The Pomp Podcast - #1371 Anthony Pompliano on Bitcoin, Trump, and Interest Rates

Episode Date: June 12, 2024

Phil Rosen, the Co-Founder of Opening Bell Daily, interviews Anthony Pompliano. Topics include bitcoin, President Trump's recent support of the industry, interest rates, financial media, and more. ======================= Meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy. Protect your loved ones with sound money built to manage life’s uncertainty and a broken financial system. Their BTC-denominated Whole Life Insurance policies allow HODLers to pass more BTC on to their loved ones and a tax-advantaged way to access BTC for liquidity during their lifetime. Visit their website at ⁠https://meanwhile.bm/⁠ to join the waitlist for a policy and to learn more. ======================= Buy and sell cryptocurrency in a tax-advantaged crypto IRA with iTrustCapital. Enjoy 24/7 access, lowest fees in the industry, and tax benefits for your retirement. Open and fund an account today at https://www.itrustcapital.com/pomp to receive a $100 USD funding bonus. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's up, guys? Bang, bang. Today's episode is a little bit unique. I have Phil Rosen, the co-founder of Opening Bell News. He is here today, and what he is going to do

is interview me. That's right. I'm in the hot seat. He's going to ask me a bunch of questions about Bitcoin, President Trump's recent support of the industry, interest rates, and the financial media. I did my best to cram a ton of information and insights into about a 20-minute interview. We're going to try out this format. If you like it, please let us know in the comments. We'll do more of them. Maybe we'll try to do one a week where Phil interviews me only though, if you guys like it. So make sure that you leave that comment, make sure that you engage with the video or the audio so that we know that we should continue doing this. All right, here is my conversation or where Phil is interviewing me today. Anthony Pompliano runs Pomp Investments. All views of him

and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Meanwhile. Meanwhile is the world's first licensed and regulated life insurance company built for the Bitcoin economy. Operating on the Bitcoin standard, they do everything in Bitcoin. You pay in Bitcoin. They pay claims to your family in Bitcoin. You take out policy loans entirely in Bitcoin when you need liquidity. Meanwhile, Bitcoin life insurance

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Go check them out today. Today's episode is brought to you by iTrust Capital. Are you buying crypto on an exchange because you're excited about the bull run? Well, I hope you're reporting your crypto gains to the IRS because they want you to pay your taxes. That's right. When you buy and sell crypto on an exchange, you need to pay the government taxes when you make profits.

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a tax-advantaged account. So opening a tax-advantaged IRA at iTrust Capital only takes a few minutes. You have 24-7 access to the markets with some of the lowest fees in the industry. The bull run has begun and people are starting to see their accounts go up. So start taking advantage of tax benefits with an IRA at iTrust Capital. You can start maximizing your crypto investment today, go to itrustcapital.com. That's itrustcapital.com. Bomp, how are you doing? I'm doing fantastic. It's an honor to be here and I'm excited to hear about your views on interest rates, Trump,

and Bitcoin, as always. Of course, I'm excited for you to do this and also everyone to meet you. Yeah, yeah, let's do it. So I read your newsletter this morning and you were writing about the Trump's new position on Bitcoin. He's quite supportive of it. And can you explain a bit more about how you think that could impact the regulatory outlook for, you know, even if Trump or Biden wins, they both seem optimistic. Can you talk about what that means for the regulatory landscape? Yeah, if you think leadership matters, right? And so in every organization, both government and in the private sector, the leader sets the tone, the leader sets the, you know,

kind of positions, the leader sets in motion what everyone else is going to do. And so currently, President Biden and the administration, they've been very anti-crypto. They've been very anti-Bitcoin, anti-mining, you know, just get on the line. And so what happens is everyone in the government apparatus is anti-Bitcoin, anti-crypto, anti-mining. With Trump, he was anti-Bitcoin. He has many tweets that he's put out there. Many times he said, hey, I actually don't like this. I'm very pro-America. That was his big stance was Bitcoin is competitive with the US dollar. I do not want this happening. What I think has happened is people have started to educate him. I know that his sons have started to become more sympathetic

to Bitcoin. They started to understand it better across government, financial institutions, private sector, et cetera. A lot of people that I know that are wealthy or successful, their kids are the ones who kind of explained to them what Bitcoin is or what crypto was and why was important. So I think that's a natural progression for Trump to go through. On one hand, there's people who now are saying, wait a minute, this guy was against it. Now he's saying he's for it. Is he pandering? Is he just going to and trying to get votes? There could be an element of that, right? I don't think he's stupid. I think he's hearing what people are saying. He's saying, hey, you guys want me to be pro-Bitcoin? You're going to vote for me? I'm pro-Bitcoin,

right? At the same time, I think he's just getting educated. He's learning about this stuff. And I know many, many people, we could rattle off a whole plethora of folks from inside the industry that have gone and met with him, had dinner, been to different events with him and really spent the time to educate him on this stuff. And so this is kind of like what Bitcoiners or kind of crypto communities we talk about for a long time, right? Is the game theory is that they're going to have to support it. And so critics have always cracked me up.

They're like, you know, I'm smart. Here's my academic theory as to why the government is going to ban Bitcoin. And you're like, dude, you live on a different planet. What are you talking about? Right. And the reason why the government has the support is the same reason why the individual supports it, which is Bitcoin solves a real problem.

Crypto solves a real problem. I'll give you a couple of examples. If I want to protect the economic purchasing power of myself as an individual, Bitcoin does that better than any other asset in the world. If I bought gold five years ago before the pandemic and I held till today, I've lost purchasing power. Gold has not kept up with the decline of the US dollar.

Bitcoin is the only asset that I'm aware of that is an asset class to itself, which has outperformed inflation. And so when you look at it from that perspective, it solved the problem for the individual around purchasing power. If you go to more of a system approach, Bitcoin mining is solving a ton of energy problems in America. And people are like, what are you talking about? I heard that this consumes a lot of energy. Well, one, Bitcoin mining is over 50%, close to 60% of all energy consumed with Bitcoin mining is renewable energy. So what you get there is Bitcoin mining is probably the furthest penetration

of renewable energy usage out of any industry in America. And so if that is the case, then actually we should be putting that industry on a pedestal saying, why is the rest of the American economy only 20% renewable? Why is it not 60? Bitcoin mining is leading from the front in terms of energy mix. And then you look at things like stranded gas. So gas flaring being a great example. If we are going to pollute the environment and flare gas, and we're going to burn a hole in the atmosphere. Well, what if we could stop doing that? That'd probably be a pretty powerful thing. And that's exactly what Bitcoin miners are doing. They're going and they're stopping gas flaring. They're capturing that energy. They're mining on site. And so you solve that

problem. And then you look and say, okay, well, that's Bitcoin and Bitcoin mining. What about stable coins? Stable coins now collectively are the 16th largest holder of US treasuries globally. Well, at a time where China and Japan are not buying as many treasuries as they used to, used to be 22% of all global debt. Now it's down to seven. Here come the stablecoin issuers. They're saying, we're going to buy debt. And so if you look at Bitcoin, Bitcoin mining, crypto, et cetera, like we are solving real problems here. And so what I wrote in the letter was I said, look, it seems like technology has been solving real problems and critics have been crying, right? They're having this war of words, but technologists are having

a war of action. And by solving problems, you're on the right side of history and you end up actually winning. And so naturally politicians realize, wait a second, I'm not going to be the anti-progress candidate. I'm not going to be the anti-success candidate. And by Trump making that move, now all of a sudden Biden, you know, he's backed in a corner. What do you do? Are you really going to cede the Bitcoin and crypto point to Trump? Are you going to let him take 50 million voters out from underneath you because they all are going to vote with their wallets? No, you're going to become more sympathetic to it. And so regardless of whether you believe either one of them. Everyone is moving to become more pro crypto and pro Bitcoin. And that is very good

tailwind for the whole industry. So something I was thinking about when I was reading your letter this morning, presidents on the campaign trail make promises all the time and they say a lot of things that don't end up being true. So in that sense, as far as what Trump is saying now about being super pro-Bitcoin. What if he doesn't follow through on all of that? Is there a worst case scenario you see for crypto as an asset class, but also Bitcoin specifically? Yeah, there's probably three different outcomes, right? There's like, okay, they say that they're supporting it. They get in office, they do support it. They go and they deregulate some of the industry. They go ahead and make a bunch of actions that are very

pro-crypto. It's a boom for the industry and we're off to the races. That'd be great, but you know, maybe it happens, maybe it doesn't. The other example would be that they come out and they say, hey, we're going to support this thing going into the election. They get elected, whoever it is, and then they do nothing. Again, promise is not kept. That's like basically the name of the game for most politicians. So it's probably not a divergence from the norm, but they're not really doing harm as much as like they had an opportunity to do something positive and they didn't do it. The third, which is probably the most unlikely, is to come out in support of the assets and of the industry get in office and then 180 and then go attack the

industry there's very few examples in history of politicians going in promising one thing and then basically turning their back on that industry and going and hurting that industry intentionally um of course there's always unintentional consequences you know and all the caveats but um my guess is we get one of the first two regardless of whether it's trump or biden is either they're kind of like agnostic to it like ah whatever i got some votes for it but I'm not really going to do anything, or they end up being supportive. It is very hard today to see a world where either one of the political candidates would end up being anti-crypto because you have now other politicians in Congress and Senate that hold the assets.

You now have people around them in their staff that holds these assets. And it's such a big voter base that you really got to pay attention and make sure that you're not upsetting those people. I think that makes a lot of sense. So something I've been wanting to ask you for a while now is your view on interest rates, because that is the hottest topic in financial markets. We started the year with about six rates forecasted for markets, and now it's down to about one or two. Where do you fall on that? And also, how has that impacted your view on how you're allocating investments and what you're considering? And also, are these conversations you're having with other investors changing because of the interest rate landscape? Yeah, it's a good

question. I would say there's two main points here. One, it is arrogant for the central bank to believe that they can set an interest rate. And when I say that, people are like, what do you mean? I'm like, the market is the true setter of interest rates, right? What is the cost of capital? The market determines that. When somebody outside of the market, in terms of the market force, an individual or an organization steps and says, no, we are going to set an artificial price of capital, cost of capital. That is an arrogant view. You are saying that you are smarter than the market. I just don't believe that's possible. So at the outset, setting the interest rate, I think is a fool's errand because you can't be right. You're not the market. You're

not going to be able to self-correct. You're not going to be able to react to all the different economic factors. And so what ends up happening is you're trying to take all this data, which is backwards looking. You're going to use that backwards looking data to make decisions today about what you think is going to happen in the future. It's an impossible decision for any human to make. Now, put that aside. Say, that all sounds great, but this is not going to set the interest rate. I tend to be what I call a market observer. I'm not going to pontificate on what they should do. I just simply want to understand what are they going to do. What they should do is completely different because what they really should do is not have the interest rate. And even if they have

an interest rate, then they should probably stop this volatile management of it. But what are they going to do? At the start of the year, it was pretty obvious to a lot of people, hey, they're going to cut. But what changed was they got a bunch of economic data that said, wait a second, maybe we shouldn't cut. And so one of the things that investors tend to do that I talk with is they get very rigid in their thinking around interest rates. They say, okay, interest rates are five and a half percent. They're going to cut seven times this year, six times, five times, three times, whatever. And they go into the year. By March, 90 days, it was obvious they were not going to cut seven times, right? Or six times. And so when you look at that, you have to ask

yourself, are you willing to change your mind? How quickly can you update your line of thinking? And so just like when you're building a product, you want to have very high iteration speed. In investing, you want a very high iteration speed in your thought process of what's going to happen. And that is all based on how much information can you consume, right? How can you sift through what is high signal, what's not, and then be able to act. And so as of right now, you can pretty much count me as somebody who believes the prediction markets. One to two cuts, somehow they'll do a cut before the election. Central Bank is supposed to be independent. Somehow we're going to get the cut before the election. I actually don't think it's going to matter that much. Right now we're

at 5.5%, interest rate is 5.75%. And you have QQQ all-time highs, right? You have S&P ripping. You have Bitcoin near all-time highs. With high interest rates, you're supposed to have asset prices crashing. What's going on, right? I saw a study recently that showed uh it is better to buy the stock index they measure the smp it's better to buy it at the all-time high than any other day because momentum is real so when it hits a new all-time high right the last time i hit a new all-time high if you would have bought it it kept going up and it hit a new all-time high right um and then the further you go out the more likely it is that it appreciated so if you measure three six uh months one year two years three years three years is actually

the biggest gap so if you buy at an all-time high and then you wait a period of time it's more likely that the asset has continued to go up um and so like that kind of is counterintuitive um but then also i've seen some statistics that show uh the housing market during times of recession doesn't really crash as much as people think and so if you look at these things like wait a second the investment class in terms of the citizens they're gonna be just fine recession not recession high interest rates low interest rates like people are getting rich stock markets at all-time highs what are you talking about this rate doesn't matter to them where interest rate really really matters is the people don't have investments right because the

investments are actually immunizing people from inflation and interest rates. But the people who just hold cash are getting decimated right now. There's estimates out there that inflation over the last four years has been somewhere close to 40%. There's been a 40% expansion in the money supply. So if you look at that, you say, wait a second, you mean to tell me that if I had $1 at the beginning of 2020, today I got 60 cents worth of purchasing power? That is catastrophic to somebody's financial situation. And so I tend to think that the interest rate will come down. It'll probably come down a little bit this year and into the following years because on a macro basis, they have to. They're addicted to cheap money, right?

And central bankers, you know, they can fight things for a short period of time, but the system is stronger. It swallows them up. And I think that we'll end up back, you know, somewhere in kind of the 2%, 2.5%, 1.5% range with interest rates over the next maybe two, three years. it sounds like you take quite a long-term view on things, especially with what you're saying with interest rates. Do you think it's maybe wiser for stock market investors, even crypto investors to be pretty agnostic about interest rates? Because unless you're day trading, maybe it doesn't matter that much. I think interest rates are important around turns in the market, but they're not important during kind of continuations of the trend. What I mean by

that is if you go back to November of 2021, something that I didn't get completely right, I wish that I had paid attention more. For those that don't know, in November of 2021, I wrote a letter to outside investors. I said, hey, I'm having a kid. I want to go spend time doing other stuff. I'm going to return all the outside capital. Part of it was like, I felt like things were, it's like, how do I make money in this environment? Every time I go to look at a private company, the starting valuation is 50, 60, $70 million. It's just the math doesn't work, right? So I returned all the outside capital. Now, in hindsight, you're like, wow, literally the month of the top of the market, you gave back the outside capital. You're smart.

Well, if I was actually smart, I would have sold all of the assets too, right? But I didn't do that. So I can't claim that I knew it was top of the market, but I at least felt one part of it, which is, hey, this is getting too hard, right? Now, why is that important? There are investors. Keith Roboy is a great example. On Twitter, he said, I'm calling the top. And a reporter tweeted at him and said, are you calling the, like explicitly, are you calling the top? And he just responded, yes. He was off by like 12 hours, right? Now, how did he do that? If you go and you ask him, he says, because the second they started talking about raising interest rates with seriousness, not like, oh, maybe we should do it. Like we're going to raise the interest rate. He knew from

back in the 2000 tech bubble, when they started to raise the cost of capital, here come the assets, they turn over. And so that's exactly what happened is the cost of capital went up. They wanted to quote unquote destroy demand was the phrase they kept using. They did a fantastic job but destroying investment demand, but not consumer demand. And where we ended up was a world where we went from cheap money to expensive money, market turns over and we go down. Now, again, that inflection point, that change in the market, interest rates really mattered. Now, did it actually matter when we went from zero to 5.75%? No, because guess what? Asset prices went down, they came flying right back. And so it's only around the changes that really matter. And you

can almost think of it like a regime. We went from a cheap money cut rate regime, right? We went down to 0% with two emergency rate cuts in 2020 and kept it suppressed there. But the second that they reversed and they said, hey, we're going to go back the other way. Now we're going to go up. That, it matters. And so right now, whether they go from 5.5, 5.75 to 6, 6.25, it doesn't matter, right? What's going to matter is the first time they cut. And we're already seeing the ECB and a couple others start to cut. And so it's coming. It's just a matter of, is it this next meeting, the meeting after? It's going to be a 25 basis point cut most likely, but that change is where you got to start paying attention. So how have your conversations from a year ago

and maybe conversations today changed around how other investors are positioning? I think that most investors are pretty risk averse. When you're investing, you have two things. You have to mitigate downside and you got to optimize for upside. And most investors in crypto, how good can it go if it goes well, right? But most other industries, people want to, hey, how do I diversify? How do I protect? How do I really make sure that I've got that risk mitigation going? And what ends up happening is they're slow to move around those turns, right? Nobody wants to catch the falling knife. But if you go and you actually look at the best investors, they're willing to make those decisions and make those calls at the right time.

One of my favorite investing kind of approaches maybe is Stanley Druckenmiller said that one of the lessons he learned from George Soros was buy first, research later, which sounds like like GameStop or meme coins or like, right. Like, like undisciplined investing. But his point is when you see a data point that tells you something, you should actually go get exposure to it, quickly do your research, and then you can always cut it. Right. And yeah, sure. Maybe take a little bit of a loss, but what if you're correct and it runs, the thing that counts is not how many times you're right. It's how much money you make when you're right, which is pretty important. Um, and so if you go and you take a look at it, uh, recently,

for example, Stanley Druckenmiller said that he was watching a speech from Javier Malay, who's down in Argentina. He listened to the speech. He goes, oh my God, this guy is incredible. He's going to turn this country around. And he went on Perplexity, the AI search engine, and he basically typed in, he goes, what are the five most liquid ADRs for Argentina? Five tickers came up and he bought them. And he said, okay, I'm going to go do some research now. Right? That is so counter to how many people invest. What most people want to do is they want to go look at all this data and they want to make sure. And it's like, okay, are they actually going to cut rates? I'm going to wait until they cut rates, all this stuff.

If you waited until they cut rates, you've missed the entire recovery of the stock market, including new all-time highs. And so you have two things that you can do. If you're a young person, you have a long time horizon, get invested, stay invested, and shut up and just let the market do its thing. It's going to go up, it's going to go down, but over a long period of time, they're going to debase the currency or make money. The only other thing that you can do is if you are going to try to tactically change

long versus cash or long and short, et cetera, is you have to be willing to risk mitigate with position sizing. And then you also have to be willing to make calls or make decisions on little information, but understanding, hey, we're going through a regime change. And so when I talk to other investors, frankly, most of them are lagging in performance because they aren't willing to make the big, bold bets, right? We live in a world where Citadel and many of these firms, they're gathering assets. Why are they gathering assets?

Their goal is not to make more return than the market. Citadel wants to make like 10% to 12%, market neutral, as little volatility as possible, and just keep 10% to 12%, 10% to 12%, 10% to 12%. But if you think of the great macro investors over time, what do they want to do? They want to make 60%, 70%, 100%, right? It's just two different styles of investing. So all of that said, I think the financial press is usually behind the ball on this stuff, we are reactive to market news and how investors are responding. Where do you see the financial media falling short in their coverage as far as how investors are positioning and how these interest rates are changing the environment for investors? There's usually three things. And

this is not just financial media, it's media in general. It's the people who are writing about an industry. They haven't been in the industry in terms of like an actor. That's good at times because they're sober and they kind of are third party that can evaluate this stuff. It's bad at times because there's just nothing like the education of sitting in the seat of allocating the capital and really understanding it, right? So there's pros and cons, but that's one piece. The second thing is most people are not going to tell journalists what's actually happening until it's already happened, right? An investor never calls up a journalist and says, hey, watch this. I'm about to buy this stock, right? What do they do? They buy the stock and

then they tell them, hey, guess what I just bought, right? So there's a little bit of like by the structure of the market and the relationship between the market participants and the media, you get the information later because they want you to get it later. And then the third thing is there's a huge difference in media in general of there's experienced journals have been around a long time. And then there's a lot of media companies that have gone, they've cut an immense amount of costs. What they had to do is hire much younger people. And so experience is experience, right? Even if you're not the person allocating the capital. You know, if you think of your career, right, you're way more experienced today than

you were on day one. And so just like that compounds over a career. And so if you have a newsroom full of 22 year olds, how much can they really, you know, kind of drive versus if you have a newsroom full of 35 year olds. Now, obviously you want a newsroom full of a couple of different buckets of people, right? You want to kind of have a well-rounded view of things. But I think that that is a huge part that no one talks about is what is the market structure? What is the relationship between the market participants and the media and then also who are the people writing the stories and like how have we whether we are the media or we as the market educated them and so i always joke that like one of the best things that we could do in terms of both sides

of the market is the journalists go spend like do a day in the life uh with the investors and vice versa do like a instead of like a jersey swap do like a like a player swap right and just like make a financial investor go sit inside of a newsroom. They'd have a whole different appreciation for everything that goes on in there, right? Vice versa is have the media person go sit inside the trading room, right? Or inside of an investment firm. And it's just all of a sudden you get exposed, right? You have some nuance and everyone becomes a little bit easier to work together. It would definitely make for better conversations, I think, long-term. Something that I thought was interesting when FTX was collapsing, a lot of the media comparisons

were to Enron, but then most of the media members writing about it weren't old enough to have reported on Enron. And sort of what you're saying about this lack of experience and maybe the longevity of a reporter's career. Yeah, I think we got a ton of very interesting insights from you today, Pomp, and I really appreciate your time. Thank you so much for doing this. We'll do it again. Sounds good.