The Pomp Podcast - #244 Michael Novogratz on Consumer Confidence in Markets

Episode Date: March 18, 2020

Mike Novogratz is the founder of Galaxy Digital, a merchant bank focused on the digital asset and blockchain industry. He is an ex-hedge fund manager, formerly of the investment firm Fortress Investment Group. In this conversation, Anthony and Michael discuss the current macroeconomic chaos, coronavirus and its impact on society, various social justice issues, how Mike is personally navigating the uncertainty, and how he thinks Bitcoin and digital assets are affected by recent market movements.  =============================== CRYPTO.COM-----The only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link http://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. TAXBIT-----Refund-maximizing, cryptocurrency tax software you can depend on. Visit taxbit.com/invite/pomp and receive 10% off your tax plan today by signing up for a free trial. LEDGER----- Ledger hardware wallets empower you to optimally secure, own and control your crypto. Visit ledger.com and give yourself peace of mind by knowing that your cryptocurrencies are safe.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Mike Novogratz is the founder of Galaxy Digital, a merchant bank focused on the digital asset and blockchain industry. He's an ex-hedge fund manager, formerly of the investment firm Fortress Investment Group. He was ranked a billionaire by Forbes, and prior to joining Fortress, he was a partner at Goldman Sachs, where he spent much time abroad, including leadership roles in Asia and Latin America. In this conversation, we discuss the current macroeconomic chaos, coronavirus and its impact on society, various social justice issues,

how Mike is personally navigating the uncertainty, and how he thinks Bitcoin and digital assets are affected by recent market movements. This conversation was recorded remotely due to social distancing, so the audio is a little shaky. Please bear with us throughout the recording. Before we get into the episode, I want to talk about the three sponsors for this podcast. The first is Crypto.com. It's an all-in-one platform that allows you to buy, sell, store, earn, loan, and invest crypto all from one place. You can join over 1 million users to buy, sell, store, earn, loan, and invest crypto in the Crypto.com app. That's right, they've got a mobile app.

Go over, download it, and you can earn $50 with my code POMP2020. Or use the link in the description when you sign up for one of their metal cards today. Those metal cards are Visa cards, and they're tied to your mobile devices. Mobile payments are now available for the Visa card in the United States. You can pay in a fast, easy, and secure way with Apple, Google, or Samsung Pay. It will work with most of the devices used every day, and card details are never stored on your devices. Also, they just added Tezos to their Crypto.com Earned product with interest paid in Tezos.

So head on over to Crypto.com, use POMP2020, and you'll get $50 US dollars. Now, our next sponsor is TaxBit. They've been with us for a while now, and they make your taxes easy. The IRS recently released new tax forms for the 2019 tax year and just extended some of the tax season as well. So you're going to need to pay taxes on all of your crypto gains and losses. TaxBit helps automate this process by enabling you to effortlessly track, calculate, and report your transactions, easily connect your exchanges to securely sync your transactions,

and run them through TaxBit's tax engine. You can generate your completed tax forms with a single click. That's right, super easy. They're founded by tax attorneys and CPAs. TaxBit is the most trusted cryptocurrency tax solution. Get 10% off your tax plan today with a free trial by going to taxbit.com slash invite slash pomp. Again, taxbit.com slash invite slash pomp. They've got live support with experts whenever you need it.

Those experts are on hand who have experience facilitating thousands of crypto tax filings and Irish crypto tax audits. taxbit.com slash invite slash pop. Now for the third sponsor, who's Ledger, we're going to do something new. They've pre-recorded an ad and we're going to play it now. Once it's over, we'll then get into the episode with Mike. So I hope you enjoy this one. Digital assets custody can be quite difficult to secure and hard to scale. Firms are often left with a difficult decision, having to choose between security or liquidity. At Ledger, we're obsessed that our clients' businesses succeed. That is why we decided to create a digital assets platform that would enable financial institutions and crypto firms

to manage their funds without compromising on security and liquidity. Firms like Uphold, Bitstamp, Crypto.com, Indax, and Dunamu are already using Ledger Vault to operate their business at scale while maintaining the highest standards of security to protect their clients' funds. Visit ledger.com slash vault to learn more. Control, scalability, agility, because security is not enough. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a

particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I'm here with Mike Novogratz. Thanks for jumping on to do this so quickly on short notice, my friend. Hope we have some fun. Yeah, look, I think one of the big things right now people want to know is just what's going on. So how do you think through, given the fact you've lived through so many of these, you've traded through so many, how do you evaluate what's going on in the global market right now? You know, every once in a while, you know, and it's happened, I don't know, three or four times in my 25, 30 year trading career, you get a category seven hurricane where it becomes just global risk off. and the the system goes through a massive deleveraging and that's what you're seeing right now um it's usually you know comes from intense uncertainty uh sometimes it comes from

intense leverage uh this one i think is really from intense uncertainty uh you know with the the coronavirus and how it's going to end up and we're going to we've never really had economy going into complete shutdown on a global scale, almost like a rolling blackout. And so things that intuitively should make sense necessarily don't, because it's where people have positions, they are selling them to get the cash. And it becomes a self-fulfilling prophecy. And so you look like things like risk parity, which is being unwound at an immense pace. And so the Bridgewater hedge fund posted 20% down for the year so far.

It's worst drawdown, I think, in 20 years. Crypto, which a lot of people were talking Bitcoin, and I was a big advocate of Bitcoin as this digital gold, this hard money asset, which should do well when central banks flood the world with liquidity, when fiscal becomes irresponsible. And, you know, we just start opening up the checkbook. I mean, this is exactly what's happening. Yet, it's a leveraged risk asset, right? We forget that it's still mostly retail held. And a lot of retail buys on leverage out in, you know, BitMEX and Binance and all the great Asian exchanges slash casinos. and people are having a hard time. They need to make their bills. They're losing money at other things.

They start selling and you just have a rolling snowball. And new money is scared. Like even if you have a ton of cash on the sideline, you're in the middle of a shit storm and you're not gonna be like, yeah, let me step in right now and buy some Bitcoin, which I've never bought before. And so you got some old hats

that maybe we're smart enough to sell it that are buying some, But you don't have a whole lot of new money coming in, and you're not going to have new money come in for a while. And so I think as far as crypto is concerned, this probably sets the story, the narrative of new adoption in Bitcoin as a store of value or in the other coins as part of the future of building a centralized internet. it sets it back 12 to 18 months. You can tell because we're going to have to get through this and then you got to rebuild confidence. How do you think about these safe haven assets? You see gold, the treasury issues, etc. Forget crypto for a second, but just when we get to these deleverage points or these liquidity crisis, do you almost expect

most of those assets to get sold off as well? Or do you actually expect them to hold up pretty well during those liquidity crises? I think in a liquidity crisis, anything people are long is going to get sold. And so people are maxed on gold, and they're selling it. Now, you can, with hindsight, look back and say, well, this is one of the greatest deflationary impulses we've ever seen in our lives. And so you're going to go through a period of intense deflation. And crypto and gold were supposed to be inflation hedges. And even if they cut rates to zero and print money and drop it out of helicopters, can

they beat deflation, which we've had a hard time beating in Japan for 30 years now and the rest of the world we've been trying? And so we might look back and say this move in gold and this move in Bitcoin wasn't as irrational as it felt. You won't know until the dust settles. I personally think you're going to have a brief period of deflation, and you're stoking the fires for inflation, because I think the economies will come back faster than you think once we get through this flu, God willing, and there's going to be a ton of liquidity

and a real fiscal profit legacy that we already had that's now going to be exaggerated. Yeah. And one of the things you started off by saying was this rolling blackout of economic activity because people are being forced to stay inside, et cetera. The thing to me that is kind of just unprecedented is the fact that it's not like people are spending a little less money. They literally are not leaving their homes at all. They're just being stuck in their homes. And so do you think that that's something where the monetary stimulus plans, et cetera, can actually stimulate economic activity? Or is it the virus kind of has to be beaten, if you will, before we

can get any of that economic activity back and the monetary stimulus doesn't really matter. So I think, listen, I think the Fed did what they're going to do and they'll do more and they're doing a great job. Lots of liquidity. They're going to, my guess is the next step, they'll come into the commercial paper market. There's no, they want to make sure there's no sand in the gears, but this is going to take fiscal. And in some ways they've set up Mnuchin and Trump, with the blessing of Nancy Pelosi, to open the checkbook and print a ton, and the Fed is going to monetize. They're going to basically monetize the fiscal stimulus. You've got zero rates and unlimited repos. In a lot of ways, this should make yield curves go steeper. It should

make the dollar weaken. It should make crypto go higher over time. In the short run, what's going to get the economy back isn't monetary, it's fiscal. And so we really got to watch what the package that, again, it's Mnuchin-led, Mnuchin-Trump, but Pelosi's going to have to bless it, that they get through. And some of that, they want to do the macro, the payroll tax cut. There's a lot of pressure to just put money into the system. I mean, everybody, rightfully, including myself, is worried about this gig economy that we have. If you're a Pilates instructor, a yoga instructor, a delivery guy, well, maybe delivery guys will do all right, but a waiter, a bartender, all of those jobs go to cash flow negative real fast.

They don't have normal salaries. And if you think about 40% of America has less than $400 of savings. You know, we go two, three weeks of this. Forget not paying your rent. People are not going to have money for food. And so there's a fear of social unrest. I mean, I have really smart, rational friends who are, you know, leaving the city, buying 30, you know, 90 days worth of food and holing up, not because they're worried about the virus, because they're worried about rioting. Now, I think that's a little extreme, honestly. I think our social safety structure is better than that, and that we'll have food available for people and that the authorities are already planning on all this stuff. But these are not irrational guys. These are smart investors.

And so you can tell where fear has gone. If you're in charge of kind of this fiscal stimulus, there's a lot of people who've come on and talked about monetary stimulus, but nobody's really kind of hit hard on the fiscal side. What would you do or what do you think should be done there that could actually have an impact? Well, listen, there are two angles that I think I would do, and I think the administration actually is going to do. I have rarely got on board with this administration, if you read my Twitter. But I think in this case, they probably are going to end up stumbling into the right movement. I mean, the first is get money out quick. And so the most radical would be some form of UBI for people that need it. Just Hong Kong

did it, I believe Australia is doing it, where you literally just cut checks to people. Cash giveaway. That, give people money so they can buy their food, so they can pay their rent, right? Just keep the economy going. You know, you can do that with a payroll tax as well on a broad scan. The second, and I think the administration was already planning this, I mean, one way Trump was going to try to get reelected is he is planning a massive, massive infrastructure bill, or at least to prop an infrastructure bill, the trillion dollar infrastructure bill.

He wanted to originally unveil it right around the Democratic Convention as his steal their thunder and ride that into the election. That wouldn't surprise me if that gets brought forward in this timeline, and they still push that. So on one hand, how do you get money into the system quickly? On the other hand, how do you actually start this big build where those are big contracts that get put in place over time. And you can see at least people say, hey, these industrial businesses aren't going to go out of business. They're going to have shit to do. Yeah. But part of what I think is interesting to a lot of folks right now is, you know, last week we spoke a lot about kind of this monetary stimulus bomb, right? It was almost like they

brought like a water gun to a combat zone to start. And then they had to come out with something really big. They did that Sunday. But then you saw the market reaction, right? Obviously this morning hitting circuit breakers in the stock market etc is there anything that they can do on the monetary side or is it only the fiscal stuff you think that will actually have an impact and and can kind of get accomplished what the monetary stuff in time always has an impact it always has an impact so i would tell you on my son was supposed to go to jackson hole for spring break skiing and he was going with another family and so they were going to leave on saturday but he was supposed to take his sat so they decided to leave on sunday and

on saturday we were talking about it and a the sat's got canceled but uh all right yeah they're still going they're still going they're still going even though they're going to maybe close one of the tram and and it went from sunday morning oh we're not going to go because it looks like they could close down to the mountain being closed to the hotel i own a piece of literally being shuttered all in like a 24-hour period and so we went from sending our kid to the whole mountain being closed. And I think there was a psychological shift this weekend where Saturday night in New Orleans to Sunday, people say, no, no, no, no, no, no, no, no. Don't leave your freaking house. And so there was a gigantic fear shift between Saturday and Sunday that I saw

felt and a wake up call, I think, where people finally got it. That translated into the market this morning. And I don't think anything the Fed would have done would have created a different environment. I do think we'll see how the market closes today. Sometimes that initial panic has to happen. We've spiked VIX to almost 80. VIX at 80 doesn't stay up there that often. There's only one other time I remember by career that it was above 80, and that was 08. And so we're getting close to panic. And I think that Fed liquidity will help. I do still think there's more to do. They need to unlock, unclog the commercial paper market, and they really need, on the fiscal side, to speak to all these small businesses. I mean, every single hotel in America is going to go to zero occupancy or some tiny occupancy.

uh and so how do you how do you throw the lifeline uh to businesses that need the two-month you know break and and then not throw the lifeline to businesses that are going to go out of business no matter what you do it's a tricky game no break and and then not throw the lifeline to businesses that are going to go about a business no matter what you do all right and then i just heard myself oh i think that um mike can you still hear me yep i hear you and i just heard myself yeah so maybe you can talk a little bit also about in terms of um the investor seat what do you think people should be thinking through and and how should they be looking at the various opportunities in the market versus just the flight to safety and getting to cash

I think if you hadn't gotten the cash, it's too late. Like, could the stock market go lower? Yeah. Could the S&P, the S&P is at 2,500 right now, or it was when I walked into this office. Could it go to 2,200? It certainly could. So that's another 10%. You know, a little less, 8%, I could go lower, I would guess, in here, 8% to 10%.

That, I think, would be the ultimate low. If you just look on the charts, there's a lot of support down there. Um, and so I would, if I was an investor, A, not take a lot of leverage yet, right? We're still in a dangerous zone, but there's gonna be a time to take a lot of leverage. And I would start looking at individual stories that are so bummed out that, you know, it's a good company that, you know, it's not going out of business that, that it's got good cash flow and you're buying it at 50 cents on the dollar versus where you were, uh, you know, uh, two, two months ago.

And there are lots of, lots of individual stocks. One of my worries for crypto, quite frankly, and as I look at my own money, you know, I was I acted decently on the macro side and slow on the crypto side. Stubborn, you know, it's a core position and so loved a lot of Bitcoin all the way down. And now I'm looking, OK, where do you add? There are so many individual stock stories that you feel like even if you get in, it's a little early. you know in a few months there's no way you're losing on this thing because they got cash flow, you're buying it at a discount, a big discount. And so I think there are probably easier investment opportunities in the stock market than there are in more speculative markets. Speculative markets take a story. They take confidence. I look back, I want to kick myself

in the freaking nose. Because I was always saying Bitcoin, in all of crypto, is a story of confidence. It's a confidence game. Stores of value are only worth things because we say they are. And gold's a confidence game right now. And we're in the middle of the greatest global confidence kick in the gut that I've ever seen. Confidence is shaken in institutions. It's shaken And it's just shaking our ability to understand things. And so that's why the market's all sold off. And it makes all the sense in the world with hindsight that crypto got the heck beat out of it. I'm hoping the liquidations of Bitcoin are coming close to an end.

You know, we've had two big pukes. And I'm guessing a lot of the leverage is getting squeezed out of the market real quick. And so I'd love to see Bitcoin, for instance, stabilize. I'd love to see it close over $5,000 and stabilize even between $5,000 and $6,000 for a while because I do think, in the long run, the story doesn't go away. And while I don't think it goes to zero ever, there is a core group of developers. They don't care if the world's blowing up. They're still developing on it.

There are most of the guys I know that own $10,000-plus coin positions. They haven't sold. They don't plan on selling. And these guys are in it for the long haul. It's part of their portfolio. And so, you know, it's a damn shame. You would have felt a lot smarter to have sold a lot of 10,000 and have firepower to be buying it down here. But I don't see that.

And so I'm hoping for Bitcoin as you get stability and for all of crypto. And I think you're going to see better opportunities literally in some of the bombed out equity markets. You with me, Anthony? So that brings the question then, like, what are you doing with your portfolio? Leo, right? You said you weren't as aggressive as you thought you wanted to be. But now that you kind of realize the situation we're in, how do you think about maneuvering in these markets? And what exactly do you do to position yourself well for some sort of recovery, you know, at some point? You know, for the first time in life, I don't know, you know, since I started crypto,

I would now, in this brief moment, consider myself a hodler. I'm going to, you know, I'm to hold our bitcoin i do think it comes back i believe it in the long run uh i think it's you know listen this was a test that it didn't it didn't look great and you know but i think it's it it didn't behave much different than most of the other assets uh that were risk assets um and so it wasn't a magic bullet by any stretch uh but i do think the story continues and so you know from From an investing perspective, we'll hold the Bitcoin. And listen, though, it's not like our whole industry is going away. Like I said, it's probably been set back 12 to 18 months in terms of people's excitement to put new capital in it.

And so I do think underneath, outside of Bitcoin, you know, the blockchain space itself continues to grow. You know, more and more companies are getting involved. and so the venture business around blockchain continues to be interesting uh i think the blockchain you know sas or consulting businesses are still busy uh and so that technology shift isn't isn't gonna isn't gonna change how that translates into markets and crypto and us trading these coins as a as a store of value or as a a forward look on what will come right if you think about ethereum or any of the other protocol tokens They have some sort of value, but they really are more a venture bet on this ecosystem being built.

That's still going to happen. It's just you're not going to see the value in the coin until the ecosystem really starts humming a little bit. You with me? And so, you know, one of my arguments here is that to your point about Bitcoin, gold, everything kind of getting sold in this liquidity crisis. If you go back to 2008, gold sold off in the six months, so kind of over the summer timeframe, about 30%. and then you saw the quantitative easing and monetary stimulus, and then it ended the crisis up about 3x from where it started the crisis. Do you think there's a similar thing that happens here with Bitcoin and that in a liquidity crisis, everything gets sold off, but Bitcoin and gold

end up doing well over the long term? Or do you think that that confidence game plays into this much more and we don't actually see that? Listen, I think it's going to be, so fool me once, smack me, fool me twice, I feel dumb. People bought gold and would have bought Bitcoin back after 08 because you believed in an inflationary impulse, right? And it took a long time. And so we're going to need to see it. And we didn't really get it. Ironically, we were just starting to get some inflation. Not a lot, but we were just starting to before this virus hit us. And so, I mean, I always thought it was crazy that Trump was running a 5% fiscal deficit while he had full employment and low rates, right?

It was, we were juicing the thing as much as we could. Now you're going to have a deflationary impulse, but you're going to have all the kerosene on the embers to see if you can get the fire going again. I think the natural inclination will be for gold to bounce some, maybe out of 1400. That would be my targeting goal for the liquidations to end. And Bitcoin, I hope we've already hit the low at $4,000 or $4,500, whatever you want to call the tradable low that flashed. And it'll start going up.

I don't think it will really accelerate until we actually see the debasement of currency, i.e. real inflation. Because people are bought into this deflationary environment. And this is a big deflationary impulse. We certainly might. we're going to see unprecedented fiscal. It would shock me if we go to an 8% fiscal deficit. We're at 5%. And God forbid, who knows what this is going to cost us? Maybe it's a 10% fiscal deficit and zero rates and a Fed monetizing. And so you'll have some people jump on that, here it comes.

But I don't think you're really going to see the acceleration of gold and or Bitcoin until you see the inflation. So you start smelling the fire, pause. Got it. So I want to switch gears real quick, because I think that the economic stuff is one half of this conversation. But then I know you're super into a number of the social justice, different movements, everything from kind of prison reform to other aspects of social justice. Maybe talk a little bit about how you see the virus and the subsequent economic slowdown affecting some of those other initiatives that are kind of outside of the finance? Yeah. So listen, I'm wearing this Just Capital t-shirt that my friend Paul Jones gave to me. He's the chairman of this group that

has been trying to tell this new story that we really need multi-stakeholder capitalism as opposed to just shareholder value-driven. And that he put a letter out. It didn't really get well-read because we're in the middle of a crisis. It looked at the Russell 1000. And you looked at there are 20 million employees in the Russell 1000. And 10 million of the 20 million people make less than the living wage. And so the letter was asking CEOs to look at their own company and say, dude, pay your people better, both with equity and with compensation, because those are your resources? And it was co-written by the CEO of eBay. I'm sorry, PayPal. So with that kind of in mind, and you're seeing that in our politics, right? How do we have a capitalism that actually

benefits more people? This is just going to exacerbate. All of those workers are going to hurt a lot more than you or I will in an environment like this. The uncertainty feels worse the medical bills could feel worse and so i do think our politicians get that and you're hearing it every time they're talking we've got to take care of the you know the people below but i you know as we come out of this maybe it gives us a chance to kind of look and say hey what kind of capitalism do we want in our country you know because it's this debate between socialism and capitalism is kind of horseshit you know what what the center has been pushing to if it's Larry Fink or Jamie Dimon or Paul Jones or Marc Andreessen all has been this multi-stakeholder capitalism

where capitalism got way too skewed to the to the uh the shareholder uh and how do you balance that a little bit uh I've got four young kids well not so young anymore but gen z millennials and you know their whole generation says this don't work from the environment to the community you work in to your to your employee uh to your customer and your shareholder they kind of want that balance and so i think you know this it'll get lost a little in the crises but hopefully coming out of this people say hey how do we build something that is a little more sustainable um you know then when it comes to the prison reform stuff we're really really worried about our prison populations getting corona you're stuck you know the exact reason they send kids home from college

right because they don't want people stuck in these dormitories so you can transmit the thing so quickly think about what a prison is and think of the sanitary conditions in a prison and so we have been pushing uh and advocating for to start with people not getting sent back to prison for a technical parole violation right we have a shocking amount of people right a million and a quarter people a year get sent back to prison for a technical violation. That means you've got a speeding ticket while you're out on parole, or you've got an illegal U-turn, or you showed up late for a parole meeting, and they send you back to the can. That makes absolutely no sense. It makes no sense any time, but especially in this environment where you're putting someone

and a whole community at risk. Same thing with free trial, right? Bail reform, you know, until people are guilty keep them out of the out of the prisons and so you know we're pushing those things people are looking at them you know hopefully some of that gets done um but this virus in general any crises always highly highlights the most vulnerable people in society and you know you're nervous you know my and you're nervous and you're and you got all the resources on the planet and then you think shit if i'm nervous with these resources how are the people with no resources feel and so you know it's a i'm surprised the government hasn't set up a charity already where people can donate uh to you know helping this gig economy world and i mean it's

not just the gig economy i use that as the but but the the this group of people that without their paychecks coming in without their income coming in are really going to feel the suffering uh you know put george bush and bill clinton in charge or something like that or obama all right Yeah. And I guess part of that really is the one part is the actual workers themselves in these small businesses, but then you've got the small business entrepreneurs too, right? The people who own those restaurants, who own kind of these non-corporate or chain type businesses, how do they navigate this? Because it's one thing for us to say, hey, we should help pay these workers. There's things like charities, there could be some fiscal policy, et cetera. But if

you're reliant on a small business for your income and your family's kind of well-being and all of a sudden the country goes into a two three four week you know really just stop what happens to those businesses what can we do to yeah i think you're gonna have to give them you know i mean they're gonna try sba loans uh you know so loans and or grants um i mean you think about your you run a sports store and you sell sporting goods you know you're you're the local main street sporting goods store and all of a sudden you go with zero sales for two months uh now there are a hundred examples i keep thinking of the small restaurants and i stopped at a chinese restaurant on the way back from uh the hamptons yesterday uh in like a strip mall and

you know we were the only people in there and i was talking to the guy he at least had a delivery uh hope but yeah i think this is this is really going to be complicated on how you get money into those businesses. And there's got to be some sense of fairness on how it happens. You're not going to be perfectly fair, but you got to have some blanket sense of fairness. I made a gallows humor joke after Bitcoin went from whatever, $8,000 to $4,000 that night, if Galaxy was able to get a small business loan because we were becoming smaller. And that was a bad joke, maybe but uh the uh you know it's painful for big businesses with payrolls and you know because businesses all businesses are going to slow down right let me tell you there's a lot less even if

the trading business is going on there's a lot less happening in the advisory business and the banking business and you know talking to someone about a new token no one wants to talk about anything right now about being safe and you know where what's this virus going so productivity city collapses. And so I think all businesses are going to have a hard time. We got to be really worried about, you know, the small ones because A, they employ a ton of people and that's where all our growth comes from. And B, it's, you know, again, they're in the, they're in the more vulnerable place. All right. I'm going to go grab my hat every time I finish talking. Got it. So one of the last questions for you, a lot of people now are talking about

MMT and kind of this helicopter money. What are your thoughts there? Do we see it happen? should we see it happen just kind of maybe riff on that you know i would think of more of as a version of ubi and i don't think it's a terrible idea if you gave everyone on the in the country a thousand dollars uh you know a month for three months right that's that's a trillion dollars that's a pretty big stimulus right there it's fairly distributed uh if you want you can kind of cut out the rich people but there's not enough rich people that really makes a big difference in the number um and so to kind of do it consistently uh hong kong did that australia is doing that that gives people some spending money um i don't believe in mmt i do think at one point if you keep

printing printing money uh you're going to get roaring inflation you know i've just seen it as an emerging market investor my whole life um you know it's a it's a catchy way uh to justify by running monster fiscal deficits. There's a thing in economics called the Minsky moment. It's another confidence gig. It's you're okay until you're not. And so there's the yield curves flat until it stands on its head

or there's no inflation until it rips up. So you have this sense that, well, look, Japan has done it. We can do it. We're running 5% deficits and the yield curve is still low. Long bonds are buck 35. should be borrowing more and more. Well, at one point, confidence breaks. Confidence, as we just saw with Bitcoin, is a very fickle game. And so if you lose confidence in people's desire to hold long-term treasuries, game over. Then we're going back to the Stone Ages, or we're going into the

Bitcoin age. And so, you got to be pretty careful when you swing around MMT as an ethos. As a short-term fix, would UBI make some sense right now? Yeah, 100%. That's my hat to tell you, you can ask a question. Got it. And so, lastly, let's just wrap up with, you've spent most of your career, or a good portion of your career, trading currencies and looking at these emerging markets. What are the things where you're like, hey, let's avoid, you know, one, two, and three, or here's the warning signs that people should be paying attention to? Because I do think that you've got kind of unique experience in seeing kind of what not to do in some scenarios. So maybe share a little bit about that.

Yeah, so the biggest mistake people make is when a crisis starts and a market breaks, everyone thinks, oh, it's time to get back in way too early, right? and oh it's a three-state issue move it's time to buy in you know time to buy the airlines it's time to to sell shit always get gets much worse than you think it's going to get and so i tell myself i sometimes make the same mistake but i tell myself hey when you have an instinct to buy something go on a long walk come back a week later and look at it uh and it's usually worse off so once things start going bad they they tend to stay going bad for a while until you get a real zenith and so you know if it's you know you looked at dollar brazil at four it looked pretty good and now it's at five you know um and pick a story where the fundamentals you know are turning

positive and so remember markets it's the it's the first derivative that matters it's not the absolute it's are things getting better at the margin or worse at the margin and so if you can see things turning better at the margin right that usually starts the the cycle of where things get better. And so, you know, it doesn't mean you can't buy bombed out things and sell them. But what you're really trying to do when there's this evisceration is buy things that you can hold for a long time. Look at, you know, Churchill Downs, Kentucky Derby is a stock, CHDN. The thing went from 160 to 80 in the last six weeks. So one half. Now, they're going to cancel the Kentucky Derby. They make about $100 million a year on the Derby. It was a $5 billion company. So you're like,

wait, they're going to lose $100 million of revenue one year, and the company is now worth half as much. And so companies like that, you do your homework, you find where the fundamental value is, then you can scale in. You don't have to, even if it jumps right away, you don't have to sell it because you're like, okay, this is a real business that's going to. So if it's a country that the country is on the right footing, if it's a business that the business is on the right footing, and don't go early. Are there businesses that you're looking at that you're salivating over and saying hey i might want to try to buy yeah yeah so i get a lot listen i we have this crypto business up here galaxy digital and then downstairs i have a private equity business that

i'm a part owner of called durational capital and uh you know we've been looking in the uh food space uh like people are going to have to keep eating and so there's some there's some really interesting plays in protein uh that we've been been looking at putting big capital to work And it looks like I threw the Kentucky Derby out there. I had been a big owner of it two years ago with the hope that maybe we could find some way to take it private. It was an ambitious idea. We did it. We made a whole lot of money on it.

All right. Well, Mike, listen, I appreciate you jumping on and doing this. I know, especially given the chaos in the markets and having to do it remote is never as much fun as in person. So thanks so much for doing this. And I'll do it again in the future. Anthony, hey, thanks a ton. Be well. Hey, everyone.

Pop here. If you like this episode of Off The Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off The Chain. We'll be right back.