The Pomp Podcast - #1383 Phil Rosen & Anthony Pompliano | Bitcoin Reveals The Trump Trade Is On!

Starting point is 00:00:00 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? Today's conversation is with Phil Rosen. Phil is the co-founder of Opening Bell. Opening Bell covers all sorts of traditional financial news. Phil is fantastic.

Starting point is 00:00:40 He used to be the Wall Street Reporter. That's my title, not his title for him. When he was at the Business Insider, he ran one of the largest newsletters in all of finance, and now he's building his own business, Opening Bell, and he does a great job covering all of the news that happens every single day for traditional finance. In this conversation, we talk a ton about what's going on with the Russell 2000, what's going on with the S&P, why interest rates have such a big impact on which index goes up, which index goes down. Then we talk about Trump and Biden and what could happen if the Trump trade becomes reality and people continue to pour assets into all sorts of things related to the potential win for Donald Trump. I hope you guys enjoyed this conversation.

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Starting point is 00:05:21 Yeah, so if you look at the beginning of this year, everyone was super long in kind of big tech, you know, NASDAQ 100, MAG 7, etc. And really what they were looking for is, how do I get exposure to this AI trend? How do I get exposure to what many would consider some of the best businesses that have ever been created in the world, right? The operating leverage that these businesses have, the efficiency of capital, their ability to grow revenue, their ability to launch new products with the distribution that they have. There's tons of compounding effects that obviously drive financial performance. That financial performance is not only exciting today, but the promise of AI, the promise of what

Starting point is 00:05:54 they're doing. People forward look and they say, hey, these businesses are only going to be even more valuable in the future. I'm willing to pay more today. And so that financial performance of these businesses is incredible. If you look at the tech sector of the S&P, it is compounded over the last five years, annualized at 25.9%. That is incredible performance for large cap, publicly traded stocks. And so I think people got very excited about that. There were some people who were long going into the year, others started to get convinced, they began to go long, et cetera. Now, what's interesting is we have seen the S&P, the NASDAQ, the Dow, et cetera, all hitting all these all-time highs. Interest rates are still 5.5%, et cetera.

Starting point is 00:06:31 And so when people see the inflation number, say, oh, wait a second, this isn't as hot as it was. They begin to play the game of what if and the game of what if says, well, if inflation is not as hot, then what is next? Well, then the Fed will cut rates. If the Fed cuts rates, that means that debt is cheaper. If debt is cheaper, the smaller companies which use lots of debt on a percentage basis compared to the big companies will have cheaper capital, which means that then they will be able to borrow more. which means that they will be able to invest more, grow their businesses faster, et cetera. And so you're seeing this rotation basically from, hey, when interest rates are high, I actually want to be in companies where they don't use a lot of debt and the big tech companies

Starting point is 00:07:11 that have been doing that, plus all the AI, et cetera. And then now if capital is going to get cheaper, I want to then get exposed to these smaller companies who will then go use that cheaper debt. And so in hindsight, it's obvious. I think that the key part to this was people have been predicting slower, less hot inflation for a while, and it hasn't actually come to fruition. And so it's been hard to kind of time that market. But guess who did? Stanley Druckenmiller. Once again, 13F just came out. His biggest position basically was Russell 2000 Options. And I think it was like 15% of his portfolio. And the guy just nailed it, as usual, the GOAT. That's legendary. So this rotation into small caps and out of big tech, that is a lot to do with the Fed cuts coming. How much of that do you see as part of the Trump trade that people are throwing around? It's in all the financial press right now.

Starting point is 00:08:05 Yeah, the Trump trade stuff is hilarious to me, right? Because I think that there are two things. One, there's just the excitement. Like we're in kind of the sideways summer. It's really boring. People are looking for something to be excited about. Here comes, you know, President Donald Trump's odds are skyrocketing that he's going to be the president. people go and say, let's look in the rear view mirror at 2016. What happened? There was deregulation. There was devaluing of the dollar. There was interest rates at zero, like all these things that occurred. Oh, if Trump gets in office, we're going to go right back to that. And so that excitement is actually speculation. Right. At the same time, he is talking about some of his policies and there is a lot of deregulation. It does appear that some of the policies would be kind of weaker dollar, higher inflation, you know, et cetera. And so how do you position yourself? Well, if the odds are increasing, that means that you should be also increasing the odds

Starting point is 00:08:54 that you're positioned to benefit from that situation. Now, the interest rate cuts specifically, I don't think are as much part of kind of the overall Trump trade. You know, Trump and Biden both have interfered quite often with the Federal Reserve in a soft power way. So neither one of them walks into the Federal Reserve and says, hey, Jerome Powell, you're going to do this. But they sure try to influence it via soft power, right?

Starting point is 00:09:19 So Trump, his method of influence was Twitter. He would just get on Twitter and start tweeting about, you know, weakening the dollar and all these kind of different things. Biden would be more kind of politically correct in that on multiple occasions, he called Jerome Powell to his office when things weren't going so hot and basically was like kind of calling the teacher to the principal's office and like, hey, what's going on? And so this is not a partisan thing. If you're the president of the United States, a huge part of how you are judged is based

Starting point is 00:09:46 on the economy. And one of the biggest inputs into the economy is what is the cost of capital? And so naturally, you want to influence in either direction what you think should happen, although you don't have control. And so Trump now is out in the public saying, hey, they shouldn't cut interest rates before the election. That would be election interference. That would be all these different things.

Starting point is 00:10:08 On the same side, Jerome Powell had some comments where he's like, well, listen, if we wait till inflation is at 2%, we waited too long. And so there's this very interesting dynamic. And if you go and you look in the market, you know, depending on what data point you look at, whether it's a prediction market, the bond yields, et cetera, it's like 80 to 90 percent likelihood that by September we are going to have an interest rate cut. That happens to be months before an election. And so it's just a very kind of interesting aspect. But the Trump trade, I think, is more like policy driven of the deregulation, et cetera. the interest rates are probably more a reflection of like what's going on in the economy although

Starting point is 00:10:47 the president or the president you know uh to be or want to be or whatever uh wants to influence that stuff but i'd love to hear kind of like what do you think is going to happen so there's a big deregulation play i think and um you know part of that the small caps will benefit and uh i know financials are doing quite well and i've talked to a lot of strategists who are anticipating a lot of more, a lot more better performance from financials. But a big piece of this, of course, is the crypto play. And Bitcoin and ETH, I think, are both up maybe 10% last week. And a lot of that is from Trump. He's pro-crypto. His new VP, JD Vance, very pro-crypto. What's your take on how, like, what's the crypto outlook now that Trump's odds are going up and

Starting point is 00:11:36 he's picked to JD Vance? I have a harder time believing that Bitcoin's price is going up because Trump's odds are going up as president. Yes, he is sympathetic to crypto and Bitcoin. He has said, hey, I'm a pro crypto candidate. I will protect this. I think he's even gone as far as to say he wants every Bitcoin to be made in America. Great tagline, not exactly how the network works, but at least the sentiment, I think, is very well received by the American population. I actually think that Bitcoin's price has been going up because somebody tried to assassinate the president. Right. And this idea that like that is a potentially destabilizing event is a very chaotic, uncertain, you know, kind of, you know, ever changing situation that

Starting point is 00:12:19 now people say, like, wait a second, there's political violence going on. And you've seen this in other countries. And that's really where I get the data point from. You've seen places where there has been some sort of conflict. There has been some sort of political violence. There has been some sort of controversy, chaos, uncertainty, et cetera. And in those countries, you see more buying of Bitcoin. And so if you go back and you look on Saturday night, the night that somebody shot Donald Trump, you can see that on the news of the former president has been shot, the price actually drops. I mean, it's like the news hits the wire and gets on Twitter, the price drops. And then as soon as everyone realizes he's okay, the price just 180s and

Starting point is 00:12:58 rips higher and so to me what that is signaling is the price dropped because there was a moment of panic and fear and like did the former president just get assassinated right did he just get killed on live television the second that people realized uh it didn't actually work it wasn't successful the price goes up because people realize like we're in a new era now right like we are we haven't had an assassination attempt on the president in terms of like actually physically hurting the president or former president in decades. And so when that occurs, people start to say, oh, this is possible, right? There's an uncertainty to this. And so that to me is the catalyst of why Bitcoin has been going up. Now, to your point, it doesn't hurt the fact that

Starting point is 00:13:42 Trump's odds are going up. He tends to be a pro Bitcoin, pro crypto candidate. And so that might be like the continuation of the trend. But there's a very real measurable inflection point Saturday night on the assassination attempt where Bitcoin was reacting to the news. And notably, the stock market was closed. And so in real time, the only way that you could really express your views of the world and the future in financial markets, almost every market in the world was closed, except for Bitcoin and crypto. So I think Mark Cuban tweeted something that the Bitcoin going up and the support that Trump is getting now from a lot of the tech billionaires, that is them voting for Bitcoin. Do you see that as, I mean, is that part of your analysis here?

Starting point is 00:14:31 Yeah. I read what Mark said. I think Mark's incredibly intelligent. And I think that, you know, the through line that he's pulling on is very interesting. In my experience, there's kind of two different camps of the tech, you know, kind of billionaire crowd. Um, some of them actually own Bitcoin, but hate the Bitcoin holders because there's like an envy of, I worked really hard. I built these companies. I like made all these, you know, took all this risk. That person just bought Bitcoin and like forgot about it for a decade.

Starting point is 00:15:02 Right now, all of a sudden they've got a bunch of money, right. Type thing. Uh, so I do think that there's like, it's not as clear, like, Hey, just because I own Bitcoin, like I think all Bitcoiners are, you know, cool and smart and that, um, that is a subset, kind of a minority subset, but there's definitely people I've met where you can just feel the like disdain as to like how somebody just bought the asset, held it, and they've made money. The other part of the crowd, I actually don't think a lot of the support is specifically tied to their wallet, whether it is their businesses, Bitcoin, et cetera. That definitely

Starting point is 00:15:36 has a piece of it. It definitely plays into it. But I think that, you know, one of the components that becomes really interesting when you talk to these people, when you reach a certain level of wealth, there's not really another amount of money that matters. Like if Elon Musk makes $10 billion more, his life doesn't change, right? So like he is not going to go out

Starting point is 00:15:57 and support a political candidate because he thinks that it's gonna be good for some financial asset. Now, he may support a candidate that is going to be good for his business in terms of something he controls and runs, right? Bitcoin is just a financial asset that he would own, But Tesla is a business that his reputation is tied to.

Starting point is 00:16:13 He's working on, et cetera. What is interesting is Trump actually is not that big of a fan of EVs, right? So in a weird way, Musk is supporting somebody who has been attacking his industry and his companies. Now, Musk is very, or I'm sorry, Trump is very supportive, I think, of SpaceX and some of the other things that he's doing. Obviously, Twitter, he's got a weird relationship with where he was a power user, but now he's got True Social.

Starting point is 00:16:37 So like that relationship between, you know, one of the richest men in the world and the political candidate that now he is supporting is not as clear that like it is good for musk's wallet if trump gets into office and so if you bring it back to the bitcoin thing um there's a lot of people who are coming out who i don't think own bitcoin also right in a weird way and so what i really think that they're basically saying to themselves is uh i want somebody who's going to support the acceleration you know kind of the the accelerate movement if you will um And it feels like, whether it's true or not, I actually think kind of the vibe, right, if you use that as the proxy, is almost more important than the facts here. It feels like one political party is degrowth, slow down, stop, you know, the pipelines, stop all of the innovation, be careful, overregulate, overreach, you know, et cetera.

Starting point is 00:17:28 And the other political party is saying the opposite. And so when you get that kind of bifurcation, again, whether it's true or not, just the thought that that's the narrative, obviously the business people are going to gravitate towards that. And somebody called me recently and they were like, you know, kind of what's your take on this? And I think just kind of saying what I said in private is probably the best way to describe this. I said, oh, shocker, the business people want a business person in office, right? Like that shouldn't surprise anybody, regardless of these political parties. And so what you really have in a weird way is you have a career politician versus a career businessman. And so if you just look at it on the basics of that, take it a step further. One political party is trying to take things from you. The other political party is trying to give things to you. And again, that's like almost oversimplified. But what do you think the business people are going to vote for, right?

Starting point is 00:18:22 Is they're going to vote for the people who don't want to take things from them and wants to give them things. And so you can actually debate, and I would say a big part of that conversation is, is that good long-term what they're giving you? If they give you a weaker dollar, if they give you less regulation, if they give you all this stuff over the long run, it's unknown, right? Like there are some aspects of deregulation that are fantastic. And, you know, I think we would all run and scream and say, like, let's deregulate this.

Starting point is 00:18:47 There's other aspects of, well, maybe actually we shouldn't deregulate 100% of everything. A weaker dollar has some amazing benefits in the short to medium term. But the long term benefits of a weaker dollar may not be as clear as the short to medium term. And so I think, you know, everyone wants to make this stuff black and white, but we can just kind of walk around, you know, look at this. You're like, why are they supporting Trump? And the more nuanced, the more like, you know, you're like, oh, they're looking around the corner. It's just kind of like, you know, a lot of conspiracy theories around the government, like you're giving the government too much credit. I think a lot of times it's like, hey, these people are they're on Twitter.

Starting point is 00:19:25 Some of these individuals who are supporting Trump are on their like fifth or sixth endorsement for this campaign. Right. Or this election cycle. And they just want to be on the winning side. Right. Like at the end of the day, they just want to say in July of twenty twenty four, I endorsed X person and they became president. Look how smart I am. It doesn't matter. Everyone forgets about the first four or five endorsements that you make. Right. They just like you get a claim victory because in July you said I'm going to back Trump and Trump wins. So what do you think are some of the economic downsides of a Trump presidency? because there's a lot of talk that some of his deregulation moves that he wants could be

Starting point is 00:20:06 inflationary. Yeah. So from my perspective, looking at the two kind of options on the table from a purely economic standpoint, forget all of the other topics that are part of evaluating a president, et cetera. From a pure economic standpoint, Donald Trump would be much better than Joe Biden. Right. Now, when you look at that, what are the downsides? You have to understand policies, right? So deregulation, weaker dollar, and kind of an understanding of crypto and AI, et cetera, with picking J.D. Vance as vice president and some people he surrounded himself with. If you look at, let's say, weaker dollar, right? It can be inflationary. It doesn't have to be, but it definitely can be. On top of that, if you look at things like Trump recently came

Starting point is 00:20:53 out and said he wants to change the corporate tax rate from 21% down to 15%, sounds awesome. There's something called the Laffer curve, right? And Art Laffer came up with this idea that if you actually lower the corporate tax rate, that will encourage job growth, R&D, innovation, growth, et cetera, which means that even though each corporation is paying a lower percent, the overall aggregate amount of taxes collected will go up. Now, heavily debated. I tweeted about this.

Starting point is 00:21:20 People from all sides, everyone comes out, right? Everyone's got an opinion. There are examples, Europe being one example, where this has actually worked. There are many other examples where it has not worked. And so it's kind of this weird thing of like, it's not just the theory, it's how is it implemented, right? And it's really important. And so that's a perfect example

Starting point is 00:21:37 where if you lower the corporate tax rate, given that we've got a $35 trillion deficit or a national debt, and we've got a trillion and a half to $2 trillion annual deficit, and you don't collect more tax receipts, that's a problem, right? You're actually widening the deficit.

Starting point is 00:21:54 Now, if it works and you lower the corporate tax rate, you keep capital in the hand of good capital allocators, business people, and you take it out of the hands of the bad capital allocators in the government, and that leads to more tax revenue, you actually could close the annual deficit. So lowering the corporate tax rate is not good or bad.

Starting point is 00:22:12 It is only in hindsight can you evaluate based on the execution, did you actually get more tax revenue or not, right? So if you're gonna lower the tax rate and you're not gonna get more tax revenue, then you probably didn't actually accomplish the goal of by lowering the tax rate, driving job growth, innovation, et cetera. And so, again, we start getting into the weeds of some of these topics. And the answer that people don't like is like, well, it depends. And there's so much

Starting point is 00:22:40 nuance there. And it brings the question, like, do the politicians actually understand this stuff in great detail? I actually think the economic stuff Trump and his team seem to be pretty strong on. It helps that they've been operating this. A real estate investor and a developer has to understand interest rates, has to understand the dollar strength or weakness. But for every one topic that they understand, there's another topic that somebody would be yelling and screaming, China tariffs. People would be yelling and screaming and saying, hey, well, how are you so good at this one policy and this other one seems insane? So speaking of people he's surrounding himself with. There are these reports coming out that he's looking at Jamie Dimon for treasury

Starting point is 00:23:20 secretary. And Jamie Dimon is famously anti-crypto, anti-Bitcoin. But now Trump is saying, oh, Jamie Dimon is changing his view on that. Give us your take on that. First, everyone in the Bitcoin world loves to hate on Jamie Dimon. It's easy, right? It's kind of like Bill Gates. Bill Gates used to be the startup pirate in the garage who's going to take on the man. And then he became the man. And now people are like, you know, why are you releasing genetically engineered mosquitoes into the air? And, you know, why are you trying to get engineered food and like all this stuff like, oh, big, bad, evil billionaire. Right. So like live long enough and you become the man. Jamie Dimon is definitely the man. The reason why he

Starting point is 00:24:03 is the man or the target for the Bitcoin world is one. He has been critical publicly about Bitcoin in cryptocurrency, but two is he represents the epitome of the banking system. He is the most well-respected banker of our generation, right? He is an incredible leader. He is an incredible financier, and he has been an incredible executive at growing JP Morgan into what it has become today. So if you look at it from the finance perspective and you were evaluating him, he gets an A-plus report card being the CEO of JP Morgan. But if you are the competitor of Bitcoin to some degree, right? We want to put a bank in everyone's pocket without the banks. Yeah, you don't like him, right? You're like, hey, that's a star player on the other team. Like, we actually don't like

Starting point is 00:24:44 him. But the beauty of Bitcoin is that Bitcoin seems to have the facts on its side, right? Kind of the truth is on its side. And what I mean by that is there's hundreds of millions of people around the world that hold it and use it. Bitcoin is the strongest computer network ever created in the world. You also now have governments around the world becoming much more sympathetic and positive towards a legal regulatory treatment. And then also Bitcoin is the only asset I'm aware of that has consistently protected your purchasing power over the last decade with this accelerated inflation. And so when you look at it from that perspective, you say to yourself, okay, of the store of value assets, this is probably one of the most popular, definitely probably one

Starting point is 00:25:26 of the most resilient. It's now got the same legal treatment and regulatory treatment as other commodities and store values. And it has done a better job of protecting my purchasing power than anything else. Well, if you're in the finance game, like you got to pay attention, right? So like the facts have changed now and it's become much more obvious. And so the last thing I'll say is Jamie Dam is not dumb, right? Like this guy's incredibly intelligent. And so sure, would he probably in hindsight go back 10 years and be like, oh, I wish that I would have bought Bitcoin and understood this and got the bank and whatever. Sure. But it's not actually where you start. It's all about when you are presented with new facts, do you change your

Starting point is 00:26:03 mind? If that is the sign of intelligence. And so Jamie Dimon's path is no different than Trump's. Go back. Trump was railing on Bitcoin too. Everyone has amnesia. We forgot about that because now he's coming to speak at the Bitcoin conference, right? Like shows up at the Bitcoin conference. He's going to say, OrangeCoin is good. I'm the Bitcoin president. And people will literally forget all the other stuff he said. Jamie Dimon comes out tomorrow and says, Orange coin is good. Number go up. I'm going to be the Bitcoin banker. Like let's roll. Literally, you ain't going to hear anybody complaining about Jamie Dimon anymore. Right. And why do I know that? Because that's what they did with Larry Fink. Larry Fink is the CMO of

Starting point is 00:26:40 Bitcoin. He has been accepted with wide open arms. People are saying, Larry, thank you. You are amazing. Keep going on TV saying it's a flight to quality, all these things. Larry Fink was on a Bitcoiner five years ago. Right. He changed his mind. And so I do think that maybe a word of caution, the Bitcoin community, when people disagree with the Bitcoin story, the Bitcoin facts, it's okay to push back, right? Like part of the debate is try to educate them and convince them, but don't kick people while they're down because they may actually change their mind. And if they change their mind, we have a history now of accepting these people kind of on our team. And so when they do that, don't dunk on them and say, oh, you know, I bought before you and said,

Starting point is 00:27:18 say, hey, thank you so much. Like who else can you now help us go do it? Because one of the big stories I think at Bitcoin is the messenger matters now more than the message. Larry Fink is more important than anything any Bitcoin is going to say. Jamie Dimon will be even more important. And if the president of the United States is running around doing press conferences, talking about Bitcoin is good, the world will change in a crazy, crazy way. On that note, Pom, thank you for having me. Absolutely. Thank you so much for doing this. Thank you.

The Pomp Podcast - #1383 Phil Rosen & Anthony Pompliano | Bitcoin Reveals The Trump Trade Is On!

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