The Breakdown - Hedgeye CEO Keith McCullough on Stagflation, Bitcoin and the Devalued Dollar

Episode Date: August 6, 2020

Today on the Brief: Robinhood doubles quarterly trading revenue Square did $875 billion in bitcoin revenue in Q2 - up 600% YoY ADP report: 167,000 jobs added in July (instead of expected 1.2 million)  Our main conversation is with Hedgeye CEO Keith McCullough.  Before building Hedgeye into a “no-excuses provider of real-time investment research and a premier online financial media company,” Keith worked at hedge funds including Carlyle Blue Wave Partners hedge fund, Magnetar Capital, Falconhenge Partners and Dawson Herman Capital Management. In this conversation, he and NLW discuss: Hedgeye’s “Full Cycle Investing” approach and GIP (Growth, Inflation, Policy) methodology  How the economy was in a period of slowing growth and slowing inflation before COVID-19 How we’ve moved into a stagflation period in response to the money printing prompted by the crisis Why bitcoin, gold, emerging market stocks and commodities are likely to thrive in this environment  Why most narratives are BS  Why the “Old Wall” media distracts rather than educates Check out our guest online: Website: Hedgeye.com  Twitter: @KeithMcCullough  

The people figure out systematically that things are inflating because they're paying the price of those things. Whereas investors, or people like me, already front run them. You know, that's the whole point. You've got to get long inflation before the people at large realize it. And by the time some government guy, central planning gal, by the time they tell us that inflation's here, you know, the investment opportunity to have been long commodities or Bitcoin for that matter is way in the rearview mirror. I don't think that the gold price and the Bitcoin price in particular are validations that great central market plannings are working. I think that they're telling you it's the beginning of the end of an establishment in a regime like the Federal Reserve. Welcome back to The Breakdown with me, NLW.

It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Crypto.com, BitStamp, and Nexo.io. and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, August 5th, and today I am so excited to bring you an interview with the Mucker himself, Hedge-I CEO Keith McCullough. We are going to get into everything from the devalued dollar to Bitcoin and beyond, so stick around for that. First up, however, the brief. First up on the brief today, Robin Hood doubles its second quarter trading revenue. Robin Hood has obviously been throughout the year a huge force in the markets,

at least from a narrative perspective. They have commanded the attention of media, but the question is, are they really growing in step with that? Well, their revenue doubled between quarter one and quarter two, or at least nearly doubled from 91 million in quarter one to 180 million in quarter two. Of that, 111 million or 62% came from options. Options have obviously been at the center of some of the strategies deployed by folks like the Wall Street Betts community to try to drive up prices in the short term in order to benefit. Importantly, this growth is not just limited to Robin Hood when it comes to telling the story of retail. Other brokerages are growing up as well.

TD Ameritrade saw its revenue grow from $220 million to $340 million between Q1 and Q2. E-Trade went from $85 million to $120 million. So what does this all mean? One, the trend lines are clear there is growth in retail trading. Impossible to deny it, just looking at these numbers. Second, the numbers overall are still pretty small when it comes to trying to understand this as a market force, which brings us to number three. What matters more is that there is a clear trend line and serious growth and enough

emphasis to actually potentially move certain stocks, but all of this really matters for contributing to the narrative and the narrative power that retail traders have. When both mainstream media is amplifying the narrative and high-frequency traders are amplifying the actual force in the market, which if you want to understand more about that, go back and check out my interview with Tony Greer. You have a force to be reckoned with. Next up on the brief, Square's Bitcoin revenue surges. In Q2 of this year, Square generated 875 million in Bitcoin revenue and 17 million in Bitcoin gross profit. That's 600% growth in revenue and 711% growth in profit year over year. It's also huge growth

from quarter one, which saw 306.1 million in revenue and 6.7 million in profit. So why does this matter? Well, one, it's very hard to ignore this expression of interest in this Bitcoin space, right? Going from 306.1 million to 875 million is nothing to slouch at, nothing to scoff at, given that it was just a single quarter. What's more, this reaffirms the importance of Square as a central and critical channel for onboarding new people into the Bitcoin space. 875 million in Bitcoin revenue in a single quarter is a serious number. Last up on the brief today, the ADP Private Payrolls Report.

What happened? Well, ADP Private Payrolls is one of the two big payrolls reports that comes out monthly. The other being the NFP report, the non-farmamentary. payroll report that's from the Bureau of Labor Statistics. The ADP report is released by automatic data processing, which is a human resources and management software company, but these are the two big ones. June had seen a 2.369 million jump in private payrolls, and people were expecting another solid, although slightly slower month. The consensus was expecting around 1.2 million new jobs. The actual number was only 167,000, so this is obviously a huge amount lower.

something like 10 to 15% of what people expected. All of these gains that did happen were in very small or very large businesses. In medium businesses between 50 and 499 employees, there actually were a loss of 25,000 jobs. What's more in terms of goods producing jobs, there were only 1,000 gains. So service jobs were up 166,000, but good producing jobs, manufacturing jobs were only up 1,000. And within that, construction jobs were actually down 8,000 jobs. Why does this matter? Well, again, everything is about expectations, and the expectation was to see solid growth month to month of 1.2 million new jobs. This really puts a pin in the point that the coronavirus return and resurgence in different parts of the country has stopped the growth

that we were seeing and the recovery that we were seeing. This is obviously something that should be at the top of mind for anyone who's trying to figure out where we go from here. So I think it's a really important bit of data. Now, we will see what the non-esumption farm payroll report says on Friday, maybe it tells a different story. It's not uncommon for these two reports to tell a different story, but this one bit of data is not looking good. With that, let's get into our main conversation with Keith McCullough. Keith McCullough is the CEO of Hedgeye, which describes itself as a no-excuses provider of real-time investment research and a premier online financial media company. He has previously been a hedge fund manager at the Carlisle Blue Wave Partners

Hedge Fund, Magnitar Capital, Falcon Henges Partners, and Dawson-Herman Capital Management. Most of you who know Keith know him from Hedge Eye, and I think that, frankly, along with things like Real Vision, these guys are completely reinventing financial media. They're speaking to a different audience, and they're speaking frankly about what's actually happening in a way that you're just not going to get elsewhere. In this conversation, we talk about hedgeing full cycle investing model. We talk about where things were going into COVID and why we're moving into a stagflation period. We talk about inflation versus deflation, the role of narrative, the role of the Fed, what it means that dollars are being devalued. We talk about Bitcoin and commodities.

It is an awesome conversation. And like all of our conversations, it's edited only very lightly, so it's as real as it was when we were having it. I hope you enjoy this. I know you're going to. So let's dive in. All right, Keith, thanks so much for joining the breakdown. Thanks for having me. I appreciate it. So I'm really looking forward to this conversation. And just briefly, I want to for folks who aren't necessarily as familiar with the hedge-eye process to define a couple terms because I think that we might come back to them throughout the conversation. So can we kick off by having you explain just a little bit about what's the idea of one full cycle investing?

What's the GIP growth inflation policy model? and what are the quads? For sure. They're all, so all these things are part of the same thing. So if you just think quite simply of where are you on the sign curve of a cycle? So again, you're either accelerating up the backside

of the sign curve. You're decelerating from the peak of the cycle. For example, in growth or GDP growth and you have a decelering component for the cycle. So when you have both, and it's really a two-factor model. So Nathaniel, when you look at it, you have GDP growth,

and inflation. So you have those two factors. You measure and map them on the sign curve. There's data points that are released daily. We use modern technology, predictive tracking algorithms, et cetera, and code to track that. So it's not an opinion on what the economy is doing. It's actually just what the economy is actually doing real time to the day. And then we strap that into a four by, basically a two by two model that gives you four

different economic quadrants. So again, and they're just a combination of those. those two factors. So when you have both growth and inflation accelerating at the same time, we call that quad two. When we have both growth and inflation decelerating at the same time, we call that quad four. When you have, and currently in the U.S. economy, we have inflation while real growth is decelerating. So we call that quad three or stag inflation. So again, if you really want to like boil it down, the economy is slowing when you're in quad three or quad four. And when you're in quad three, the dollar goes down. So there are a lot of different

we back tested every single thing in macro that that you could possibly own, which would include Bitcoin. And, you know, in Quad three, Bitcoin's going to do really well because the dollar is going to do really poorly. The U.S. economy on a real basis is doing quite poorly. So again, if you stay with the full cycle investing process, what you're really doing is you're just staying with these two very basic factors in macro as being causal. They're, they're, they're the ones causing the outcomes. And once those change, well, then you change your position. So, for example, if you were to go into Quad 2, then all of a sudden you'd have real growth accelerating and people would find a lot of other things to buy. But when you're in Quad 3,

it's quite a damning situation economically where the people are really getting plugged with commodity inflation, things like that, higher cost of living. And I think that that's why something like Bitcoin's going to continue to work higher and has most recently. So I think one of the things that's really appealing to folks about this quad model is that it sets an analytical framework from within which we can have more precise debates, right? So policy has a dimension here where certainly you have expectations based on what we've seen in the past about what policy might do, but that becomes kind of an additional variable. And I think what people like, like I said, is that, you know, it refines things down a little bit. And so one of the things that I thought was really interesting

I was going back and reviewing some of your writing and content from earlier in the year. And as we were coming into COVID, at the end of February, you guys said something to the effect of this. You wrote, risk accumulates much like grains of sand. Put more succinctly, risk happens slowly than all at once. Coronavirus is obviously a big risk to financial markets, but the overall instability of financial markets has been building for some time. So this was obviously something that you were seeing even before this crisis hit. So I guess what were you watching earlier this year kind of in the February time frame? And then how has COVID changed or moved things since then?

Yeah, it really, I mean, it started to manifest at the end of January and to your point into the heart of February, where it was kind of interesting because at that point, the S&P 500 was making all-time highs or wasn't as much interest in the kinds of things you'd be buying today. But it was just, like I say to myself all the time, it's just the data stupid. So at the end of the day, you can kind of be stupid about it because you just wait for the data to change. So what was happening was the economy was super late cycle. So again, just think about that, like back on the sign curve coming off the very top of the sign curve. So the probability of an event was rising. So when you think about economies or nonlinear systems, anything in nature, when you think of it fractally or how I measure map it again, not using linear assumptions or valuations or any of this old wall.

or as Portnay would say, you know, the suits garbage in terms of like garbage in garbage out. It was just very obvious that all of our predictive tracking algorithms real time were signaling a big deflation was coming. Now, deflation, again, is quad four in that GIP model that you mentioned. Again, it's a growth inflation policy model. And the P part of that model, which I meant to say Nathaniel, you're basically front-running policymaker's actions. So if I know that growth and inflation are slung at the same time at the end of February, at the

of January. Obviously, in March, everybody's starting to figure out. Eventually, the Fed figures it up. And then the Fed, the P part of the GIP model, the policy response is to devalue the dollars, or it's to, you know, print money. And then we had this, you know, this glorious synchrony, I guess, in their own eyes from the establishment to effectively not only print money, but give away money, you know, from the Treasury's perspective. So now you've got the rates of change in addition to the economy slowing, both growth and inflation slowing at the same time, you had the rates have changed the deficit rising, U.S. debt rising as a percentage of GDP. So it just became very obvious that there was a developing risk. Again, just like any sandpile theory, you're

dropping grains of sand on top of a pile that's already destabilized. And once it was done, it was done. I mean, obviously the Fed's panic and the Treasuries too reflects the economic reality or economic depression that we had throughout March, April, and parts of May. So basically we have this sort of late cycle part. We're at Quad 4. There's a huge exogenous event that happens. And so the next thing is the money printer revs up. I think that when we look back at early 2020 at least, the meme of the year will be the money printer go Burm meme.

Like it or not. And so the outcome of this or part of the expected outcome. And I think what we're trying to piece through now is inflation accelerating. and this is how we get into Quad 3. But I guess one of the questions, and I see you debate this constantly on Twitter, is where are we expecting inflation to show up? It feels like this is maybe the most gotcha Twitter fight, FinTwit fight, you know, since 2008 almost, about inflation or not and where it's going to appear.

Yeah, I think that's because you have a lot of academic wonks or people that have their PhDs and are part of the establishment. They think on a linear basis, I'll actually call a lot of them linear economy. or people that know nothing at all about economics that are just, they just have an opinion on deflation versus inflation because they're long treasuries and, and a lot of different things that got them paid on the deflation side. We were there. I obviously understand it. But you can have a cyclical inflation within a longer term secular deflation. Inflation is pretty simple. It's in your account. I mean, it's in anything that you buy in dollars, if it goes up in price, that's inflation. I mean, if it's, if anything you buy in dollars goes down in price, you know, that in your account is going to look like, loss of money or loss of capital and deflation. So again, you know, deflation is a much bigger risk. That's the big bang theory that a lot of people have the end of the world thing. But the Fed is fighting against that.

And their number one way to weaponize inflation without ever mentioning it. And the irony, obviously, Nathaniel's that most government linear econs will say, well, there's no inflation, not until we get to our target. You know, by then, you know, who knows what amount of money we would have made, buying commodities and bitcoins, anything that's got intense in, correlation to the dollar. In other words, as the dollar goes down at a faster rate, these assets inflate at a fast rate. I don't think it's a debate. I think it's actually probably the easiest debate that I've ever, I get in plenty on Twitter, as you know, but I mean, this one's, this is an

easy one. You can knock somebody out in the first round with this one. Well, I think this is what's so interesting. And I do think that the kind of focus on on wonky traditional measures, particularly the CPI, it's maybe also the area where I think regular people feel most disconnected from what policymakers are telling them, or at least one of the areas, right? And you've pointed this out in terms of things like coffee prices. People have seen groceries go up. And these are measures that are excluded from CPI because of, you know, they have a demand that's basically not going to change or fluctuate too much.

But people, when they experience inflation, it's in those areas. And this is a, it's almost distracting to have such a focus from a kind of traditional academic economic perspective on this one measure of inflation. Yeah, that is right on the screws correct. And again, just think back when the Fed or the establishment econs, when they're telling you that the risk to inflation, when's the last time they actually acknowledge that? Well, they said that at precisely the time that my model said we were about to have deflation, which was in Q4 of 2018. The Fed raised interest rates because they were concerned about inflationary pressures at precisely the peak of the sign curve on inflation. That's one headline or CBI inflation, the one that you called out, just was right around 2.8%.

Some of the monthly's got to 3%. So well above their quote-of-quote target, oh, so therefore now we're worried about it, right when you should be worried about a reversal. The thing about inflation is that it's mean reverting. It goes up, then it goes down. It goes up, then it goes down. It's actually one of the easiest things. Again, I built predictive tracking algorithms to front run it. So I use a commodity, to your point, with like a lot of these different callouts, and human beings really do see, like, if you're a carpenter,

like my dad was, you're going to have seen the cost of lumber as risen dramatically in the last month and a half. Or to your point, if you drink coffee, you're going to realize that. And that's the thing about the people. The people figure out systematically that things are inflating because they're paying the price of those things. Whereas investors or people like me are already front run them, you know, that's the whole point. You've got to get long inflation before the people at large realize it. And by the time some government guy, central planning gal, By the time they tell us that inflation's here, you know, the investment opportunity to have been long commodities or Bitcoin, for that matter, is way in the rearview mirror.

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with interest rates starting from only 5.9% APR. NXO also lets you earn up to 10% annually on your Fiat and digital assets. What's more, interest is paid out daily and you can add or withdraw funds at any time. Get started at nexo.io. Another part of this story that I think is really interesting is the dollar story. And I think we've seen kind of this narrative, two major narratives since the peak of the crisis, let's call it in March, around the dollar. The first was, holy crap, why is this thing staying so strong? There's all this money printing.

We would expect it to get weaker. And then that weakening actually showing up, although there's kind of a debate a little bit, it feels like, around what the DXY story is actually telling us, right? Is this a dollar weakening? Is this just really a euro story? The dollar still seems strong against emerging market currencies. What do you make of the dollar narrative right now? And maybe more than the narrative, the actual kind of story of the dollar in a real way?

I think generally, like a lot of narratives are bullshit. I mean, there's a lot of people that have a narrative that fits their permanent position, if you will. And whether that permanent position be a political position on one side or the other of the aisle or a marketing position of an asset class, you know, people are just constantly spewing a narrative. Now, the thing with Wall Street is that their narrative is always moving. So what we follow is that, you know, there's narrative drift. The reality is that the dollar moves with deflation, like moves within the quads. The only time the dollar goes up is in quad four. So again, that perpetuates deflationary pressures.

That's why there's something like Bitcoin got smoked when you had quad four deep quad four depletion into the thralls of March. And that surprised some people. Didn't surprise me. I mean, we weren't long Bitcoin at that point. We went bullish on it in April when it became very obvious that the Fed was willing to devalue the dollar and do it in a way that nobody, even beyond the wildest, I think the bulls, the people that love the Fed lovers. They call it, you know, creative and innovative in a ways. So at that point, it started to become clear that the dollar was done going up because the Fed was, and the fiscal side was committed to devaluing it.

So by May, you know, our signal and our model said that the dollar was done going up, starts the breakdown, and you finally get that dollar-based inflation. If you pull back a long-term time series of the dollar, we're just getting started. I mean, I think that that's why you see such a parabolic move. I'm not just bullish on Bitcoin. I'm bullish on a lot of things. And if it offends people that I call Bitcoin a commodity, that's fine. I mean, but I don't think of it as a currency.

I think of it as a commodity that trades in dollars. So again, I think of silver the same way. People that think of silver as a currency, they might get offended. I'm not trying to offend people. It's just what my model calls these out as. And I call it a commodity because it has the volatility characteristics of commodity. So if you want to go through that, we can too. But what happens when the dollar starts to develop this intense.

Hence inverse correlation to commodity prices. Currently, Nathaniel, it's 98% on a 30-day duration. Like the machine, you know, the modern-day machine and asset management, purely algorithmic doesn't care about narratives, absolutely chomps on that all day long. So it just sells dollars and buys things inversely correlated to dollars. That 98% level on gold and on the CRV commodities index broadly that you have now, it's just unbelievably strong, almost unprecedented.

Those are the things that I really care about. It's like, what is the math do, not what is somebody telling me a story about. I can tell you a story about, you know, pump coming out and saying, look, I'm going to print another whatever and do this for whoever ahead of the election. I mean, I get the story, but the reality is if the dollar's not doing what it's doing, then I won't be as grossed up, if you will, on the invested side of long commodities and Bitcoin. It's really interesting.

I mean, I think one of the things that, you know, I talk a lot about narratives here in this exploration, but it's always in the context of narratives being a battle of self-fulfilling prophecy, right? And the reason to understand narratives isn't to accept them, it's to understand what people are trying to tell you. And it's a weird combination of a lagging indicator, or sort of a lagging explanation as well as a leading indicator of people trying to push things and make them so. I think actually that's part of what makes Robin Hood and the Davy Day Trader phenomenon so interesting this year is that unlike a lot of folks who kind of have their perpetual narrative, these guys are willing to absolutely engage in total narrative warfare and use

any means at their disposal to try to drive prices in a way that make their narratives crude and memeified as they are makes sense. Yeah, that is such a good point. I mean, for me, you may or may not, people may or may not believe this, but I can't even begin to comprehend somebody's narrative unless it's written in numbers. I just can't. There's no code for it. There's no backdests for it.

There's nothing. So when I read things like at night, I read things in the morning, I'm literally reading rate of change numbers. It's not somebody's interpretation of the numbers. It's the rate of change, which is, again, you know, some people kind of think this is funny, but when I say that or not, I mean, the secret to the universe is calculus. I mean, it's not that complicated. So if the rate of change of the numbers are moving, then I'm listening. I think there are just, you know, human beings by nature, I think to your point, just need to tell themselves a story that they can. believe in. But I don't, I go both ways all the time. I mean, I've been bearish on Bitcoin

plenty of times and bullish on it now. I mean, it's, I will go the direction of these, of the numbers, the rates of change, change, I'll change. So I want to just add a little bit more to the, the U.S. dollar conversation, because I think you had another tweet that, that sum this up nicely. You said, being, quote, bearish on the U.S. dollars since May of 2020 means being bullish on commodities, China and emerging market equities. We talked a bunch about commodities, but I'd love those other pieces as well, if we could bring them into this story. Yeah, I think that, I mean, again, a lot of people, their narrative is, you know, we as human beings have confirmation biases, you know, recency biases. There's so many different heuristics

that we have in our thick craws that people anchor on. But imagine for a second that you live in Mongolia or you live somewhere that's not, you know, in the state of Connecticut where I'm sitting today, which is a tough day from the state with the storm. But, you know, people around the world for a long time have looked for an opportunity to see American weakness and to see American weakness through the lens of its currency. That's what all those other things are priced in. You know, China's debt, for example, the largest swath of the U.S. dollar denominated debt in the world is held by the Chinese. If you take down, if you take the dollar up, well, that's going to hurt them. If you take the dollar down, then that's going to be better for the Chinese.

If you look at all of emerging market currencies, like you mentioned, and some people will say, oh, it's just against, like you mentioned, oh, it's just against the euro. I mean, that's complete bullshit. The dollar last week alone was up against the Chilean peso, like 2.5%. It's been up against that 8% in the last month. The Chilean peso, for God's sakes, the Hungarian for it is up almost 10% in the last month against the U.S. the bludgeoning of the U.S. dollar. So that's the thing is that they, and think of it maybe like this.

If you're, again, if you're a non-remency bias, non-confirmation bias, non-location, be and you're sitting there and you're sitting there and you're saying okay what currency do i want if i work all day do i want to be paid in a currency that's going to be worth more to morrow or less and how about like for seven or now it's seven straight weeks the dollars down against their currencies sure damn right the hungarian guy or the chilean gal is happy because the currency that they're working their ass off for is going up in value and so are their equity markets now um that's that's obviously there's a high correlation, inverse correlation between the dollar and emerging markets. So again, I often say this. If you want to get commodities emerging markets in China right, you got to get the dollar

right. If you want to get the dollar right, you got to get the quads right. And that's why we start with the quads. Get that right first. So there's another piece of this. And I think one of the things that, again, people appreciate about this type of analysis is that it connects the dots between otherwise disconnected data points or things that can feel disconnected. You got another tweet that said the bond market gets the quad three stagflation joke. What do you think that that means? So when somebody says, and this really is why you see, and I think it's a really good point that you make about the Twitter battle today, just think of like how intense battles can be,

but this one about inflation versus deflation, as soon as one traditional, the traditionalist or an establishment person hears word inflation, they think, okay, well, that means bond yields must go up. So you can't be on bonds. Again, that's bullshit, right? That is true when you're in quad two, when you have the two factors in the model, real growth and inflation rising at the same time. So nominal bond yields are rising gold, eight-sac, gold collapses when you have rising real yields, and it loves it when you see real yields collapsing. So again, stagflation is when you take a falling growth rate, real growth rate, in this case, the U.S. growth rate is negative, so that's easy to understand.

And then you subtract a positive and accelerating inflation rate. So all of a sudden, the negative real rate gets more and more negative. And that's what stagflation is. This is why, actually, if you go back to the 1970s even, this even confounded Warren Buffett for a period of time in the 1970s because he's like, holy shit, every time I buy one of these stocks, it goes, because he's a value guy, right? So he bought it at, let's say he bought it at 10 times earnings. And then it went to 9 times earnings.

And it went to, the S&P 500 went to 7 times earnings in the 1970s. Because stagflation is so damning for P&Ls for a lot of different things. Just think of it. Your revenues are slowing, your costs are rising. That's it. So your margins are getting squeezed. Margin compression equals local compression, and that's why that happened. I think we're on the front end of that, and I think that's quite literally why now stock market up days are being led by commodity sectors of the market, not by, you know, all the things that people would have traditionally expected, like banks or financials.

Financials heat stagnation. So it's not just the bond market gets quad-3 stag inflation a day. Short sellers of financials get it. financials are down 22% this year. The NASDAX up that same percentage or they're about it. So I think the market actually, if you break it down into its parts, which I think a lot of people of the modern macro era would that aren't really, I call it, macro tourism or narrative base, you can see it. All the different parts of the market understand us. So the macro tourism thing is really interesting.

And one of the things that's interesting is that you've spent a lot of your career doing the actual number side of this, right? making money by applying this analysis, by applying this process. But you've also made a major, major investment in media, right, in offering an alternative approach and alternative take. How much is what you've called the old wall, the traditional financial media at fault in kind of people's misunderstanding of what the markets are telling them? Well, it's a blessing that they're still gainfully employed and running the place. So we'll just start with that. I mean, you know, it's, there's so many components to this, we could have a whole discussion for 30 plus minutes on this topic. But, I mean, you know, there's a generational problem.

You know, all the establishment politically and from a Wall Street or the old Walls perspective is run by a bunch of baby boomers. And so again, it's not like my dog's name's boomer. I'm fine with the name and not trying to use it as a pejorative. The reality is that I'm Gen X and most people I talk to are boomers, Gen X, Gen Y, Millennials. It doesn't matter what generation, the people I'm talking to about this are. It's the people are unanimously of one generation, of one establishment, of one view, the old wall view, that are basically running the place. You know, so the most recent example of that was when it came time to choose your liberty or safety, you know, what did Wall Street and the old wall choose?

They chose to devalue the dollar, strap millennials with the largest deficit in the history of humanity, and debt too. You know, that's what they chose. some short-term safety at the expense of long-term liberty. And these are super long cycles. George Friedman just wrote a wonderful book about this called The Storm Before the Con. And Friedman's got to be north of 70 years old, but he's a great geopolitical strategist. And we have one too, and Neil Howe, who I think you might know, he actually coined the term millennials, and he calls it the fourth turning.

So these generational turnings, whether they'd be an institutional one that's like 80-year institutional turning. These are long, long, long cycles, or a 50-year one, freebent, I think he calls that a socioeconomic one. You know, there's a tremendous amount of angst and disbelief that starts to get built up into the end of the regime or a generation's reign. And that's what I think about that. I mean, Old Wall and CNBC has never been as conflicted in compromises that they've always been, whether it be banking fees, whether it'd be trading commissions, advertising dollars. And that's saying a lot to think. I mean, I think people know that conflict of interest, but for it to be the worst it's ever been out, I mean, that's embarrassing.

Yeah, it's interesting. So my first entrepreneurial project ever was actually a magazine about this generation, the millennials called The Journal of a Generation that doesn't know whether it's a generation at all. And it was largely predicated on or influenced by a lot of Neal How's work, which is an interesting little twist. So this actually gets me, though, to maybe a kind of a wrap-up question that is something that I think is really fascinating. I'm interested in your take on. Your method, obviously, your process, you've built a process that helps you take advantage of to make sense of and then make money from the reality or the circumstance we find ourselves in, but you also get enormously frustrated by the decisions that are feeding into that system, right?

And so I'd love your take lastly on kind of building out a little bit more on this question of income inequality, the Fed's role in it, and just the, the, policymaker in generals, what they're doing to kind of straddle the next generation with just an untenable situation? Yeah, it's a great, like, moral divide in my fixed golf, you know? On the one hand, my number one goal is to preserve the capital that I've had the blessing to make over the course of last 20 plus years working and preserve that capital for my family and compound that, the returns on that capital. So that's on the one hand, that's my, that's my number one goal. And then on the other side, there's the moral decay associated with making money on something that is going to absolutely pulverize the people that not only I am still to this day.

I mean, my father was a firefighter for 38 years. My mom didn't work. And, you know, I get it. I get that I'm making money on the back of a broken establishment's policy. And that's, I just kind of like, I get frustrated that. I'm not sure you can see that because it's frustrating to see that, as, in place, particular a great country like this, and I came here in the 1990s, I'm a Canadian, my family, my kids, my four kids are Americans. I came to this country. It wasn't like that. I mean,

it was, you know, free market capitalism was at a far more pure definition. And I get frustrated with that, too, because I worry for my kids, I worry for what happens after all this or what's about to happen now because of all this. A good start to happen tomorrow. It's already happening. I don't think that the gold price and the Bitcoin price in particular are validations that that great central market plannings are working. I think that they're telling you it's the beginning of the end of an establishment in a regime like the Federal Reserve. What are signs that you take optimism from?

Are there countervailing forces that you hang your hat on as you try to kind of wrestle with this challenge of where we're headed? Yeah, conversations like this. I mean, it's kind of like therapy. A little bit, you know, it's not about how many times I sort of, grew up and make plenty of mistakes. Everybody can see those. I think it's about the opportunity and really what I think generationally is the opportunity always has been in this country in particular. Generationally, people just throw up their hands and say, that's bullshit. And

other conversations like this are happening and it's okay for, I think I've said bullshit enough times. You could have called me out on it if you didn't think it wasn't. And evidently you have it. So I mean, and I have so many of these conversations. These conversations are real. These are the ones that I think the next generation should look forward to. Unfortunately, these have a central tendency to end in a mess before you can actually have new leadership, you know, take control. But the establishment is locked and loaded. They're going to play this out in full and that's going to be one hell of a ride. Well, along that ride, for people who want to strap on and keep track of what you are saying as opposed to what others are saying,

and what HedgeEye is looking at, where can they find you? Hedgeye.com. That's where most of the sound bites of what I'm trying to communicate, or my Twitter handle at Keith McKeever. I'm there every morning and then grinding away. Awesome. All right, Keith. Well, thanks so much for hanging out today and we'll see you on Twitter.

One of the things that I really appreciate about HedgeE and Keith is that their process is so rooted in a numerical analytical framework. We have such a strong competition for narrative in the social media sphere, in the mainstream media sphere, that to have a basis, a starting point that is so driven by just what the data is saying is really refreshing. I think in fact that in some ways it gives Keith and Hedgeye an upper hand even when they're participating in a narrative conversation because their whole point is that they're not wedded to one or another. One of the things that gets me the most excited about the future is that more than ever, a different demographic, a different set of people, a different

generation is asking questions about the economy. And rather than just being accepting of the standard narratives that they're being told, they're wanting something different. They're wanting a deeper understanding and they're wanting to go figure out what answers make sense to them. I think that's one of the major things driving interest in assets like Bitcoin. But it's not just Bitcoin. It's an entire new world of financial exploration that's opening up for a whole different group, and it's not just one age group, it's a lot of different people who have been excluded by traditional financial media. That's a powerful thing, because when more people and more different types of people have a chance to have their voice heard in the context of the economy,

it breaks the power of those narrative gateholders that have shaped things for so long. Anyways, guys, that's it for today. I hope you enjoyed that conversation. We'll be back tomorrow with another great interview. Until then, be safe and take care of each other. Peace.