The Pomp Podcast - 301: Travis Kling On The Future Of Bitcoin

Episode Date: May 22, 2020

Travis Kling is the Founder and Chief Investment Officer at Ikigai Asset Management. In this conversation, we discuss the great accelerator, quantitative easing, modern monetary theory, inflation, strong dollar, politics, China, the generational divide, and Bitcoin. ===============================  BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. www.blockfi.com/pomp =============================== Pomp writes a daily letter to over 50,000 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 www.pompletter.com

This is Anthony Pompliano. Most of you know me as Pomp. You're listening to The Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Travis Kling is the founder and chief investment officer at Ikigai Asset Management. In this conversation, we discuss the great accelerator, quantitative easing, modern monetary theory, inflation the strong dollar politics china the generational divide and bitcoin i really enjoyed this conversation with travis and i hope you guys do as well before we get into the episode though i want to quickly talk about our sponsors the first is blockfi they've got three products you can deposit crypto and they'll give you a u.s dollar loan you can deposit crypto and earn up

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subscribe at Pompletter.com. Again, Pompletter.com or go in the description of this podcast and click on the link there. All right, let's get into this episode with Travis. I hope you guys enjoy it. 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. Travis is back. What's up, man?

Hello, good, sir. How are we doing? we're great this is uh quarantine time now you got a beard we're doing it remotely ready for round two yeah round one was uh quite popular don't disappoint don't know you let's start with uh what you do and where you come from Yeah, so I run a crypto hedge fund called Ikigai Asset Management. We launched December 2018. We're primarily focused on the liquid part of the crypto market. And to be honest with you, these days, we mostly just trade a lot of Bitcoin, mostly. I came from a traditional hedge fund investing background, specifically in the energy industry. So I worked at a hedge fund

called magnetar capital for four and a half years doing long short energy equities and non-control private equity and debt in the energy space and then in the middle of 15 i went to 0.72 in new york steve cohen's hedge fund was a portfolio manager there running a long short equities book of energy and materials equities a little bit of commodity a little bit of options uh fell down the crypto rabbit hole summer of 17 um not being a tech guy not a tech investor not much of a tech kind of guy um and convinced myself that this was the most significant technological innovation since the internet the first time around and as such was likely to be the most significant investment opportunity of a generation so i decided to start my own

investment firm. When we launched in December of 18, we had qualitative research as a pretty big part of our investment process. And over the last, going on nine months now, starting in September of last year, we evolved our investment strategy into something much more systematic, models driven, and primarily quantitative so it's kind of started off as is something a little bit more qualitative and now we trade we trade bitcoin pretty systematically um and so all of a sudden we're going to talk about today is like all of the not even just the crypto qualitative stuff but it's good but it's the really big picture macro qualitative stuff that's like wrapped up around it and then there's there's little 150 billion dollar bitcoin you know right in the

middle of these you know these really big things so there's a lot to talk about so uh when you made that switch from qualitative to more quantitative or systematic uh performance went off the charts that's all we can say i know because we're lps uh in the hedge fund uh which is important to get out of the way. But let's start with, we are just living in a crazy, crazy world. And I think that you've used a number of different frameworks to think through this. But one of them is kind of the great accelerator. So maybe let's just start there with like, what that means. And maybe you can explain a little bit of like why it's important yeah so you and I have been talking about doing this for probably a month or so now and even longer than that because I think I

remember kind of in in like mid to late March and you're asking about doing an episode and I honestly there was so much going on that I didn't know what was going on and I was like I don't have a view on any of this stuff yet, because it's such a tremendous amount of change that's going on in real time right now. And so I think over the course of, of April, some of these things started, you started getting more clarity around some of the broad directions that these various different things might, might take. And if you think that, you know, maybe there's half a dozen or so big factors that you want to say, okay, what's going to happen in this factor and that factor and that factor and at the beginning you have such a broad spectrum of outcomes that it's

like impossible to develop a base case on on on any of these things but then i feel like over the last three or four weeks it's i've at least been able to start to develop these base cases and then you can definitely change your mind right as new information becomes available but you can at least have maybe like a base case to work off of and then as new stuff comes about you see whether or not you're right or not right and so this concept i keep coming back to is uh corona as the great accelerator and there's just on on all of these different fronts it seems like corona just um accelerated things that were already well on their way and and you can think about that in like a very like micro uh personal level and you could say oh man you know i was using postmates a pretty

good amount and uh it seemed like this whole cloud kitchen thing was like gonna get some legs to it okay you just saw an incredible acceleration of that trend that was already in place right and you can think about it on on a bigger picture you know work from home right that was a trend that was ongoing and then you can think about um the really really big stuff so like uh quantitative easing mmt china um the strong dollar um globalization versus de-globalization the this generational divide and then those are these big pieces i was talking about and then it's like i think we're going to talk a while before we actually start talking about bitcoin but i think a bitcoin is just it's just the thing that's sitting right in the middle of all that so

and it feels like uh this idea of the great accelerate uh really isn't just a financial thing right you you mentioned kind of the idea of uh everything from food delivery and cloud kitchens but if you really go even further than that work from home if you look at you know colleges and universities, kind of the questioning of like, why are we paying so much money if we can do the same thing online and not have to pay for such a kind of high touch experience? If you then even go even farther and start talking about like, okay, well, there was a lot of talk about high valuations, right? We saw WeWork kind of blow up and now all of a sudden there's a lot of companies under pressure. It just feels like this is something, I've used the terminology like

the virus exposed the shams of society so that's kind of the the structural things that were there no one really wanted to talk about them but like bam now they're there front and center but i think what you're talking about is more the trends that are that lay on top of that structure right the things that the world was changing already now people are being forced to literally accelerate that change right yeah no that's exactly right and so you know friendly reminder because it's easy to lose track of all these things that have happened, right? So the Fed's expanded their balance sheet by just shy of $3 trillion in the last, you know, less than 90 days.

But we were doing QE before anybody ever said coronavirus. The Fed cut rates three times before anybody ever said coronavirus. The repo market blew out five months before anybody said coronavirus. The Fed funds flipped the overnight offer rate a year ago, a year ago that happened. And so these pieces that were in place, you know, well before any of this coronavirus stuff started happening, and specifically like this dollar shortage situation, which you've had, you know, a few guests on that have talked about it. Brent Johnson with his dollar milkshake theory, Jim Bianco. I call these guys the macro voices cohort. It's the guy that Eric Townsend has all the time,

which I've been listening to that podcast religiously. They've done a great job. Luke Grauman goes in that bucket. Danielle D. Martino Booth goes in that bucket. And they all have, you know, a lot of similarities around their, their viewpoint. but they were talking about how dire this dollar shortage situation was before anybody ever said coronavirus and then you can just look at the magnitude and the ferociousness with which the fed and the treasury reacted when this hit and you know that they knew how tight everything was beforehand. And that's how you got a situation where in the second week of March, you had

capital markets seize up so much, right? And it's real easy to think about this. If the VIX is going up at the same time that gold is going down, you're having a big problem in a financial market. And it's a Lehman-esque type of problem. And I didn't think in the second week of March that it looked like um it looked like an investment bank was going to go down because the banks have you know had to recapitalize like they're not nearly the same situation as 08 but like what about the risk parity funds what about all the all the really biggest hedge funds that had gotten involved in the overnight lending market um and the repo was blown out and the knock-on effects of that right and so here comes the fed with whatever it was four trillion of of a essentially infinity

actually the way to characterize it was infinity because they they said infinity but it wasn't just that we'll do unlimited amounts of qe they were also real acute they started getting the term that i like to use is exotic but the feds started getting exotic with that monetary policy stimulus and they started doing things like like uh announcing that they're going to buy credit etfs and we're going to do municipality stuff and uh you know we in such a short amount of time you're talking about talking about like 45 days that all this stuff happened right and you lose track of you know this this term cross the Rubicon right we cross the Rubicon so rapidly in terms of the things that were acceptable or deemed unacceptable previously

that that now we've already done them and nobody cares oh and then we're you know then a ton of fiscal stuff Andrew Yang yo Andrew Yang was running for the president of the United States on a universal basic income with an MMT underlier and people I mean people thought this guy was crazy. And then you fast forward 90 days. And now they're doing exactly what he's talking about. I mean, it's exactly what he's talking about. So I want to go back to the idea of the dollar shortage first, right, which is, I think, in the macro economic world, and people who manage money professionally, they really have a good grasp of that. But just spend kind of a minute describing what that means in layman's terms for people who aren't in that seat. And then we can get into kind

of some of the knock-on effects and why that's put us in the position that we're in today? Okay. Simplistically. And again, I would say, if you want to go deep, go dig into all the macro voices, guys. Simplistically, dollar shortage, the dollar is the world reserve currency. That means a lot of different things, but it means that countries around the world want to transact in dollars, dollar-based transactions, financial contracts, liabilities, financial instruments, you want to do that in dollars, because you feel good about the stability of what that's going to be. That creates what is very broadly now been called the euro dollar market, which is basically all of the dollar denominated liabilities and financial

instruments that exists outside of the United States, and thus, outside of the direct purview of the federal reserve and when this dollar shortage situation was which had been again going on for a year close to a year i mean you know i think the macro voices guys would probably tell you it's been going on for like five years if you want to go all all the way back to you know when you know i guess when in like i guess foreign buyers of treasuries stopped becoming net like net purchasers of treasuries which i think was in 14 i know that was a big part of that kind of dollar how that started um but you fast forward to today and you have a big deleveraging event a market crash like we had in march and the whole world was already scrambling

you know barely getting enough dollars to satisfy these various different you know contracts and financial instruments. And then there's this big race, $4, and you hit, it's just a vacuum. And the easiest way to think about how big that vacuum was, was that the Fed and the Treasury and the US government announced north of $7 trillion of monetary and fiscal stimulus from you know over about a six-week period of time in kind of March April and the Dixie the dollar index which is the the U.S. dollar weighted against a basket of international currencies the Dixie was unchanged over that period of time so seven trillion of stimulus again you only did you did like two trillion in the financial crisis over a really big you know multi-year period of

time and we did seven trillion in uh you know six weeks and nothing happened to the dollar that's how short the world was dollars and so so the setup that that puts in place is um it now puts the united states government in a position to basically be shooting against dollar weakness with record levels of stimulus, unprecedented levels of stimulus. I don't know if you saw the statistic. Goldman put this out in their research about three weeks ago. The disposable personal income in the United States in 2020, Goldman predicts to be 0.5% higher than in 2019. Higher. Basically flat. Let's call it flat. Disposable income flat year over year. How is that possible? That's possible because of the magnitude of the fiscal stimulus

the United States is providing right now for people in these unprecedented times. Whether that's the right thing to do or the wrong thing to do is not what we're talking about right now. And it's almost like less interesting, actually. So let's just identify what they're doing. And that's what they're doing. And as long as the dollar is hanging in around here, in my opinion, it's giving the Fed and the Treasury the green light to keep doing more and keep doing more. And that's basically what they're shooting against. So the way that I think about this, right, is you have a dollar that is strong because there's a shortage, right? It takes less dollars to buy more of a good or a service.

And what you're basically saying is the Fed and the Treasury are sitting here saying, wait a second. I realize that we have a strong dollar. The way to drive recovery is going to be to weaken the dollar over time. If you talk to somebody like a Dan Taperio, he would say, you have to systematically weaken the dollar over time, or you won't be able to drive the actual recovery that you need. Right. And so what they're doing is they start out with, you know, I call it the water gun showing up in the combat zone. Right. They literally, it was like a couple hundred billion, just didn't do anything. And then all of a sudden it was, they dropped a monetary stimulus bomb on the battlefield. Right. And they literally said, Hey, we're going to drop, you know, I think it was the $2 trillion, right. Which by the way, it was a trillion dollar stimulus plan. And over the span of like 72 hours doubled in size before it got approved.

Right. Right. And that now all of a sudden they're realizing, wait a second, we still didn't put a dent in that. And so now you see, you know, the Democrats having approved, uh, I think it was in the house, $3 trillion, right. And it's just like, Hey, how do we go bigger and bigger and bigger? And what they're really trying to do is systematically weaken the dollar by flooding the market with as much currency as possible. I think that then leads to this world of like, okay, so how are they doing that? Or what are they doing with it? You've already mentioned

that it started out with easy stuff, right? Let's go buy treasuries, you know, all that kind of stuff. Then they got it more exotic. It ultimately leads to the question of like, do we just get the UBI and MMT where you basically have the politicians directing where the money's going, not the federal reserve etc yeah as we sit here today how do you think through does that happen or not and what's the ramifications if it does happen yeah so the kind of the only difference between qe and mmt is whether or not you're going through the the machinations of pretending like you're going to pay it back in in qe the treasury prince treasuries sells it to the fed the fed creates money to buy the treasuries um and they use a dealer right an intermediary bank they use

a dealer um and in theory the dealer is supposed to add some sort one it legally there's a there's sort of like legally i think it's the federal reserve act i guess um or some offshoot of that so legally they got to go through that and then also in theory it's supposed to like keep a market price on whether it's going on right but it's like the dealer that's not at all the way so i can just promise you that's just not at all the way it's working right because the dealer knows that that uh they're right here to buy it off of them buy it from the treasury to sell to the fed make a little spread nice little business um and so um i i like i i think that when you when you look at um going through the the machinations of pretending like we're

still doing qe um but with the treasury right alongside the fed and then the only difference between qe and mmt is that okay we're not even going to borrow the money anymore the um we're just going to create it literally out of thin air not even pretend like we're doing this kind of paper iou type of thing and i don't there's not really that much difference between that and what we're doing right now there's just not that much difference in practicality so we're kind of already there on MMT. And again, back to this cross the Rubicon kind of thing. Uh, a lot of this stuff, you know, it's tremendously hard to walk back. Once you get it out there on the monetary side, it's really hard to walk it back. Um, we've seen that, like we've seen

this movie before. We've seen them try and walk back the monetary side. We saw the tightening And it ended up with Q418, dumpster fire for all risk assets globally. And you had J-PAL, December 17th, 2018, talking about the Fed was on autopilot. And the market really didn't like that autopilot, right? and uh trump didn't like that autopilot and they did in january of 19 their massive dovish capitulation again reframing just how quickly we've come here but that all these pieces were in place before we got here right because we're just talking about january 19 or when january 2019 they did their dovish capitulation and so so walking back the monetary thing is going to be really really hard to do walking back the fiscal is going to be really really hard to do um and And finding the right kind of give and take in terms of the pace that you're trying to pull back this fiscal support when people can't find jobs is going to be very, very delicate.

And they're definitely going to err on the side of doing more, not less. That's just, they are. So, where does that put us with the pace of quantitative easing? You know a lot about the pension liability problem. You and I have talked about it some, USCO talks about it a lot. That again, the great accelerator, that was a problem before anybody ever said Corona. the stock market move in march made that from a you know a very very big problem to this kind of gaping hole right at the s&p 500 at 2000 the size of the pension and what that does commensurate to

other risk assets right so just use that as a proxy for all risk assets what happens the corporate debt what happens the real estate blah blah blah doesn't work what we you know pension liability problem you know it's been a problem for over a decade uh used to feel like it was a long way away that problem used to feel like a long way now all of a sudden it's not it's not feeling like it's such a long way away and so here comes quantitative easing uh we're 12 years on into it in the united states uh we did qe and then tried to do the qt didn't work started started qe again before anybody ever said corona and then um what we know what we think we know about the way qe works is that it doesn't really cause inflation it doesn't cause headline

cpi inflation it doesn't cause uh the way that the fed measures inflation for their two percent inflation target right because you hit one month since the financial crisis did you hit that right We know that's that. And it doesn't really cause that much economic growth causes a little bit. But that was the most tepid economic recovery in, you know, in the history of the United States since World War Two that we had. So it doesn't really work that well for that. But what it does do is it makes asset prices go up. and uh the fed is dealing with it's it is an organization full of people the same age as the people that are having the pension liability problem it's there it's it's those are the same people and so the fed is willing and able and incentivized to put the s&p 500 at 5 000 instead to 2000, where that pension liability problem becomes a much smaller problem. And they have a track record of a willingness to do that. And so the base case that they're just going to keep

going and keep going, ad nauseum, got to worry about the Dixie to a certain extent, but you sure would like it weaker than it is right now. You know, you just did 7 trillion and it didn't do anything to the Dixie. You can look at what's happening with inflation expectations right now, right five-year forwards were at two percent right before anybody ever said corona you dip down to 80 bips in march five-year forward inflation and now you're you're hanging out at one and a half percent one and a half percent inflation for five-year forwards and so um i'm also the opinion they don't want it to happen too quickly because i think if um i i've you know you talked to a lot of different people about about what's going on here i've talked to some really smart guys that

you and i both know uh that from very early on said um this corona thing is being tremendously overblown and the magnitude of the monetary and fiscal response that's that is uh happening in the face of this is just going to completely juice risk assets in a big big way and they're going to overshoot and the the motto amongst that group is uh new high by 4th of july they're talking about the s&p 500 getting you know getting back to the highs of of late feb uh by 4th of july which is would be a disconnect you're talking about 40 million unemployed s&p 500 at all-time highs that feels too soon to me and i i would have thought before sunday night that they wanted and i actually think they got qe dialed in well enough i actually think they've got qe plus the

messaging dialed in well enough that um that they could i think they got a pretty decent handle on on when to take the S&P 500 to all-time highs. I thought they would want to lay off of that, honestly, until late September when people get ready to vote. So it was my base case assumption you were going to get new all-time highs in the S&P 500, and they were just going to use QE. It's just a lever. It's just a lever.

But after listening to Jay Powell on 60 Minutes Sunday night, that was not a man that wanted to wait very long before getting a new all-time high in the S&P 500. And so you see all these different pieces that are kind of starting to get put into place. So when you get that disconnect, right? Because I agree with you that there's a massive disconnect right now. And I continue to say that the stock market is not a representation of the economy. It's a representation of central bank actions at this point, right?

And you're talking specifically about using that QE as that lever. Do you believe that they can stay disconnected? or do you have to have some sort of matching, whether that means the stock price can go up and eventually has to fall back down to match economic reality, or you basically inflate it for so long at the dislocated level that you buy time

for the economic data to recover and kind of get up to meet the expectation of those stock prices or asset prices. Like how do you solve the problem over the long run of not having a dislocation? I boil it down to, this is the way I simplistically think about that. I say it is a totally reasonable base case to assume that that disconnect will be meaningfully wider than it's ever been ever before. And you just, and so you just kind of, I don't know, use that. I don't run an equity spun, right? So it's like, I don't, maybe I don't

have to have it that dialed in right as opposed to maybe some other people that's just how i think about it is that it's a great base case to just assume that those things are going to get way more disconnected than they ever have before and they could stay disconnected for an extended period of time and then again when you know as new information becomes available you just keep watching jay powell keep watching steve mnuchin okay steve mnuchin's doing the debit card thing okay he made a joke about debit cards with trump okay so we got that going on and then you got jay powell on 60 minutes okay so that's okay we'll put that there we'll put that there right and that's you know you just i think you take it kind of level level by level from that perspective

so the one thing that uh we definitely agree lockstep on is it's very hard to walk back all of the stimulus, right? And if you look at, let's take the unemployment benefits, the boost or the beefing up, right? The extra $600 a week. We know for sure that there are many people who are making more money on unemployment than they were at their job, right? You could argue that that's because the unemployment kind of boost was inappropriate, or you could actually argue that that says more about people being not paid enough before all has happened right kind of two sides of that coin democrats want to extend it past july right and they're talking about kind of end of the year and their latest three stimulus uh three trillion

dollar uh proposal republicans say we're not extending that at all right and and now you get this political kind of battlefield over who's going to take it away right and who can point who the finger at who because we're in an election year and so how much of that like political uh really just posturing right or peacocking if you will uh plays into the federal reserve decisions understanding that jay powell in the 60 minutes interview said oh congress has oversight over us right which i thought was you know hysterical to hear him say but how do you think about the kind of the political layer over all of these decisions that are getting made in the economy yeah look i think the first thing i'd say is i did not come on here to talk about the coronavirus

like i'm not gonna talk about medicine don't ask me about but like it's like i try and understand like everybody else but like it's been a little annoying when you get like the hedge fund guy to come on and try and talk epidemiology it's a little you've seen a lot of that lately um but i think what's been really disappointing to me has been how politicized the response has become and if you're paying attention you know that to be the case and uh i just would have hoped we could have done a little bit better than that um part of me you know if you pay attention to what i talk about you know i'm not a huge fan of government in general uh and i think for a multi-decade period of time we've had an issue

where the the best in this country most of them have no desire to go into politics and a lot of people that do have a strong desire to go into politics aren't the guys that you want in run like making the decisions on how to run the country and there's definitely exceptions to that i really want to point that out but broadly speaking a lot of times the people that are most attracted to the way the political process is in the united states right now are people that have these specific personality situations that um you know would make them less ideal than than some leaders that you could think off the top of your head man i wish that guy was you know helping us around the country right um and you're seeing that a lot of different you're seeing that in

the state's responses with the federal government you're seeing that in um kind of a number of different layers but it seems like the fighting over the magnitude of the fiscal stimulus honestly i think is just posturing because you're talking about somewhere in between an unbelievable amount and a completely unbelievable amount and if the if the more fiscally conservative side of people if if they go in their direction and it looks like things aren't working out we'll immediately do a lot more and and uh everyone's very cued in on that and again the main thing that they're kind of kind of shooting against dollar you know where the dollar is and inflation and you need inflation and we can't find it we couldn't find it for the

last 12 years we haven't been able to find it and coronavirus is a deeply deflationary event but you had again the great accelerator um you had a number of other really strong deflationary forces that were already you've been in it forever technology right technology is very deflationary been going on for a long time demographics deflationary everybody's getting older deflationary it's the uh yuppie yuppie to nerd ratio the ratio of the the spenders to the savers and when you get an elderly population uh that's a that's a deflationary fundamentally deflationary event and we've got japan as an example you have a number in a bunch of different countries as an example um one that i heard recently that i had not thought of before as

deflationary effect is um unprofitable companies so very very large companies that uh the market allows them to issue equity and debt continuously to fund businesses that don't don't generate earnings or cash flow we got a lot of those right we got a whole lot of those uh because they have this kind of top line revenue growth or whatever but you're if you think about that you're throwing capital into a hole that uh isn't you know functionally producing sort of gdp type of growth right deflationary um you have uh and then here comes coronavirus deeply deflationary and uh uh oil okay oil you know does this incredible pullback uh also deeply deflationary and so so the united states is searching for where to find inflation and so if you use that

as the base case backdrop they're going to keep doing more in terms of monetary and fiscal stimulus and then where else can we find inflation we can find inflation in deglobalization and that brings us to this is what shamath was talking about and uh and other smart guys have been talking about this okay so the corona this corona event sort of pulled back the curtain on the fact that there's supply chain issues number of people have been talking about this already there's a book written a couple years ago china rx or something like that the the book about uh how vulnerable our prescription supply chain was in america uh whatever the stat is like 90 percent of all uh uh blood pressure medication or i don't know

i don't want to misquote it but it's like real problem you saw that come on you just recently last week you saw the announcement of the uh advanced manufacturing facility for um prescription medication i think richmond virginia i think is where that's being done um a lot of people talking about bringing you know first it's the kind of national security type of supply chain so you bring back pharmaceuticals you bring back pp and e bring back microchips right whatever that microchip company just announced last week they're they're now they brought their manufacturing facility they're building back on on onshore and then um and then you can just get creep in terms of other supply chain things especially you can get creep in terms of of other supply

chain bringing it back from from china back in the united states when larry kudlow is talking about paying for the costs that was a month ago like oh why don't we just peel off and the thing is is like before crossing the rubicon before all the numbers that we started doing this go around to peel off 300 billion dollars to pay for u.s manufacturers to bring manufacturing facilities from china back on the united states where are we going to find 300 billion dollars where are we going to find that well now in in the backdrop we have now we ripped two trillion on a thursday the other day because pal was worried about the unemployment numbers like these are incredible numbers that we're talking about now so you can definitely find 300 billion dollars to bring this

supply chain back from China oh and by the way oh we get to create a ton of jobs awesome oh and we may be able to get that much much desperately needed inflation that we can't find and then the real kicker the real kicker is that we get to fight communism Bob so the two things that are really interesting to me the the problem you're talking about in finding inflation right I think the concern is uh there's a bucket and when the bucket's empty that's a deflationary environment right and we're trying to fill the bucket with water and literally we started with an eye dropper right it's just drop drop drop drop and then take a genius or a rocket scientist look and say hey that's going to take a long time to fill that bucket up or say hey you know what maybe we should

pour a little more water a little faster and then all of a sudden something like coronavirus happens say hey we need the bucket full right now and they take literally a fire hose but the fear is you don't only fill the bucket it's overflowing because you shot way too much water and right or you shot too many dollars into the system and so before we get to the fighting communism and kind of the whole china showdown do you worry about overshooting in terms of the monetary stimulus and eventually getting that high level of inflation or even just over 2%. Forget high level. I don't, I don't worry about it. They're going to do it. There's no, there's no point in me worrying about what's going to happen because they're going to do it. And then we're going to

find out what happens. I mean, they're going to do it. They're doing it right now. So I agree with you. Uh, and I actually think that there's a separation. This is the other thing that I've been thinking about a lot recently there's a separation between the inflation actually happening and just the fear of the inflation happening right so if you go back to 0809 gold goes down 30 you know summer of 08 and then they do start doing all this printing and people just oh my god here comes inflation they run into inflation hedge assets those things explode right gold hits all-time high in 2011 all that kind of stuff inflation never actually came right but it was the fear of it that drove the inflation hedge asset prices up here i think you get a kind of a

repeat there's the fear you see people talking about it people will definitely run into these assets right you even see paul tudor jones talking about all this kind of stuff but i actually think that they're gonna do it this time right and to your point does it become a hey we're targeting two percent and so we hit two and a half or three percent or is this a well we way overshot and we get into scary levels of inflation that i think people are looking around the room saying hey is this thing going to survive like where do you think we end up if we get the inflation yeah so first you need to make sure we're talking about headlines cpi inflation and u.s dollar terms because as soon as you step outside of u.s dollar terms you know people use this

the term the dollar wrecking ball you heard people right then describing what the dollar does to emerging economies right dude the euro is in a lot of trouble man i mean the euros i don't know how much you're paying attention to the constitutional court in germany and like i mean it's in real trouble japanese yen it's in real trouble so now you talk this goes back to these macro voices cohort guys where you're where they're talking about oh you're going to flee the dollar as the as the they're doing so much monitoring fiscal stimulus you're going to flee the dollar as the world reserve currency into what into another currency what what currency are you going to go to everybody's in worse shape than we are and so um that's why they're all such

gold bugs right um and i get that and you know sometimes i always have this nagging feeling in my head about gold, where when the entities most incentivized to keep the price of gold from drastically increasing relative to the currency that they control also hold 25% of the gold in my head, I'm just like, you know, and it used to sound real temporal hot until a couple of those guys at jp morgan went to jail on the precious metals desk right now maybe anyways i don't want to get into that but like wait before before you go on it's not so tinfoil hat when you know that they're willing to do certain things because right now what you know whichever side is right or wrong i don't know all the details but literally venezuela

is suing i think it's britain because they won't give them their gold right basically everyone is admitting yes this is venezuela's gold but we're not going to give it to you and i get it that there's sanctions and kind of all that kind of stuff but it's just you you start to understand that there's things that uh are happening that everyone is a rational actor and that sometimes leads to irrational things happening in a market if you don't understand why somebody's doing something right and and it feels like um like this is kind of brent uh johnson's theory at santiago right which is like we're in bad shape but relative to everybody else we're actually in great shape and so even though we get kind of screwed if everyone else gets screwed more

then on a relative basis we win right which is pretty crazy yeah you know i have this weird i've had this theory again as a guy that has done plenty of public railing on the fed and treasury and all this kind of ridiculousness it's a big part of why I do what I do for a living I've had this like crazy thought they're like what if they were actually way smarter than I'm giving them credit for and they were setting up all of these dollar denominate you know allowing all of these dollar denominated contracts and financial instruments to exist and they see that keep growing and keep growing. In the back of their head, they go, if anything really bad ever happens, the whole world is going to have to rush to try and get dollars to satisfy these

things. And it will give us the buffer that we need to do, you know, incredible amounts of support for americans i don't know i'd be giving them a lot of credit which has not generally been my tendency but um but at the same time at the same time it's not out of the realm of possibility no right all right so as we see this all happening let's talk about china There is a man who's the president of the United States who came in and he had, to put it lightly, some very radical ideas compared to the establishment. This is everything from the deglobalization. This is taking on China directly in all the trade. We'll call it talks if you want. Befriending dictators of enemies of the United States and kind of playing up those relationships to questioning very long-term relationships that the United States has, both on the diplomatic side, but also things like the World Health Organization, the Climate Accord, all these different things. Whenever there is something very disruptive like that,

it's obviously going to be polarizing. So I don't want to get into kind of the political polarization that's well documented. But the one thing that in some weird world we've backed into, many of those policies are now going to be adopted but the impetus for them is not going to be our president wants to do this it's going to be the virus forced us to do this right so the deglobalization now everyone wants to take on china both sides of the aisle are looking over there and saying whoa hold on a second right and maybe for some different reasons but ultimately we get this showdown and so you know you know uh i spent a year in iraq a war that was started over wmds that weren't there uh and there's a lot of people i think that question that whole narrative

of what you know 18 20 years later why are we still at war in the middle east this is not a let's go invade you know the the largest population country in the world this is let's engage in an economic war that 50 plus percent of our country doesn't even understand right and so let's just start at a high level how you see us positioned today like that economic battlefield if you will like how is it positioned and then where do we go yeah the a lot to unpack on china um trump ran for president on make america great again and like you said again back to this the great accelerator he was already making moves on china way before anybody ever said coronavirus and um you had the tariff wars which were you know a year

ago right that those cranked up and they came to this like pseudo deal that you knew that like the pseudo deal was really just trump was like that's enough for my first uh term and like i'm definitely coming back with these guys in the second term and a lot of this has been driven for trump a lot of this has been driven by steve bannon right that is the most hawkish guy that's closest to um trump and steve bannon was out here the whole time with kyle bass and some of these other guys with a level of hawkishness that felt like it was kind of halfway to alex jones right especially it felt unpresidential in a way because obama was such a you know he really was a globalist and he wanted everybody to get along he's a big get along guy right and um that felt

you know obama was incredibly presidential right it's just i mean sometimes politics aside sometimes i see trump get on tv and you really miss obama right regardless of policy decisions but just like you know obama's a good guy right so so with the so with the globalization um trump starts wanting to walk that back then here comes coronavirus i'm of the opinion that you know it's it's becoming increasingly apparent that the United States is gonna hold China accountable for coronavirus and there's gonna be a

full uncovering of the facts I have no doubt that the intelligence agencies like let's be like how how much digging do you think the intelligence agencies have been doing over the last couple months like let's be honest let's just frame it like that and we don't even have to answer the question just frame the question they're going to answer for that and then you're just starting to see the first things trickle in right like what you said world health organization okay um a number of other things and then here comes the supply chain coming back And the craziest thing, the experience for me personally that's been crazy is that, have you listened to Steve Bannon's podcast at all? So I haven't listened to Steve Bannon.

But before you tell us about this podcast, the one thing I will say about Steve and Kyle. So I did an episode with Kyle, went down to Texas and had lunch and it was fantastic. Incredibly intelligent guy. Right? Obviously. I left and I said, he really believes what he's saying. Right? There was no doubt. There was no kind of anything. I didn't know anything about Steve Bannon. Before I went down there. We did not talk about Steve Bannon while I was there. Afterwards, I saw on Real Vision that Kyle interviewed Steve Bannon. i watched that episode yeah and uh basically you could sum up my uh understanding of steve bannon as headline you know kind of coverage of him right so kind of he was the the right wing crazy guy that the media really kind of took some shots at and that was you know that's all i knew about him didn't know anything after i listened to him and kyle talk in that interview i said two things you

can't argue with is steve bannon is incredibly intelligent mark and steve bannon has a better pulse on the geopolitical landscape than pretty much almost anybody else i've heard talk about right and he may be wrong he may be right he may be you know um ill-advised in one area he may be kind of you know waving his hand in other areas whatever but the dude is on top of a lot of stuff and so I have not listened to the podcast but I just want to put that out there as I was very surprised when I heard him talking on those two fronts yeah so so the way the way that my China view has been formed really over the last probably like five weeks or so at the beginning of April I started listening to Steve Vann's podcast the guy goes two hours a day like

six days a week played a lot of content man and again it's like kind of halfway to alex jones but i started noticing that he was talking about things that were that the united states was going to do on the podcast and then like 10 days later it would come true like trump would do it and you or you'd see some announcement you'd see some move and he had talked about he took he called the pull it pulling the funding from the world health organization he called that a month before it happened and he was talking about it factually and uh and so that was the first thing and then i think in the second week of april i saw bill maher um say that we need to call this the china virus and that there's not we shouldn't be changing the nomenclature whatever of

how viruses are named just to try and be not step on anybody's toes in China okay this is not Kyle Bass saying this this is deeply left right the champion of Bill Maher right and then I started thinking about it in you you start this is what I mean at the beginning of this conversation where you see how all these things are interconnected then you start thinking about the inflation thing and then you start thinking about how the hell we're gonna get what we need jobs we really really need jobs and then you start thinking about the potential for behind closed doors politicians on the conservative side rapidly arriving at the view that you know

the ccp the chinese communist party is uh is being treated as uh you know really a bad actor and we're treating them as a bad actor because there's now this body of evidence that shows that they're acting as a bad actor towards us and it's not kinetic war which was what we used to call war like what you went to go do and and but now they're talking about the economic war and the information war and you're increasingly seeing this this mounting body of evidence that that is what's going on and one of the main ways that I realized that it was gonna get bipartisan support after you think about inflation which you need and the job creation which you

need um was one of the main reasons that that progressives were having a hard time getting on the this make america great anti-china is because it feels xenophobic right building a wall along the mexico texas border feels very xenophobic and uh progressives have definitely tried to paint um some of the situations going on with china in a in a xenophobic type of manner and i understand that but what you're able to do is this is not about the chinese people we love the chinese people this is not about um uh chinese americans we love chinese americans this is about the chinese communist party we are fighting communism and there is nothing more that americans love than to fight communism and when you can reframe it like that is we actually want to

um free the chinese people from the communist rule and then you start getting these ussr lookalikes and that picture yeah what what democrats gonna what how do you stand up to that oh no i'm super super pro china because i don't like jobs for americans in the worst economic downturn in american history when unemployment rate is at unprecedented levels oh no i don't want to bring jobs back to america nobody's going to take that stance and now it doesn't have to be about xenophobia and again i'm not this is not my view this is my observation of of these pieces that have been laying in place and the amount of you know it was a little over a month ago that i think i kind of came to this realization and the amount of dominoes that have started falling

And this broad direction is giving me pretty strong confidence that the United States is about to put the screws to China a bunch of different ways. And to a degree that I think just a really short amount of time ago would have thought is being impossible and that we're going to see how strong the Chinese economy really is when the United States really tries to start to punch back, I think, against a lot of the different things that have been going on. so most of that punching back uh as we sit here today looks economic right and that's everything from uh weakening the economy uh from the inside out pulling back supply chains pulling back jobs right all that kind of stuff uh also externally weakening them uh that's through the tariffs and all that kind of stuff do we go from an economic war to a physical war like do does it creep out into something that looks different than what I think the path that you and I see right now? Like, can you see that happening?

So I just take the view of experts. Some of the experts that I've read and listened to on this topic say that China does not have interest in a physical war. The really sad part is that if you just looked at history, history would tell you that with almost no exception, you go to physical war. when things like this come to a head, with very little exception. I think there is some hope that in 2020 we can avoid that,

but it's scary. But I have, again, heard from experts that make a career out of following China, that China does not want that. um and that they think that over again they have a tendency to think on you know they think much much longer term than i think u.s politics and things like that are able to think on and they're thinking over decade over decade over decade of experience uh or or uh just decades of of going back and forth with economic and information warfare that eventually uh you know

the u.s just slides into a sort of more subsidiary position um i just get the sense that over the next handful of years the u.s is gonna punch back there yeah it was really interesting uh peter zahan uh kind of a yes global strategist did you have him on i did oh man i didn't listen to that oh he's so good and and he basically his whole theory for those that don't know is he looks at demographics. He tries to understand how the world will kind of evolve over time based on that demographic information. And he's of the belief that within the next 10 years, there will not be a unified China, right? He believes that basically China is on the precipice of at best breaking up, at worst, blowing up, right? It's kind of, I think, would be fair way to categorize

it and so how does this affect um the rest of the world right you got the two superpowers locked horns in kind of the middle of the arena and they're going to go at it right and and uh it's kind of like a prize fight in that they're both going to land punches to some degree uh the question is going to be who knocks who out at the end right is the rest of the world just sitting in the stands watching or are they doing things um that to help either side uh or manipulate the situation in any way um i mean it feels like there's going to be major collateral damage from this right we know that the eu is the eu economy is basically mostly germany And Germany has hitched its horse to the China cart and they've been able to sort of, you know, import growth from China that is in a lot of ways buoyed the entire European Union.

So I think there's potential for major collateral damage in the European Union is, you know, if, you know, these two sides start going against each other. um i don't have a base case there it's more you know all these different things these really big things we've been talking about i really if you can tell i just try and pick a general direction as a base case and then you're just waiting for new information and you see if you're confirmed or you're denied and what it looks like right now is like okay it looks like the united states is really going to try and put the screws to china and there's a good chance that china's going to do something to try and put the screws back to them and we're going to go in that direction and then you just watch as you know every time a new you know every time chinese stocks get

delisted from the nasdaq right like you're seeing dude bannon a month ago he was talking about at least three weeks ago bannon on his podcast was telling you this was going to happen that's what has made listening to his podcast like such a weird like just a weird experience because of how accurately he's called a lot of this stuff and it's not by coincidence right it's not like the guy's got a magic ball it's one of these things if you if you want to predict the future you know go build it right and that's what he's doing is he's got the ear of the president and he's basically saying this stuff that's what he believes and then he goes and he tells the president hey you should do this right and some percentage of those ideas you know get through

the filter and will end up getting implemented. I guess the other part of this kind of superpower showdown is in a world where China wins that, right? And it happens over a decade, let's call it. Does the US dollar lose the global reserve currency status? Is it a battle where that is what is at stake is the global reserves currency status it's a great question um you could put yourself in the shoes of the leaders of the chinese communist party and they're trying to play 50 year 100 year ball and you could say man this u.s dollars of world reserve currency is a huge pain in our ass and it is a tremendous pain in china's ass and if you saw in april when the fed extended those fx swap lines to all the major central banks in the world you

didn't get a swap line pboc did not get a u.s dollar fx swap line and then just to start we very talked about crypto so far we're going to get to bitcoin but just to circle back to crypto uh here comes the u.s uh usdt prints the tether prints all the u.s the majority of the tether printing has been a backdoor fx swap line into china and other parts of asia that desperately desperately need dollars and they'll take them any way they can get it they love tether they've been loving tether for non-crypto use cases i first started hearing about that in april of last year all remittance payments cross-border payments supply chain logistics payments capital flight all these different use cases um and and and so as as we kind of start to squeeze china

and we figure out the different ways that we can put you know the u.s puts the screws to them but in the meantime you know incredible amounts of of money supply increase now look you you listen to some of the macro voices cohort guys like i think luke gromman would say we got like 50 trillion of room i think that i mean i've heard him through you know i think these guys throw out these insane numbers uh in terms of the amount of room that you have uh i don't have those guys are way more of an expert on that than i do but i think the thing the important thing to realize is that those chickens are going to eventually come home to roost for the u.s dollar and they're not going to be baby boomers problems they're going to be

our problems there's gonna be that's gonna be your problem that's gonna be my that's my problem that's that's not my i love my mom i love my parents it's not gonna be my parents problem It's not Donald Trump's problem. It's not Joe Biden's problem. It's not Jay Powell's problem. It's not any of their problems. That's going to be our problem to deal with. And so you're doing damage to the strength of the U.S. dollar to kick the can further down the road. And when people talk about boomer sociopathy, that's exactly what they mean. In terms of you're putting it future generations, you can just look at it. There's a history to all this shit, dude. There's hundreds and hundreds of years of fiat currency history, central banking history.

There's history to all this. Without exception, when you do this, it ends very poorly. There is no exception to that. But it doesn't happen right now. We've got room to give. and by the time it does come to a head it's not going to be their problems can be our problem so how are we going to fix like what's our generation going to do to fix that problem okay here comes a non-sovereign for money

really it's real radical technology hadn't been around very long to do it boomers definitely don't like it i think it doesn't make any sense at all but when you look at how we got here and the way that we got here with the monetary policy situation it's actually a lot like how we got to the global financial crisis on the micro level of subprime how did subprime happen most people everybody's seen the big short a lot of people read the book right if you read the book then you know that a key factor in how

the subprime mortgage crisis happened was because of a lack of there's nobody checking anybody else right and there was a lack of uh checks and balances and the incentive structure was all wrong right because everybody got to punt the risk and you had the guy making the originations that got the bonus and then the bank didn't have to hold it they could punt it and then the bank that got it punted to them they collateralized it and they sold to somebody else and there's germany over there they were always buy everything and like that's there was not a system of accountability. Well, the same thing has happened over a multi-decade period with what we've done with the monetary policy of the US dollar. And that's part of this, you know, bigger thing that

I talk about a lot called the trust revolution. And as we fast forward through the rest of this decade, and I think we've touched on a number of things that we're going to see happen in the next decade real big important massive things that are going to happen who knows what the outcome is going to be but as you move through the 2020s and you know we probably get to 2030 is the euro round i don't know probably not honestly you know huge changes that will have occurred and does the world start looking at the damage that's been done to the u.s dollar and the fact that historically inevitably inevitably there's a transition from one world reserve currency to the next the last time we had one of those was uh the british pound after world war one we got to world war one pound

was wrecked people used the dollar and the british pound together in between world war one and world war two got on the backside of world war two british pound was so wrecked we did bretton woods here comes us dollar been there ever since there's a timeline to all of these what's the chances that as the u.s dollar inevitably becomes so damaged that people are really looking for where else to go that our generation not not our parents generation our generation decides i think we should go with non-sovereign i think we should go with something that's governed by open source computer software i mean look i'll take it even a step further not only is it our generation at what point do other countries just say look I'm not playing this game right I see

the economic battle between the U.S. and China I see all of this manipulation going on I see the printing I just want something that I know what's going on right and I think that that perspective applies to countries but to your point also to an entire generation of people who literally right now uh the meme right which as we're learning is the memes are the message the meme is don't fight the fed but money printer go burr right and and i was thinking about this the other day actually money printer doesn't go burr it actually goes beep poop i don't know i thought about that the other day yeah i mean but but here's the thing right is when you think about what they are doing there's never been a generation that has had the access to information and the access to the people

that we have today so part of what i always joke about is a magic show only works if you don't know how the magic is done but as soon as somebody tells you how the magic trick actually is carried out it's no longer magic yeah right and what we're seeing is they're revealing the magic trick they're saying we we literally go into an account and we edit the number right if you hold on a second why do i pay you taxes yeah right why do you need my tax money as revenue if you can just edit your bank account that don't make any sense right and you start again that's a small subset of people who start to think that way then they see on you know the first 60 minutes uh of the crisis where literally they're saying well we have infinite money right we just we can print

as much as we need yeah okay there's a second you're talking about cash card yes that one yeah that's amazing yeah then you get jay powell right and you keep going through it and what you realize is it goes from a very small subset of the internet right this crypto community but there's literally videos floating around there's memes i've tweeted three or four of them where people are taking jay powell and they're putting him on videos of rappers throwing money around right and and it's a joke at first but the reason why it's a funny joke is because there's truth in every joke yeah and when you start to see is the narrative changes and of course there's some cut off i don't know what the age cut off is but some group of people above a certain age are like

you young kids are idiots right you know um uh who's a dave column the other day said uh young people the number one rule is don't complain about your government that's for old people to do right but but the point being at some point that meme is just accepted fact and when that happens trust ends up eroding away and people start looking around the room and they say well where's the most transparent thing yeah right and i think that that's what we're seeing happen the question is can you get enough people to kind of tip over and seek that out yeah to actually get the the tipping point to actually occur right well i mean i think i think that just in the last 90 days again the great accelerator just in the last 90 days i think you have had an entirely new

swath of you know kind of almost category of um of investors that were not considering bitcoin that look at the magnitude of what we just did and and are really starting to consider it at the first time i mean i really know that to be the case right and there's a few that obviously you know paul tudor jones is you know probably you know the one that's being talked about the most and that's great and um uh you know he's an investor letter you know what he wrote was you know really really good or i highly doubt he wrote it but the guy you got to write it you know they spent a lot of time on it like a third of the whole thing was dedicated to it um and rentech renaissance technologies trading it um again very different very different type of

investor um and i've been having some fun sort of like daydreaming sessions imagining trying to imagine how renaissance technologies is investing in bitcoin and like what are they because they're not a market making firm they're they're a firm that like tries to take every single financial instrument on the planet is incredibly simplistic and nobody really knows how they do it but like they again most successful hedge fund of all time by a long shot and they like take thousands of financial instruments or hundreds probably thousands and each one is made up of like a tiny little slice of a specific type of risk and each instrument is like a combination of different tiny little dashes of like a thousand different types

of risk and then there's a relationship across all those different types of risk across all those different financial instruments and then you like try and find ones that are you know cheap or expensive relative to some other ones and you go along those the cheap ones you go short the expensive ones and it's that kind of thing again i could be completely wrong but i mean broadly speaking they're you know it's something maybe something like that so it's been fun to imagine like how do they how do they code up bitcoin like when is like when is bitcoin i mean they didn't they didn't get into it and make a change to their fund structure or their regulatory documents to short the thing into a hole in the ground they didn't it was more likely they did something like

oh bitcoin's cheap relative to the fed the size of the fed's balance sheet it's you know that's a very simplistic relationship and then you just think about that and then you and then insert like another thousand different financial instruments with different sort of types of risk right and it's just like it's been fun to think about you know what do they think the relationship of btc is to gold or to 10 years or to the vix or to thang stocks or to you know a lot of different things like that but you are seeing you know okay another example andreessen horowitz right oversubscribed on a 515 million uh million dollar fund um you're seeing a lot of different i'm sure you've noticed it anecdotally um how many people just hit you up out of the blue right you're a

little different you're like a major figure but in crypto for me but i'm like for all my friends and family and things like that i'm just the guy that does a lot of bitcoin more than anybody else they know and so you know when i get you know a dozen text messages in the third week of march about buying bitcoin most of them already bought and then you know we we just recently uh opened up our fund to take outside investment again and the amount of interest that there's been in it and you see a lot of these different things where we've covered so much ground from a monetary and fiscal policy perspective you know again i bang this drum all the time bitcoin is a non-sovereign hard cap supply global immutable decentralized digital store of value and it's an insurance

policy against monetary and fiscal policy irresponsibility from central banks and governments globally been saying that since the beginning of last year way before any of this stuff happened then you do seven trillion of monetary and fiscal stimulus in less than 90 days and people just start thinking about that a lot more yeah well and i think part of it is before it was a religious kind of irrational type investment, right? Very similar to like a venture capital investment. So it's either going to be worth, you know, boatloads more than it is now, or it's going to be worth zero. And I think a lot of people looked at it that way. Now what people say is, well, hold on a second, forget what asset it is. I know what's happening

on the economic side, because they're talking about on television every day, right? And the numbers are just mind-boggling. What can I do, right? And there's really only three things you could do. I guess four things you could do, right? In the short term, you can hold dollars, you can hold gold, you can hold land, you can hold Bitcoin, right? And maybe there's some other, you know, kind of crazy exotic things, whatever. But for the most part, those are four easy to understand examples. In the medium term, you probably can still hold dollars. You can hold gold, land, and Bitcoin. In the long term, you can't really hold dollars, right? Because it's going to end up getting devalued away. So now you're back to gold, real estate, and Bitcoin. And yes, I'm sure

that there will be the inflation of stock prices along the way, but you still have that dislocation between the actual economic underlying data and the asset price. And so, you know, Paul Tudor Jones wrote it, I thought really well, where he said, look, the fastest horse wins, right? And it's, I think all of these are going to go up, but this one specifically. And it reminded me, i i gotta go back and get it i wrote um this is in march i wrote a piece uh ranking all of the assets over the next two years and i gave stocks like an eight out of ten right i gave uh oil like a i think it was like a five out of ten and i said gold is gonna go over two thousand i think it's gonna end up somewhere between two thousand twenty five hundred bucks but it's a two out of

ten because that's really not that big of a move compared to something like a bitcoin where the volatility is going to work in its favor right you're going to get this massive increase in price and what shocked me was how many like traditional wall street folks reached out and they said wait a minute you're telling me that the same drivers of you know gold or real estate is going to be the driver of bitcoin like explain that to me more yeah because they were already convinced that those other two assets were going to do well because of all the monetary stimulus stuff right and so i think that's where you're going to see the kind of confidence build is that connection between what drives this price compared to that macro environment but

another way to back into high conviction around a bitcoin long is going back to the incentive structure for the fed to put the s&p 500 at 5 000 again the way i was framing willing able incentivized with a track record of printing look at that pension liability problem We need this thing at $5,000. And you think about that as the backdrop. There's no way Bitcoin doesn't work. If that call is correct, it's highly unlikely that Bitcoin doesn't work in a really, really big way. and obviously from a percent return perspective works massively better you know that's a double so that's a double in the s p 500 from here right little a little less than a double well if that if that's the backdrop then i mean btc is going to be 50 000 plus it just is that's it is and maybe there's a chance that satoshi moves his coins maybe there's a chance that somebody does some

some of the blockchain somebody steals all the coin bit is some catastrophic idiosyncratic type of risk and you got to manage around those and that's why there's active management but like that backdrop it's really really unlikely that bitcoin doesn't work in a big way there yeah yeah and i think we're talking specifically about is structurally bitcoin couldn't be better set up for what we're seeing right and and it's just interest rates drop you get printing of money you've got a a store value asset that is based on an artificially capped supply and you just had the halving right like that's the part that that's so crazy to me is a lot of the analysis i see right now talks about bitcoin in the macro environment and they basically like as soon as

it's like the halving isn't even here right it's like that's not even part of the analysis when you add in that part i continue to tell people it's like gold in 2009 when everyone should have been buying gold before it went up almost 200 imagine if 50 of the gold miners just shut off right and they just said hey look half the half the gold supply that you thought was coming online is not coming online now yeah the other thing that's been i think pretty specifically around bitcoin that's been incredible to watch over the last couple months is People talk about anti-fragility a lot, throw that around a lot. But the juxtaposition of Bitcoin's anti-fragility relative to how obviously fragile traditional financial markets have become is so incredibly distorted. it and specifically you think about black thursday and at peak to trough bitcoin is down 50 in 24

hours really hate to see that for your if you're gunning for the world reserve currency being down 15 24 hours big problem right i get that but the bounce the magnitude of the bounce and how spot driven it's been and also specifically around anti-fragility this is this is a setup around black thursday it was leverage driven people had gotten real bulled up on the halving people were super super long on on the perpetual swaps across all the platforms tether borrow rates were super high contango was blown out I did a little podcast with Nathaniel Whittemore on February 14th. At the end of it, he asked me, what do you think the biggest risk is right now? And what are you most worried about? I said, how levered this market is right now. It's very levered long. It was a month before. and that was an untenable situation and last time Bitcoin encountered a big

untenable situation was the BCH BSV fork a hash rate war thing in November 2018 and Bitcoin did it down 50 then to took a couple weeks but it did it down 50 what happened after that was Bitmain and Jianwu and Craig Wright and Calvin Ayer and all the clown shows their role in this ecosystem was diminished to the point that it got a lot, lot harder for them to do something bad to Bitcoin. And don't get wrong, down 50, right? But it bounced all the way back from this and the other. leverage situation very untenable you roll through to black thursday down 50 in 24 hours

but you shook it that was a a nuclear bomb event in terms of the market structure for bitcoin i can just tell you that without getting into detail it was just like and the entire market structure changed and that entire buying back i mean the vast majority of the bounce after black thursday was very much a spot driven um it was just not derivatives led it was not leverage led and it was mostly u.s spot and u.s retail and the herd and we know a little bit more about what the herd did now with a little bit of hindsight right herd's been buying like you think paul Tudor Jones and have any friends and and you get to where we are today and you now have us it wherever we're at right now 9k and but there's the foundation

underneath where we are at the price level is much much more sound and don't get me wrong Asia's you know still the 800 pound gorilla in the room but the bounce from from a bunch of different angles looks to us to have been u.s led and that's real healthy and i think it's directly in response to both retail investors high net worth the guy buying 200 on coinbase every from him to paul tudor jones everybody's looking at what's going on with monetary and fiscal policies and they're going probably worth taking a little flyer on this this may be the best hedge on the face of the planet for this thing and the market caps the size of costco so i should you know might be worth doing so the the part that's so

funny to me is on that 50 drop the coins that were sold had all moved in the last like year for the most part right over generalization but basically if you had held for you know more than a year at that point they weren't selling and you just saw the transfer from the weak hands to the strong hands and the part that i continue to go back to is we could sit here and we could talk about all the technical aspects of bitcoin we could talk about all the macro etc all that stuff is important but at the end of the day money is a belief system and there is no group of people that believes in a currency more than bitcoiners believe in bitcoin that just absolute hold forever lock-in it's the greatest defensive moat in the world right because nobody can do anything

to shake them right whereas the u.s dollar a lot of people who believe but literally by the way when people are writing about inflation they're writing i'm questioning what's going to happen in the future right there's a shaking of confidence and it's not i think it's going to fail tomorrow it's not i think it's going to fail in five years but it's this all of a sudden doesn't look as strong as it did yesterday right and i actually think that when bitcoin drops what you see is the exact opposite of what you see in other markets you see those convicted people lean in more rather than run i just go back to like that's really hard to quantify it's really hard to explain to somebody until they see it but when you look at that that to me is the most uh defendable

thing for all bitcoin and it's the most bullish signal right in all of this yeah i mean just i don't know try and sum it all up like those really big pieces that are surrounding this thing and then you just have this this non-sovereign form of money sitting right in the middle of it and i mean we didn't even get into you know bitcoin in the middle of the china versus the united states thing i mean that's its own and and trying to bring mining capacity back into the United States and that is a trend and, you know, stranded gas and, and, and renewables out in West Texas. And, um, you know, it's, it's, uh, you know, uh, the digital remember, right, the DCEP and that rolling out. And, um, it looks like the United States is

may go let Libra kind of compete against the DCEP. I also think that there's probably a view internally in the government that nobody's going to use the DCEP because the United States is about to put the screws to China and people just aren't going to want to deal with the renminbi. and um then maybe in time you can get libra to go compete on the continent of africa because that's the big the big i think dcep on the continent of africa china one belt one road you know while the united states states spent 10 trillion dollars in the sand dunes in the middle east they spent 10 trillion dollars on infrastructure in africa and uh if you ask any

kind of global macroeconomist where the next 50 years of gdp per capita growth in the world is going to come from it's going to come from the continent of africa it is in the best interest of sort of the united states national security for i think the dcep to not gain mass adoption on the continent of africa and they probably recognize that it's uh it's probably a good idea to let libra go compete on that and uh you know if you're on the continent you know i don't want to speak for i've never been to africa actually so i don't want to put words in anybody's mouth but i would guess that if you could choose between a venmo that was loaded up with dollars and a venmo that was loaded up with dc you know with remembe like you know all

being equal you'll probably pick the dollar so uh that's going to be you know big factor of it i think unfolding over the coming years you're ready for a wild prediction that i think has a lot of uh possibility of happening libra is r and d for the digital dollar yep they're gonna let they're gonna let libra play it out fight them a little bit let them know you can't do whatever you want keep doing it come give us an update do all this kind of stuff at the 11th hour all of a sudden digital dollars going to come out of nowhere and my guess is uh right now it's intellectually interesting to them right we saw it in one of the stimulus package proposals let's give a digital dollar to people to deliver the the stimulus whatever it got taken out pretty quickly

but oh yeah it's too sexy of an idea they don't understand how it works they don't understand how to do it they have no clue the risks associated with or anything but to say i helped put forward the digital dollar means you get re-elected right and so so intellectually interesting from a from a politician standpoint technologically we need it right for a whole bunch of reasons uh and then from a global power standpoint what you're talking about it's accessibility right and i keep going back to look if you're in venezuela right now right or zimbabwe or wherever your currency has failed you you want dollars right you want the stability you want the full faith and credit of the united states government behind you and you know all this kind of stuff you can't get the

dollar and so if all of a sudden there's a digital currency that has a different monetary policy and happens to be China's, but all you need is an internet connection. Now, all of a sudden China's currency is more accessible to you than the US dollar is. And so you're just naturally by path of least resistance, you end up with the Chinese currency or there's Bitcoin. And so that to me is interesting, but I don't believe that the US will let that happen. I think that they'll go ahead and digitize the dollar and make it an even playing field, but ultimately where the competition comes down to it's not on a technology front because now everything's digital it's at the monetary policy level and i and i think that the one thing that's going to end up happening is the internet

is going to break the fed because the fed is dependent on at least 50 percent of americans not understanding how money works yeah yeah and if the internet you know basically teaches you gives you access to the information you say hey this is a game that's rigged right it's rigged if i don't know the rules so let me get out of this thing um and whether that's into stocks other assets bitcoin whatever i just think that that education will be one of the the biggest inflection points out of all of us yeah he's like we're headed there uh before i let you go two questions one i don't think you'll answer but i'll try uh any price predictions that people want to know from you? Any timeline, any price you choose. I nailed that. The last time we did this, I

nailed that one to the wall, actually. That's why they want you to do it again. I don't know. I'd prefer not to, I guess. I think you know if i got even money that a year from now even money bet a year from now we've hit new all-time highs i mean i would take even money yes all right that's pretty conservative compared to most people what they think is going to happen yeah i think uh i get the sense that maybe the herd's not going to let this thing run away from them you may you may get into a period of we may be in a lot of accumulation over that period of time

over the next year and like how much you can disguise that accumulation you know probably depends and um you know there's still potential for a lot of macro stress but yeah i mean that's a little that's maybe a little conservative but you know like if you told me new all-time highs by september 30th even money i'd take the under all right yeah what is the one signal or data point that you wake up every day and look at that people wouldn't expect you to look at it it's probably it's probably uh without getting into too much specifics it's the because we've built a lot of models that cover a lot of bases

so the few things i look like and to be honest because we've done a lot of this this modeling work it's actually freed me up to uh spend a lot more time thinking about and researching the bigger picture it's funny like i said we talked about this big picture stuff the whole time but like we run this fund on a bunch of models that don't have anything to do with big picture um so i think the things that i still look at on a discretionary basis are things that we have not nailed down the model for yet and i'd say without getting into specifics broadly it's like putting together piecing together a picture of how much leverage is in the kind of bitcoin price discovery process at any given moment and you know kind of broadly how much uh you know

if longs or shorts are off sides relative to that kind of price discovery action that's happening right now that's probably what i still look at pretty regularly kind of manually um yeah if people want to uh to find you on the internet where uh where you want to send them uh twitter is good travis underscore cling k-l-i-n-g and uh the fund website's ikigai.fund i-k-i-g-a-i.fund don't i get i thought i'd get a question for you sure so i still can do that how's the i don't what do you what do you like a like a podcast guest expert now you're just waiting for them well i thought that was part of the deal i get to ask you a question yeah for second time guests it's like you already got one question why don't

why should i give you two but go ahead i wanted to know maybe yusko has been having a lot more of these conversations um i just haven't had a chance i've talked to him recently but i didn't no chance of asking this question the conversations with the more institutional side of folks just over the last two months how would you characterize the state of that you know kind of broadly has it changed is the frequency picked up is the tone changed at all is it about the same were people already interested in january and they're the same amount like how would you characterize that so there's definitely uh i'll just say like fun fundraising uh mechanism changes you know if if people uh had to focus on their own portfolio not investing in new funds at the

moment give us a couple weeks like all that take that aside uh i think it's a lot of people who understand what's going on they do this for you know living they manage a lot of money and uh they're asking the same questions that the paul tudor jones are asking right how do i hedge this thing um if it what happened if what i believe is going to happen happens what assets are going to perform best uh and it's kind of this feeling of like all right we're in the warm-ups for showtime like we're about to play the nba championship game you know it's game seven uh we're in warm-ups so we got a whole game ahead of us to play but like the the four quarters get played over the next 18 months right or the next 24 months and uh you know it's like any game right like hey first

quarter yeah there might be some back and forth whatever but like it's pretty chill compared to the fourth quarter with two minutes left yeah right and so i think that um that type of analogy of like they feel like hey we're getting warmed up you know there's some electricity in the stadium right people are excited they know it's going to be a big game the question is just which team wins and uh and so i think you know that's both the challenge and the opportunity of uh you know i think i've told you this before but i don't think i've ever said on a podcast uh i'm always shocked at how many people i talk to in the institutional world that close the door and say i own bitcoin i said what like and i'm not talking like you know family office like you expect it there

i'm talking about like the cio of public pensions that are managing like the fireman's pension fund Right. And they're like, yeah, I own Bitcoin. I've owned it for three years. Like I'm a believer. Right. I know all you guys. And you're sitting there, you're like, why? And you're like, I believe the same thing that you believe. Right. And it's always funny because then you look at their portfolio and you say, why isn't in the fund? Why have you not made certain moves? And they go, well, the thing is that people think I make the decisions around here. Right. I make the suggestions, but ultimately, you know, I got bosses. Right. In terms of the boards and things like that. uh and so i think that that is the been the biggest uh challenge that is becoming an easier conversation for a cio to have with the board because renaissance technology paul tudor jones jp morgan chase is now banking coinbase and gemini right you get all these little data points and each one on its own doesn't really matter but the the totality of them uh gives you um some mitigation of career risk is how i would put it and i think that that is probably one of the more important developments over the last you know six months or so what one last thing i'll say on that

note i feel like in the last couple months because of what's going on with monetary and fiscal stimulus i've heard more and more people frame bitcoin as bitcoin has to work here like it's if it doesn't work here we should just you know maybe we should give up on it because if it doesn't work here it's just it's not gonna work it's never gonna work um and then and then i think about that the whole career risk thing and then the generational thing that we talked about earlier and you go no it probably is gonna work now it's probably gonna work in 20 it's probably gonna work in 21 and 22 it's gonna work in 32 oh and it's gonna work in 2040 as well too as you just slowly transition from the 70 year old that still thinks this is magic internet money for drug

dealers who buy drugs on the internet and has never done the work and it's just the decade plus amount of time that that rolls off and you know maybe there's some chance that it's that it's not bitcoin because something happened bitcoin ends up being ask jeeves and you know i don't want to piss off the maximalists for this but i'm just saying there's a you know whatever but like a non-sovereign form of money and uh you know i think that bitcoin over its history has had a tremendous ability to get people to give up on it and cough it up into the hands of people that don't and that that's been an incredible trade every single time without exception so i'm always worry about people being like oh it's gotta work it's it better work now it's it's not gonna work

and it's like bitcoin may make you sell everything and then right after that it works the way i've been talking to people about it is uh if you don't see a material increase in price in the next 18 months what you will get is not bitcoin failed you will get people revisiting what bitcoin is and why bitcoin is important because one of the strong narratives right now is the macro environment and the macro environment is here now and so it's almost like that is a thesis that makes a lot of sense and is intuitive to a lot of people if it's disproven again i'm with you bitcoin doesn't fail right but people go back to the drawing board of like well what is this thing right and i think that that's a really important nuance because there are a lot of people

who say over doesn't work in 18 months it's over right and i don't think that it's over i think that that narrative now comes into question right and you got to kind of talk through okay well if that didn't work in that time period when you know what is the the narrative that uh ends up proving to have a higher degree of accuracy yeah it's probably gonna work though listen you ain't got to ask me what i think you you know where i stand i think uh i think a lot of people um you know we're getting to the point now where it's not so much uh what do i think about bitcoin now a lot of the conversations uh with the people who you know in 18 and in beginning of 19 even middle of 19 we're kind of should i buy some uh what is this thing kind of all that early

education stuff now when i talk to those people it's not do you have exposure it's how much have you increased your exposure right it's like they're on you know stage two three four etc uh and uh i have a buddy uh who uh who bought some bitcoin um and uh when it dropped it basically dropped to his cost basis and uh i talked to him afterwards i did not talk to him on that day i called him a couple days later and i basically was like are you good right and he goes well i guess i'm a bitcoiner now because that shit was scary right but it was just this belief of like hey i wrote it out i didn't panic right i you know whatever and he almost felt like he had earned the right now to enjoy whatever happens next um and i thought that was really interesting obviously

the only benefits the people who kind of had skin in the game that day but uh i don't think that there's that many people who uh held for example in the november to december 50 drop i think a lot of people got shaken out there this one i actually think a lot of people didn't get shaken out it was more kind of leverage in the wall street and all that and so people kind of earned their stripes now and now they feel like hey you know if i didn't sell it then and i you know i can't ever sell it basically yeah yeah so all right man i appreciate you doing this i think people will uh will enjoy it i got tired of people uh tweeting at me saying that we had to do a round two so well you did not disappoint but uh we'll do it again we'll do a round three at some point

always a pleasure all right guys thanks for listening to that episode i hope you enjoyed it just as much as i did my goal is to educate as many people with these conversations as possible So please go subscribe on your favorite podcast channel, leave a five-star rating, and a review. These things really help the podcast get higher up on the popularity charts, which ultimately brings more people to learn. Also, don't forget you can go to YouTube to watch each conversation in video format as well. Just search my name, Anthony Pompliano, on YouTube, and you'll find our channel with hundreds of awesome and informative videos. Thanks again for listening to this one, and I'll see you for the next one.