives of basically the games that are screwing the countries, not just retail investors, but you're talking about the populace as a whole being screwed, the government being screwed because Wall street has taken over. They were the biggest campaign contributors to George Bush, to Obama, to pretty much anyone in a position of high authority and they now control the governments. If you look at Italy, they just got the new prime minister installed, he's from Goldman Sachs, as is the new guy from the new guy in Greece and they got in without elections. So what you're talking about is Wall street is not in the business of ripping off the retail public anymore. It's in the business of destroying nations and taking power.

Well, they certainly destroyed Iceland, didn't they?

Yeah, Iceland was the tip of the iceberg because that was the first nation that was dumb enough to listen to what the Goldman Sachs and JP Morgans told them about how to run their finances. But you go right down the line to Greece and the pigs and municipalities in America. Look at that municipality in Alabama, the biggest bankruptcy ever. Last week that was all JP Last month that was all JP Morgan that told them to do dumb things.

Unbelievable. So what you're saying is that the old Wall street and yeah, you're right, that's a good point. The old Wall street has really, I guess they dec. Decided to become the new Wall street because the general public, the retail customer if you will, just doesn't have enough money for them. They've got to get into the sovereign world and go just destroy nations because there's a lot more money there, right?

Yeah. Well, it's bigger game and that's what you progress to in life. And again, there is no more retail stock market. I can't emphasize this enough. The retail investor was wiped out in the stock market crash 10 years ago. They were given a brief respite of spending by the real estate bubble, care of the Federal Reserve. And now that that's bust, there's nothing left. That's why we have record unemployment, and it is record unemployment if you look at what the real numbers are, not what the government does.

By the way, I say that the real numbers are about 24 to 26%. When you count underemployment, you count independent contractors who, many of them earn no money even though they're considered employed. And then the discouraged workers that have fallen off the rolls. It's amazing how highly educated working at Starbucks is. I mean, it's just. It's scary. This is a person sitting there with all kinds of student debt that isn't dischargeable by bankruptcy. They've just trapped the population in this cycle of dependence on government, haven't they?

Yeah. The only relationship Wall street has with the public these days is in plotting with the government to put out enough propaganda to keep them at bay. Like things like Occupy Wall street worry them because it's a wholesale uprising of the public like we saw in the Arab Spring. I mean, it's not quite to that violent level yet, but that's what they worry about. The people are upset because all the promises that were made to them are not happening. They're continually told every day, don't worry, things are better. We're bailing out Europe. We're lowering interest rates. This, that, the other thing. The fact is that the people are starting to get upset, and Wall street and Washington need a way to keep them in line, which is why you see things like the National Defense Authorization act pass without any opposition. And, you know, who knows what they'll do in an election year.

Well, what do you mean by that? Tell us about that. I don't understand.

The National Defense Authorization act passed last week. I'm not sure if the President signed it yet. He will, because I think both houses passed it. And it was basically part of the annual omnibus defense spending bill where they've now said that the has the right to arrest and detain any American citizen, whether they're in the country or out of the country, if they deem them to be an enemy of the state, which is very, very loosely defined. Basically, anyone that they don't like. And that goes against the Fourth Amendment, against unreasonable search and seizures, and almost no one seems to care about it. It's a two to one vote, a pass by in Congress and it's going to be law soon. And you have to worry about the social aspects of what the government is doing right now.

When you look at this as a political issue, it just doesn't seem to be. Seems like the whole debate between left and right, Democrat and Republican is just kind of a big distraction. It seems to be that there is something going on at a much higher level. Maybe the New World Order, maybe the Bilderberg Group. I don't know how sort of conspiratorial we want to get here, but it just doesn't really matter. They're both out to just destroy the middle class. You can call it socialism, fascism, feudalism, mercantilism. I don't even know anymore. It's just such a strange breed of what we've got going on. But certainly we know that the left and the right are in bed with the corporatocracy. I'm happy that the Occupy Wall street movement is going on, frankly. And I'm not a hippie, I'm not a left winger. I'm more on the right side of things usually, but I don't know.

Well, what you're seeing now is a rapid evolution because when people say, well, this is how it is, and the fact is this may be how it is yesterday, but then today it's different. Look, when it comes to the Congress, the President, all they want to do is get reelected. They really could not care less about anything else. And the biggest problem is because of the inflation that's been created by the Federal Reserve's nonstop money printing, not to mention unlimited money printing in Europe and China, Japan, you name it. The cost of getting reelected soars. I just read that. I think they spent $3 billion on the campaigns eight years ago and then 5 billion three years ago and now it's going to be over 6 billion.

This is on all campaigns, you mean?

Yeah, yeah. Of which the huge percentage is for the President. But the point is the only way, it's kind of this vicious loop, the only way that these people can get reelected is by having this campaign contribution money. And that's why they continually say that they will get rid of it like Obama promised he would and they don't. And he gets more than ever. And the number one contributors to, like I said, to Bush, to Obama, to everyone, are the Wall street banks and of course the military defense contractors. So it's only going to feed on itself. And every day what these guys are doing, Republican, Democrat, it doesn't matter. They're just on the defensive. Just like the ECB with their Today they had their LTRO bailout and two weeks ago it was the Federal Reserve swap bailout. And they're just every day just trying to kick the can down the road and there's no road left to kick it down. There's going to be a day of reckoning in 2012 when they can't do this anymore. And there will have to be bankruptcies or nationalizations and plunging stock markets and all that. You can't avoid it forever.

Well, I couldn't agree more. You can't kick the can down the road forever. But tell us what the day of reckoning looks like. I mean, what happens on that day? Does every global fiat currency just suddenly collapse? What happens? What does it look like?

Well, I wish I knew, Jason. I wish I knew. Look, there's only a few things that I do know. I know that physical, not paper, but physical gold and silver will go higher. That's number one. I know that the standard of living of all these supposedly first world nations that have been overprinting money and over indebted are going to go down dramatically. And no one's is going to fall more than the United States because no one's printed more money, no one has more debt and no one has a higher undeserved standard of living. So when you have bankruptcies and foreclosures and poverty and a decline in currency, you're going to have social unrest. I mean, the only reason you haven't seen it here yet like you've seen, let's say in these Arab nations or in Europe or in Greece. Yeah, in Greece is because we still have this reserve currency and we've been able to, when we have problems, print more of it without destroying its value. These other countries haven't had that. And that goes for most of these European nations now because only the ECB can print money. Italy can't, Greece can't. And as a result you're having problems. But the problem is that the inflation in this country has gotten out of hand in recent years and it's only going to get worse because now they're really turning on the afterburners with money printing and eventually it's going to come back to roost for America. Will it be in 2012? Well, it may be. I would be hard pressed to believe that we'll get through 2012 without a day of reckoning here. But you know, how fast will things Come apart? How will they come apart? It's just hard to tell because there's too many. Like the last answer I gave about how everything's evolving on the defensive. I mean, anything can happen, but it's not going to be good. And that's why, you know what I write in every single piece that I've written for years now, I end with protect yourself. Because it's all about thinking, if these worst scenarios happen, where am I going to be?

So a couple of things. We've talked mainly about irresponsible government spending. We've talked about government debt, money creation and fiat currencies. But what we haven't touched on yet are two other major points I think. Number one, I want to ask you about derivatives and number two, I want to ask you about Comex and the possibility of it being a Ponzi scheme and not being backed by the physical gold and silver that it says it has.

Right. Well, all those things are Ponzi schemes that are not backed. That's how I'll start. But again, I'll go back to 1999 when the glass Steagall act was repealed. That's when this game of derivatives started. And frankly, even I hadn't heard of derivatives other than knowing that theoretically an option or a warrant is a derivative. But what we're talking about, where people make these huge off, off, let's call it off, exchange bets about how things are going to happen, almost like you go on these online gambling and bet what's going to happen in the football game tonight. It's no different what they're doing here, except they do it without any regulation and they're all doing it with each other. So no one even has any idea who's really beholden to who. And now we're at a level where the notional value of these derivatives. I read it yesterday. It's $750 trillion.

Let me just give people a perspective on. I thought it was only 300 to 600 trillion dollars. You're saying 750. That's trillion with a T. Folks. Just understand the US national debt is about 15 trillion dollars. The US GDP somewhere around 12 trillion. Correct me if I'm wrong on any of these numbers, but I'm close enough for government work, probably. And the global, the GDP of the entire planet is about $60 trillion. The entitlement time bomb of the US is 60 trillion plus. So you're saying that the amount of derivatives floating around on planet Earth. $750 trillion with a T. Yeah, that.

Was actually in my piece I wrote yesterday that comes from the US Office of the Control of the Currency or occ. That's a real number. And actually that number is up, that says of June 30th that number is up 120 trillion just in the first six months of the year. So it's probably closer to 800 now. That was six months ago. Now again, these bets are completely unregulated so no one knows what they're doing. But more importantly they don't work because look what happened in 2008. I mean AIG was the largest writer of derivatives on earth and they went bankrupt because they wrote all those derivatives. And the reason that Goldman Sachs and all these other guys did not go bankrupt is because they were bailed out. AIG was nationalized and Goldman Sachs and those guys who bought all the, the derivatives that they weren't getting paid on were bailed out by the government. And it's hard to believe that with all the regulations so called that's happened since then that this hasn't caused derivatives to go down. But I mean you can look at the piece, it's in my piece yesterday. They've gone up, in fact they rocketed up in the first half of this year and it's only going to get worse. And now you're talking about, now we're talking about Comex and you asked me before the call about MF Global, okay? Now MF Global is the largest clearing firm on the COMEX. Now again, I'm a Wall street professional for 20 years I've heard just about everything. I never heard of MF Global. They're one of these, I call them dark pool firms that are in the shadows that you don't even realize they're there. But they have a huge market share of all these trades that are going on on this comics which as it is I spend half of my day writing about the fraud that is the comics these guys just basically run. And they're run by a Goldman Sachs ex CEO and an ex senator and governor basically stole billions of dollars from their clients and no one's going to do anything about it. So the comics which I have written exhaustively for God 5, 7, 9 years I work with Gatta. I write pieces, hundreds and hundreds of pages about it. The comics is the biggest scam in the history of American financial markets.

Markets.

It's there for the most part just to manipulate paper prices. It's dominated by bullied banks, naked shorting and these derivatives behind the scene that are somehow connected but you never know how the CFTC is in bed with the government. They will never enforce anything. That's why John Corzine is not even arrested right now, let alone in prison. So the linchpin of the whole system to me has always been physical gold and silver. Because when we went off the gold standard in 1971, and it wasn't just us, it was the whole world that went off the gold standard for the first time, there was not a single country on earth, for the first time in history, not backed by gold. And since that time, their currency. And since that time, every one of these currencies has printed money and created these derivatives to push the game to the level that we're at right now. There's no end game except for them to collapse. And so you're seeing the final death throes here, where I believe MF Global, there was much bigger reasons behind it than simply stealing money. I'll never know what they are, probably, but the fact is the COMEX is a paper market that tries to pretend what the real prices are. And each day the difference between the real prices and the paper prices there gets wider. And at some point, either by force majeure or simply irrelevance, the comics will be no longer used. And in fact, I believe that at some point in the next few years, the whole futures game, which really was spawned in its fashion the way it is now after the Glass Steagall act, may be dead for some time because people just won't trust credit anymore.

Wow. Give us a concept, a size. How big is the comics? If we're looking at, we want to compare it to good old Bernie Madoff, for example. His fraud was about $60 billion, I believe. The comics has got to be huge. I mean, what's the scale of it?

Well, you know, that's a hard question. It's more the importance of the comics than the size because again, I only really follow the precious metals markets. I'm not watching what the corn pits are doing or soybeans or.

Yeah, fair enough, fair enough. Well, what's the metal size of the comics? Maybe just the gold and the silver size.

Well, you look at the, you know, we were talking before the call again, there's only about, if I have Right, about 2 million ounces of gold in inventory. There's. And there's only about 100 million ounces of silver in inventory. And of that, not even half of it is actually deliverable, meaning probably at least half of all that is simply being stored there by customers. It's not being held by a bank available to be bought. So we're talking about, let's say there's only 30 or 40 million ounces of silver. At $30 an ounce, that's like a billion dollars. I mean, it's nothing. It's absolutely nothing. And the same goes for a million ounces of silver. I mean, I don't even know if that's one ton of gold. It's so little. The fact is, I believe they trade in the paper market something like a billion ounces of silver in a year. Actually, I take it back. They traded a billion ounces in a day back in April when it hit $50 an ounce. You have a fractional banking system there where at least 100 times more papers trading than actually exists over there. So it's hard to say how big, how big the size is. But the fact is, what matters is that people believe, people have to believe, they have to have confidence that the COMEX is a real price discovery mechanism. And each time that you see these kind of scandals and each time you see a giant gold smash where like just two weeks ago, I won't even go into the whole thing, you know, gold Suddenly falls almost $200 for no reason, people start to realize that it's not real. The premiums between the physical price and what's shown on your screen get wider and wider. And the open interest on the COMEX has been dropping dramatically over the last few years, particularly after the MF Global, because traders are scared to trade there. They don't believe it's real. They also are now scared that they're going to have their accounts stolen from them by the MF Globals and the other clearing groups. So it's an enormous, enormous size of problems, but it's not the dollar size, amount so much, it's the confidence. Because if people don't believe the COMEX is a real market and they just look to the physical market for gold, the cartel that holds it down, it will blow up immediately. And then you'll see people rushing into real items like gold and silver and rushing out of paper items like treasury bonds. And the whole daisy chain starts. So it's a critical, critical part. It's right at the nerve center of the cartel, the, the banking cabal, the Washington, Wall street access of their ability to control markets and people.

Just a reminder, you're listening to Flashback Friday. Our new episodes are published every Monday and every Wednesday. Yeah, yeah. Very, very interesting. Very scary, actually. So when we look at MF Global, I mean, how Much money are investors going to lose in that fiasco?

Yeah, and the numbers every day are different. It's just like any of these other scandals. They said it was 600 million and they said it was 1.2 billion and they said it was 3 billion. And then it's at the point where no one even knows what the number is. And JP Morgan is right in the middle of it. They have a hold of the money and they were custodian. And you know how they. Yeah, and they're not in trouble, as usual. But again, it's not even the amount. It's. The fact is, if people don't trust that the COMEX is real or that their accounts are safe, because look, I mean, the government will bail out Goldman Sachs or Merrill lynch for billions, tens of billions, but they're not going to bail out a bunch of innocent people with their accounts for 1 billion. Even though the CMA, that's the Chicago Mercantile Exchange, which owns the COMEX, even though they tell everyone we will guarantee every one of our trades, and they're not, the little guy here is not being protected. They're being destroyed. While John Corzine is safe, JP Morgan is safe. And at some point people just won't use the COMEX at all. I believe now that most of the trading in the gold and silver there isn't real anyway. That it's just computers, government computers and bank computers from JP Morgan. And so at some point you're just going to see a full separation. You've already seen a pretty big separation between paper and real. And at some point you're going to see a full separation.

It's just another central bank. It's just another big scam. It's just another big fiat money scam. Instead of with dollars, it's with certificates or numbers on a computer screen, you know, about commodities. It's unbelievable. It's just unbelievable. I mean, so far as I know still now, what are we, three, four years out? Not one person has gone to jail out of this financial crisis. Anthony Mozzilla with Countrywide got a little tiny fine which to him is no big deal. This is just incredible. I mean, it's amazing. If you're a little guy and you're a small time crook, you're probably gonna go to jail, you're probably gonna get busted. If you're a big time crook, you just get rewarded.

Yeah, well, they're part of the system. And if you're not part of the system, like Bernie Madoff was not, or Lehman Brothers was not, they had people who were at odds with the, with the big wigs, then you're out. And you know, it is a cartel, no matter what anyone wants to call it, it is collusion in Washington, Wall Street, London to keep power. And again, as the world gets more difficult and there's more poor people and more dissension, they tighten their grip. Like the National Defense Authorization act, like this exchange, what do they call it, the European Stabilization Fund that they're working on now. I mean, unbelievable draconian rules that would take away sovereignty of some of the big European countries. Because I fear for economic martial law, I fear for military martial law because when people are poor and they're broke, they are controlled. Governments act to control them. And we need to protect ourselves. And assume it doesn't mean it will happen, but we need to assume that it will happen because we want to not be caught when these things do happen.

When you say economic martial law, Andy, what do you mean? What does that mean?

Well, I mean bank holidays for one. What if they decided that it really is going to hit the fan and they can't kick it down the road anymore and this weekend they decide we're closing the banks and we're making new rules, we're devaluing the currencies. We're not going to let you take your money out of your bank or if you do, it'll be with controls. We're going to take your IRA and force you to put it into treasury bonds and we'll give you an annuity when you're 59 and a half based on those treasury bonds. The point is telling you increasing taxes, changing rules, tax havens, anything to serve their purposes and at your expense. That's economic martial law. And then of course, if there's social unrest, who knows what they'll do.

Really, really amazing. Let me take a brief pause. We'll be back in just a minute.

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Well, gosh, there's just so much to talk about. Can I just maybe get a little bit conceptual and esoteric with you for a moment? This is kind of really basic in a way, but it's really sort of conceptual too. And this is a thought I had recently and it applies to the fiat money issue, the derivatives issue. And when I say this I certainly know that the chips on the table will be moved around pretty dramatically. And that's why listeners, they want to position themselves so that they won't get hurt or they'll be hurt as little as possible from what is going on. And what is going on is giant. It is happening at the foundational levels and at the highest levels of global finance. These are huge, huge mega trends, mega games that are being played and we've just got to protect ourselves. But you know, if you really look at it pre financial crisis, let's just go back to 2006, 2007 and then today if you look around the world, the amount of goods in the world are pretty much the same as they were before the crisis. Now the chips on the tables get moved. But wealth is denominated nowadays on a computer screen and to some smaller extent in fake paper fiat assets like stock certificates and currencies. But the amount of resources hasn't really changed. In fact, it might have grown by better exploration techniques and technologies. When a crisis hits, when the can can't be kicked down the road any further, does it really change things that much?

Oh, it changes them a lot because the resources may be the same like oil or cotton, but the money to pay for it is not. The incredible amount of financial wealth that's been destroyed by first the stock bubble, then the real estate bubble, now the sovereign debt bubble. You're talking about unbelievable amounts of losses and bankruptcies and foreclosures to the point where people can't afford things anymore. And what's replacing that money is freshly printed government money. And of course that freshly printed government money doesn't go to you, it doesn't go to Main Street. It goes to the very people who caused the problem, the banks. Goldman Sachs gets that money and Goldman Sachs gets what they do is they speculate with it. Speculation generally makes things go higher in price. It makes it more difficult for people to buy those scarce resources. Plus certain businesses, certain resources are not growing. Gold production, despite being in a 12 year bull market. It peaked in 2002 I believe, and it still hasn't gotten there yet. Who knows if and when it will. Silver production. Silver used to come out of the ground 15 times as plentiful as gold. It's down to nine in all time high. So there are some things that are, let's call it peaking. I'm not saying that there's no more gold and silver in the world, but certainly at these prices there aren't. And even oil, the surplus. I was an oil analyst for 10 years, OPEC ruled the market. Whatever they did mattered. OPEC is irrelevant now because they have so little excess capacity. I think it's all in Saudi Arabia now and a lot of people question that they even have what they say. There's a lot of moving parts, as you say, and chips are moving around. But the fact is that the only new wealth coming into the world is printed money, which isn't wealth at all.

Yeah, it's just a fake symbol of wealth and it's very temporary and fleeting. So it seems like the plan is just a couple of things here. Number one, control resources and commodities. Have lots of long term fixed rate debt attached to them if you can, and let inflation enrich you while it unfortunately impoverishes everybody else.

Right, right. I'll agree on most parts. People ask me all the time, well, if there's going to be inflation, shouldn't I have debt? Because it'll get wiped out now during hyperinflation. Yes, debt will be wiped out. Heck, they're on a bank holiday for all you know. They'll just devalue the currency and write off all the debt this weekend in Europe. They really could do it in Europe at any given weekend right now things are so bad. But unless there's hyperinflation and that's wiped out, and believe me, that's not a scenario that anyone should be looking forward to. I'd rather have a lot of debt than have that situation where you have food shortages and social unrest. But again, unless that happens, you're going to have debt and you're going to have to pay that debt off. And in this kind of economic environment, if you lose your job, which 26% of people have already, you're not going to be able to pay off that debt and you'll lose your house and that kind of thing. So one needs to be extremely careful.

Yeah, let me qualify that. I agree with you on what you're saying. I was talking about debt against say rental properties or income properties, for example, where someone else is paying the debt for you now granted their ability to repay that debt for you. In other words, in the form of rent that will be affected. No question about it. And I think the renter will change. In other words, the standard of living will decline rather radically where the standard of living of that renter will change. So for example, if it's a house, let's just take a little single family home as an example because it's simple. But say you have a renter in there who's paying $1,500 a month. Today, that renter will be due to inflation, they will be impoverished. So they will have to move out of the 1500 dollar. And let's say it's a 1500 square foot house down to a $3000 because the dollars are worth less. 800 square foot house, right. So their standard of living will be declined, but it will be replaced with another renter who used to live in a 3,000 square foot house who maybe got foreclosed on or rented it, who sees their standard of living decline as well. So it's like a ladder. That ladder moves. People get knocked down a few rungs on the ladder, no question, but there's still someone there to rent it and to outsource the debt to.

Right. And without being a real estate expert, which obviously you are and I'm not, you know, I realize I've been saying forever about how people can rent, you don't need to own a house. And that's, that's been the whole problem with the real estate bubble is everyone's told that you must own.

And there's no reason why that's a bunch of crap. I mean, you know, let me just comment on that if I can, and I want to hear your thought. I moved from Southern California to the Phoenix area recently. I have pretty much all my life been a homeowner with only a couple of very short exceptions. Now I'm a renter and I love it. I own lots of rental properties that I rent to other people, but I rent this gorgeous penthouse and it's a, it's a steal, frankly. I mean, I think I'm, I think I'm kind of ripping off the landlord. I got such a good deal, so I would rather, oddly enough, rent my own high end penthouse and rent basic, more necessity housing to other people seems to be a very good equation as far as I can tell.

Well, it's, you know, I mean, I would guess at least I've heard anecdotally and I'm pretty sure that the rental market is dramatically better than the ownership market because people are losing their houses, so they need to rent. And you know, again, I'm not going to talk about the financing of real estate because that's not an area that I'm focused on. But people, again, they need to realize that the paradigms that they've been taught about stock ownership and home ownership and all kinds of things, the standard of living that they're expected to have with their iPhones and their flat screen TVs, you have to simple it down and make life simple because things are not going to get any easier going forward. I was in New York working for Wall Street. I rented the entire time I was there. I moved out here when I was 37. I was renting a New York apartment because I knew that that's a market I don't want to be in. Once Wall street finally goes down, it's going to be catastrophe. When I came out to Denver, housing is a lot cheaper. I bought without finance and I don't plan on moving anywhere. But if I did plan on moving, I'd probably be renting here.

See, the problem with owning free and clear and buying without finance is that none of us ever really own anything in this country because we all have property taxes which are a perpetual lien on our ownership. And that's just the government all. They always win. They always figure out a way to win. But let's talk about metals, because that is your specialty. And let's maybe wrap up with this thought. How should people enter the metals market as a hedge against the rather dramatic inflation that we both think is coming?

It's really a hedge against everything. It's a barometer of bad tidings, which is why the government does not want it to go up. But as you say, it's most identified with inflation. And again, people need to realize the definition of inflation doesn't mean higher prices in the store. It means the printing of money. How fast are they printing money? They've been printing money exponentially. They're really printing it exponentially now. I mean, just this thing this morning in Europe and the Fed's thing two weeks ago. QE3 has been ongoing even though they don't talk about it. And I assure you they will be talking about QE3 pretty soon, especially with an election year.

They'll give it another name, though. It won't be called QE3.

Oh yeah, whatever it is.

Some name like the Twist or something. Yeah.

But whatever it is, it will have to be overt because things are really falling apart right now. And I mean, they're really, really falling apart. So you're going to see that kind of fear of inflation. And the way to protect yourself is simple coins. It's that easy. I mean, there are lots of options of how to do it. There are even ways where it's quote, paper, gold and silver, but it's safer than other ways. But what I advocate to anyone is simply to buy coins. 1 oz coins. The standard issues that people are aware of. The eagles The Canadian Maples.

Non numismatic though, right?

No, numismatic is like. It's like stamp collectors. I mean, you have to be an expert in numismatics. And frankly, the people that we know, that we deal with, who are numismatics are coin buffs more than they are inflation buffs. They just love the game. It's like baseball cards. So you want to avoid them because you're going to probably pay way more than they're worth and more importantly, not know why. You paid way more than. Than they were in all value. So you want to buy standard coins, protect them. There are ways of storing them that we can help you with or just store it yourself in a very safe place. Not a bank, and you should be just fine.

So, yeah, you mentioned not a bank, not a safe deposit box. Because you think if we have a bank holiday, maybe suddenly there will be a guard at your safe deposit box and that guard will be a government person that says, let me see what you're getting out of there. Or maybe they'll deny you access. Right. Is that why you're saying that?

Yeah, Banks are public domain. There was a decree back in the 1930s, and again the 1930s, completely different world. We were under a gold standard. Now it was a very isolated world, US Centric. So the government put out a decree that they were going to confiscate gold. And it's something I don't think is even remotely possible today. It makes absolutely no sense because it's a global world. There isn't even that much gold in this country. It's all in China and India. But when they did that, no one returned the gold. They said you had to. No one did it.

Some people did it. When you say. No one used to say that figuratively. Right.

The only gold that they really confiscated was the gold that was in the bank safety deposit boxes, meaning gold that was left in the public domain. So I'm saying do not leave it in a safety deposit box. In fact, I've taken just about all my wealth out of the system. There's nothing in banks. I have a tiny bit in Charles Schwab because I trust them more than the rest of the. And everything else with banks I don't trust because I do believe there's going to be bank holidays and as we spoke before, some kind of economic martial law in which my assets. I cashed out my ira, paid the penalties because I believe that.

Those are going to be nationalized. The IRAs and the pension funds, they're going to be nationalized. And folks, if you got a 401k, you better watch out. If you're putting money in an Iraq, expect Big Brother to come and nationalize that. They're going to engineer a fake crisis, false flag. And I think they're going to say, we have to, for the public good, take care of people's retirement now. And we have to manage it because we've done such a great job with Social Security, haven't we?

Yeah, I mean, my piece yesterday, and I write about this all the time, was about it was actually called out, out damn ira, because I want people to take them out. It's funny because one of the things that's been brainwashed into people's heads is that IRA money is after tax. So everyone's like, oh, my IRA is 100,000? No, it's 65,000. Because you're going to pay that tax no matter what.

Well, unless it's a Roth, you mean? Right.

Well, if it's a Roth, you've already paid it. But again, they can still roll.

But the law can change. You know, this is. Andy, this is the amazing thing. Who in their right mind thinks that the law will be the same by the time they retire? The government is broke. And living under a government that does not have money becomes an ugly scenario. Because then the government tries to attack any source it can to get that money. The monster is coming after all of us.

And tax rates will be higher.

Of course they'll be higher. They'll just change the law.

I won't take my IRA out because I have to pay 10% penalty. We're a socialist nation. You don't think that 10, 15 years from now, when you're 59 and a half, it's not going to be a 10% higher tax rate? Unbelievable.

It's ridiculous. It really is. It's a crazy belief. So I would say if you have an IRA and you insist on having one, have a self directed ira, as do I, and own physical assets with that ira. So there. It's much harder to nationalize that than it is a stock account where it's simply a paper transaction. So that's one thing you can do, but as you say, you're just out of the system. You know, I had Howard Ruff on the show a while back, and he's a big old gold bug. Been around forever talking about this stuff. And he says, bury it in your backyard. I don't know what, where do you put it? I like physical. But again, it presents another problem of.

Where, you know, look I mean, people, I would guess, I would guess that 90% of the people that own physical own it in their house. I mean, it's just my sense that that's what people are doing. And if they do. Well, look, if you get safes and you bolt them down and you get alarm systems and a dog and all that stuff, I mean, it's not going to get. It's unlikely to be stolen, especially if you're armed in a state where you're allowed to be. That's what I think most people are doing. But some people don't want it in their house. And some people who are very wealthy just don't have. Just can't afford the space and the weight.

A nice problem to have. Yes.

Yeah, it's a nice problem to have. But believe me, silver at this price is very heavy. If you own a million dollars of silver, that's. That's a lot of silver. If you own 10 million silver, most houses can't handle that. So there are storage facilities and we at Miles Franklin have storage facilities that we work with both in North Dakota. We work with Dakota Depository and we work with Brinks, the security company. It's not even a bank or depository in Montreal, Canada.

It just scares me again because I had Peter Schiff on and he was peddling his Perth Mint deal and I'm like, okay, let me see. I give you money, I give you my fake fiat money and then you give me a certificate saying, I've got gold in the Perth Mint. See, that's just another Fiat. But granted, it's not the government Fiat and it's not the Fiat, the Wall Street Fiat. So it's probably better than both of those. And you know, spread it around, diversify.

There are degrees of risk. You can go on a continuum from having a coin in your hand to owning a Convex futures gold, no question. And yeah, the Perth Mint is somewhere in there, but to me it's still a certificate. And in a million years I wouldn't buy a certificate. I don't care where it's from. I wouldn't buy it from the Royal Canadian Mint, from the Perth Mint. It's a certificate. And I don't believe for a second, especially with what's going on with the COMEX and MF Globe, I wouldn't believe for a second that a piece of paper has something behind it.

You're absolutely right. Well, Andy, fascinating discussion. Andy Hoffman, folks. Andy, give out your website. Tell people where they can learn more.

Sure. It's milesfranklin.com. actually, if you go to the front page, you can sign up for my newsletter. I write for free five days a week. My firm writes two newsletters a day just to help educate. There's nothing more than that. We try to tell people what's really going on in the world so that we have educated customers.

Good stuff. Hey, thank you so much for joining us today and keep in touch as things develop and the can can't be kicked down the road any longer. We'd love to have you back on the show for an update and your thoughts on things.

Great. Thanks so much Jason. You know Penny, sometimes I think of.

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