The Wolf Of All Streets - Banking Crisis & Crypto Adoption | Macro Monday With Dave Weisberger & Mike McGlone

Episode Date: May 9, 2023

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A debt ceiling crisis is apparently looming, although it could just be politicians playing politics. We have CPI this week. We have Binance halting withdrawals, and we have regional banks bouncing all over the place like meme coins, up 30%, 40%, 50%, down 30%, 40%, 50% the next day. Absolute mayhem in the market. As I was saying to Mike McGlone right before we started this stream, I'm having an increasingly difficult time understanding what is signal through all of this noise. It's an unbelievable amount of information and news flying in our faces at all times. So of course, I have Dave and Mike here to discuss and help me parse everything that's going on. You guys don't want to miss this. Let's go.

What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button. We missed Macro Monday last week, much to my dismay, because everybody who's anybody and anyone who knows me knows that this is my favorite conversation that I get to have. I'm very fortunate to have every single week with my co-host, Mike McGlone and Dave Weisberger. Dave, I see you're in the Formula One jersey there, so you must have had a good time in Miami this weekend. It was amazing. I mean, look, I'm casual, right? You know, I'd never actually gone to a Formula One race before. The speed of those cars and the ability of those drivers to do what they do,

it's just, it's literally awesome. Yeah, I'd never done it until Singapore last year, and it absolutely blew my mind. I was at the Kentucky Derby this weekend and was strangely having an incredible experience, but also having FOMO about Grand Prix in Miami. So I guess there's a lot of fun things happening. But that's not what people want to hear about today. We want to talk about all of the insanity in macro. Mike, you know, I look at Bloomberg every morning, the market wrap, and I include parts of it in my newsletter.

I don't think I can ever remember a longer list of quote unquote key events this week. There was like 20 things that are happening this week that are supposed to be extremely important noise and signal, right? I'm having a really tough time with that. But I like how I'm pre, before we hopped on together, you mentioned it, and then after this week, it's all going to be forgotten. But it's mostly the inflation day that really matters this week. CPI, PPI, and then import price indexes and things like that.

I look at it as the market is doing what bear markets are supposed to do. They make you feel safe and calm. They give you massive rallies. They don't allow you to get short. Being short's really hard. They take money from everybody. And then before you know it, at some point they flip over and go down hard and stay down. I think that's what's starting in cryptos. That 30,000 level in Bitcoin, that 2,000 level in Ethereum are just saying, no, thank you. And so I'm always, to me, some of the data to me is just noise. And what I fully anticipate is the macro of a significant economic reset kicking in. And all the data picks that way.

So here's one key thing that's going to come out this week is PPI. Producer price index, it's basically got a two beta to CPI. Fed doesn't really watch PPI. It watches CPI, like ex-food and energy and things like that, PCE and Employment Cost Index. But it's got a two beta. It's a good indicator. It's right now below Fed funds.

And by the end of this year, maybe by July, I think it's going to be minus 10% if you subtract out Fed funds. And by the end of this year, maybe by July, I think it's going to be minus 10% if you subtract out Fed funds. Fed funds are 5%. PPI is likely to be minus 5% by the time we print the June or July PPI. It's just based on normal things that happen in commodities. And that's significant deflation. So the way I look at markets right now, I just want to sell everything, everything, if I'm running money. Now, Dave is doing that. I just find want to sell everything everything if i'm running money now dave is doing that i just find ways to sell everything and the key indicators are cryptos they're the fastest horse in the race they went up the most they're in a speculative boom they're going down the most and the sense i get everywhere is the worst is over like okay look at that trade so the key thing

we just got off our morning call with our economics team and gina martin has pointed out she's our chief strategist equity strategist she's been spot onams pointed out, she's our chief strategist, equity strategist. She's been spot on. She pointed out that it's very rare for S&P 500 to be up this much and the KBW index, bank index to be down this much. So what's going to happen? Obviously, you know my bias is once you flush out those, frustrate all those shorts, poof, everything goes down. And the only thing I really like in this space right now is gold and U.S. Treasury long bonds. That's a lot to unpack there, but I don't see right now what changes that. And I'd love, I'll end with this.

I just love how Fed Funds futures are, basically everybody knows they're done. And they're trying to nuance it like, oh, there's good reasons. Well, of course there's good reasons. And by the end of the year, futures are priced. So we're going to drop 69 basis points in Fed fund futures from this level. And everybody says, no way. There's one simple way for that to happen. Stock market going down.

Have at it, Dave. So, I mean, the thing is, is that apart from grouping all of crypto in with all of risk assets, I actually think there's a fairly high likelihood that what Mike said will pan out. The wild card, of course, is how gutless our political leaders and economic leaders at the Fed and people in Treasury are. And, you know, if you told me, if you give me the answer of will the, you know, will, you know, McCarthy and the Republicans in Congress blink yes or no, I think I answer that question. I'll tell you my answer in both scenarios. If the

answer is no, then I have a feeling that we'll have a, it will probably have yet another shutdown. We've had it before. I think Biden may make Yellen walk the plank. And what she said sounded awfully like shrill denials of someone who is already standing on a piece of wood over the boat with their hands tied behind your back. So it wouldn't. And someone's prodding her with bayonets. You know, the reality is, why do I say that? I say that because without Yellen in the administration, the people who are actually running this country will almost certainly do the platinum coin gambit or threaten to do so directly with the Republicans and say, listen, we don't need you. We can just go ahead. And in my mind, that's the signal that decouples Bitcoin.

I'm not talking all of crypto, but decouples Bitcoin from risk assets and has a trade like a much faster version of gold. To me, that's the event that I'm looking for, because the truth of the matter is Bitcoin is its use case is all about confidence in institutions. And I don't see any version of the world where absent the Biden administration saying, oh, well, 2022 spending isn't that bad. I guess the congressional deal is okay. I don't see any version of the world where this doesn't end in a mess. I mean, you know, they had Schumer talking this weekend and everyone else saying, oh my God, the Republicans are trying to kill widows and orphans, except for the fact they're literally asking for 2022 spending to be the line. And it's, you know, the media will go along and print and publish things, you know, to make it sound whatever. But the truth of the matter is we have an issue and whether they're going to print or not matters. And the fact of everything Mike is saying is going to give them, is going to let them know that, yeah, you know, we may very well be about to go into a seriously hard recession. This regional bank crisis is a big deal, Scott.

And it's a big deal because banks have been paying below market interest rates for a long time. And the smaller banks are the engine of economic growth in the country. If you cut through the crap, if you end up with a world where it's only JP Morgan and Citigroup, et cetera, as banks, small businesses, I'm not talking about small crypto Silicon Valley businesses. I'm talking about small businesses uh throughout the united states are going to be deprived of capital bank lending going down that's that is a core of why mike's economics department is telling him things are going to go crappy because bank lending uh going down is a serious problem for the real economy not the stuff that we trade but the real economy, not the stuff that we trade, but the real economy. And that is where the political pain point will be. So I look at this as a very important day. I mean, yeah, a very

important, you know, few weeks. The truth of the matter is, yeah, the inflation print is going to move stuff up and around. And whether or not Binance is going to get shut down by Interpol is, you know, the various rumors that are flowing around, you know, that'll have impact. I mean, absolutely. But the absolute fact is we're in a situation where there's a game of chicken being played and whoever blinks, it's going to control what actually happens on the macro side, at least in terms of gold and Bitcoin, in terms of a counterweight, and at least in terms of the big tech stocks in the S&P, where people seemingly can ignore recession, although I don't really know how.

Yeah. A couple of quick comments there. So one is that it sounds like you guys have the same base case, but interestingly, it's whether Bitcoin will emerge as a risk on asset, like a tech stock, or emerge as highly correlated to gold. So really, does Bitcoin go down with the stock market or does it go up with gold? And then just one other quick point. I and Mike, you can address this as well because we've talked about the debt ceiling in the past. You've sort of said dog and pony show, it gets resolved.

This time is not different, which is probably the case. Should we at least consider the fact that, I don't know, McCarthy took 15 times to get elected Speaker of the House and maybe politics are a bit more broken this time than in the past, or is that, you know, nobody wants to walk that plank, as Dave sort of eloquently put it? Well, I think you're spot on there. And there's one key force, having done these before, and Dave has too, but in the most recent, I think best examples, 2011 is markets will force them to get to the table. And that's why I'm still worried that,

man, we dropped 10% in the stock market. Guess what? They'll come to the conclusion really quick as we get to June when they're supposed to be running out of funding. At the same time, what happens in June by July, that's when we're supposed to have significant signs of economic contraction. Now, I shouldn't say signs, measures showing that. The signs are already there. We're way past that. I was just on with my colleague in corrugated box, and he said we're basically in a depression in boxes. I mean, when I traded treasuries in trading pits years ago, that was one of the key things you watch. Now, obviously, it's much different now, but I want to piggyback on what Dave said. I fully expect that Bitcoin is going to trade more like gold someday in treasury bonds. But at this stage, and you want to be like that much when it's oversold and it's trading below 20 in a 1918 handle, but not when it's bouncing up near 30, getting overbought.

And the complete consensus, oh, we're getting a halving and the worst is over. The things you learn when having been with customers your whole life and sniffing out markets is you don't want to get bullish at risk asset in that environment. It's still very much a risk asset. I mean, just look at Ethereum. I look at the Bloomberg Galaxy Crypto Index. Very much risk assets. And Hopium, the expectation they will trade more like gold and long bonds someday, but not yet. And to me, this is where we are now, where we're at that stage now is the next shoe to drop is showing it's happening right now.

We're seeing that almost 4% drop in Bitcoin today. We're seeing it just can't get above 30. Ethereum just can't get above 2000. And the key thing is when you take money out of the system, I mean, I'd say NASDAQ just simply drops another 10 percent, S&P 10 percent. That money is going to come out of the highest speculative risk asset. Twenty four thousand cryptos are still indicative of epitome of speculation. We're going to look back at this and say, OK, that was kind of like the stock market in 1929. So to me, to me, that's where we're right now.

And that's where there's two key saviors. The Fed has done tightening the market's price freeze. They'll kick into that ease really fast if markets make them, which means treasury long bonds and gold. And, yeah, the trade in didn't work so well last year, but it's got that reciprocity that's going to kick in. So that's why I look at it as the debt crisis. Everything is OK. What's good? What gets us past this? And the number one thing that gets you to the barding table is when americans start losing money um and i i don't it's a political pain point um there's nothing forcing them to come to the table at the moment but what forces them yeah i do want to point out one thing and then we'll continue there two weeks ago we or two or three weeks ago we kind of discussed the tens of thousands of crypto coins and that that was a sign that we still need to go down further.

And I sort of argued that most of them were gone and we just didn't notice it. Yeah. Since then, though, we've gone into full-on meme season and it's complete nonsense. And historically, I will not say that it has to repeat. Those are our market tops. When Dogecoin and when Elon Musk is on Saturday Night Live and Dogecoin to 70 cents and SHIB is going to make us all good jillionaires, that's usually a sign of at least the local top. And right now what's happening in that space is literally just people. What blows my mind is that the crypto community rails against money printing and then literally just prints money and pumps and dumps these things all over the place.

But we can we can. I just want to say you were right. Right. I think that I pushed back a bit on that a couple of weeks ago and then the market went ahead and proved me wrong within a matter of hours. So, yeah, I think that was crazy. It is undeniable that and that's one of the reasons why you see you know you see people talking about you know the the Bitcoin Maxi you know debate yet again I mean look at the end of the day we all know that I'm not a Bitcoin Maxi but I play one on TV right you know I I think that you know from a store of value perspective uh Bitcoin is a big deal i think ethereum as a global computing platform as a platform for coins is a big deal but when peppy the frog becomes worth a billion dollars and sheba jumps and all this other stuff you just look at this as animal spirits i kind of look at

it a little bit differently than you scott though because we've seen this before in bear markets, you don't see people, you know, the hot money chasing stuff. You see people, you know, desperately trying to do other things. And so it doesn't feel like a bear market. It feels like we're in a range bound market and people are increasingly saying, OK, where the hell can I manufacture money? And, you and you know inevitably there's there's a a rug pull that's coming and we all understand that and it tends to take the it tends to coincide i mean i i go back to the internet bubble in the 2000 you know in the early you know stages the late stages of last millennium you know 1999 period through 2000 when every week there was some new stupid you know coin, stupid stock that no

one had ever heard of that all of a sudden rallied hundreds of millions or even billions of dollars. And it's a similar sort of pathology. That really never changed. The difference is people stopped getting, you know, the amount of money that went into it changed. And so when people see range bound trading, they're like, well, you know, it's like you went into it changed and so when people see range bound trading they're like well you know it's like yeah you talk to people and they go well our models are working great when when the market was going in one direction but when it stays in a range we're getting killed it's like well okay so what do they do well they take and they look for the new thing and so you follow crypto crypto twitter like i do i mean the number of people saying who's the next

100x altcoin? It's like, I feel very similar to you. Your look and your shaking your head says it all. I mean, it's like, it's still, there's that foolishness at the same time, as I will point out again, because I keep saying this, and I'll say this every week, probably. The market for Bitcoin relative to real dollars is very small. Literally every leg up in Bitcoin takes one or two end investors to say, you know, I need to start DCA into this thing because I need to get to be part of my portfolio. Will that happen from 30? Will that start at the top of the range? No, it will start at the bottom of the range whenever when you're in a range or, you know, that sort of thing occurs because people sit there and everyone said, well, it should be going down, but it isn't anymore. At which point you end up liquidating people.

And the truth is, is liquidations have been even today is a 5% move. The liquidations are relatively small. I was actually really surprised. Not a lot of leverage being washed out just kind of uh okay we're not no one's buying so there it goes but it's you know there's just not a lot in the system right now which doesn't feel like the beginning of breaking the trading range to the downside now that said there are news events that could cause the trading range to break to the downside but we're pretty much bouncing along the bottom right now.

I was muted. Sorry, I look at the weekly chart. I mean, we're just trading around $28,000 for one to eight weeks, right? I mean, we made this move up and here we are. And yet again, we all want to talk about things. Well, so that does give us, Mike, I'll let you go. But then after your comment, I want to jump into then what's happening with Binance, Dave, or both of you. Go ahead, Mike. So that's been the key thing. We're doing that in Bitcoin and Ethereum and the exact same thing in the most significant asset measure on the planet, the S&P 500. It's still got a four handle on it. I think it's going to go four offered and head towards three. And that's the key thing that I really enjoy listening. Dave gets this, having

lost a lot of money in bear markets and made money too. You got it. Bear markets don't end like this. I just don't see that. They end for not months of pessimism, but years of pessimism. And that to me is what we're heading for, particularly something like this that has 100 years of foundations behind it. And so a key thing I want to go over a little bit is the gold Bitcoin ratio. Here's my prediction of the future that fully expect people to throw me down the mat on if I'm wrong. But I think this is what's going to happen. People from cryptos are going to FOMO into gold for a while. It's overdue for that. It's just sensing the way I see in the market, sensing all the speculative excesses. They're going to realize, okay, I've made so much money. I can get 5% or

so in a T-bill, 4% of 2-year note, lock it in, bear market kicking in. There's a lot of excesses in here. And this thing that we call boomer rocks is going to be self-fulfilling. I think every day that stays above 1,000 goes higher, just the way human psychology works. People are going to say, all right, I got to get some of this gold stuff. And that to me is just what's starting to happen. Bitcoin holding those levels, Ethereum holding the key levels, starting to trickle down for good, solid, fundamental, speculative, excessive reasons. And gold going up for good, solid, fundamental reasons. The key point is the price of gold is almost the same as it was 10 years ago. This is the first recession for most crypto traders. And that's most crypto traders have

not lived through pure good, good bear markets. I mean, they think they have, but I mean, ones where the stock market's going down, where you're losing money and the Fed wants you to lose money. This is the case where we are right now. The Fed wants the stock market to go down. That's my interpretation and they wouldn't be raising hikes raising rates into this environment they were so to me this is what's going to happen we're going to see fomo into gold we're going to see a bear market to resume in cryptos just the bounce and that's and there's only one other bull market i see coming and that's in treasury bond yields and the key thing is i ask myself is if deflationary signals are all there

and that's where it becomes self-fulfilling. You get that next iteration, crypto's going down. Severe deflation means gold. So far as the next subject, I think that's definitely for Dave, but that's my prediction. And it's already starting to happen. I think the difference in you and I, Mike,

is you're expecting that this administration and this political climate is the same as it's been for the last hundred years. I think we have people who are who effectively running the country who read the opinion polls to decide their policy on the morning that they're making the decision. That is a sad commentary on our leadership. And by the way, before anyone wants to point me in one particular camp, I'm basically talking about the entire spectrum of political leaders here. And I think Powell feels like he's the only adult at the table sometimes. If you remember, a month ago, or actually two months ago, I predicted what the next two meetings would be.

Not only what they would do, but what he would say. And I pretty much nailed it because he's basically sitting. Remember, he's pretty close to a political independent. He was put on the job by a Republican. He's in with the Democrats. He basically sees himself as trying to combat inflationary expectations, as doing everything he can to do it. The other thing that came out this weekend was something that was said by someone who I often, while I respect some of what he's done, I also understand his hypocrisy. But Warren Buffett made the point this weekend that had the Fed not put the backstop in, absolute cataclysm would have occurred, which is literally what I said on this show about a month ago. So obviously,

I agree with him. The fact is, we have a really serious situation. We haven't even talked about the fact that the regional banks have problems just from the bonds they hold in their balance sheet. We haven't even talked about the value of collateral in corporate leases and corporate real estate, which is another massive problem. I mean, you can't have 50 percent or below occupancy rates in every major city and not expect significantly impaired collateral going forward. And so these are big problems. The difference between you and I, Mike, is I don't expect that our leaders are willing to allow austerity to creep in, particularly as the clock. The clock, you know, father time is inexorable. You know, we got six months, you know, before the only thing people are going to be talking about is the 2024 election. You know, it's like the closer we get to that, the more likely it is that right now posturing will become panic if people think that they're going to be held to this recession. If you're right, Mike, then it'll be regardless of who's running.

I mean, incumbents don't win in great recession slash early depressions. And it's not like incumbents don't know that. So I just expect to see a wave of liquidity entering the market based upon that at some point in the next year. And I think people, that's why the stock market isn't dropping. There's enough people like me who believe that. But I agree with that. But the key thing to make that wave of liquidity come in is the stock market going down in a severe recession. Let's make predictions.

The next president is going to be a young Republican because we're going to be in a recession. I don't know who that's going to be. It's almost, as you say, you can't, you got to get rid of the old incumbents. And we got a real old one. It's a Democrat. That was the biggest problem. So the politics, I think, are a big part of it. And it's amazing how it all comes at the same time as the halving.

So I keep, one thing I have to, that really got me into cryptos basically about 10 years ago is watching the gold Bitcoin ratio. To me, once Bitcoin went above that price of gold, was it like 11, 2011 or so? And he went back and then and then stayed above it as we got to beginning of 2017. That's when I believed I got in the chart right now. It's at the same level as it was 2017. It's breaking down. It's at 14. level as it was 2017. It's breaking down. It's at 14. The level is 15.

That's per ounces of gold. And to me, that's one of the best indicators for worry to look for your for assets and things. And that's that Bitcoin gold ratio. And I overlay that with you look at like leading indicators, plunging negative bank index, plunging negative. And like you mentioned with banks early on, this is one of those things we're going to look back and say, okay, the bank crisis really started in March, right about when people were able to buy two notes at 5%. I mean, I looked around and talked to money managers and they said, are you serious? Who wouldn't on the planet be doing that trade? And what has the Fed done since that? Two right hikes. We're going to look back at this and say, okay, we had something, we're

going to look back and say, we've had something maybe similar to the Great Depression and very simplistically why. There's going to be, I think, another prediction calls to ban the Fed, just like Volcker got. Volcker, helped control inflation. In this case, Mr. Powell is going to be blamed for creating a severe depression. So what did you do? You raised rates twice after the bank crisis started? History shows, just simple rhyming with history shows that you should not be involved with buying any risk assets in this environment unless you have to.

It's just the way things work. And hopefully it won't even be a rhyme with history, but that is just from someone who's always studied financial history, just the great crash of 29, the big bike index pump of 1890 in England. It's just that we're going to look back and say, you don't raise rates or hike rates in a banking crisis. What's the key thing that caused that banking crisis? Rates going up too fast and the duration mismatch. Yeah. No, I think that that was the first case. I think the second bit is a secular trend, not cyclical trend, a secular trend in terms of corporate real estate in significantly leveraged purchasing and building in multiple markets. I think that that is a big deal. But look, as I said, our difference is purely on, I think that we have one of these right-hand, left-hand things. Back here, the real stuff's going on. They're going to be completely in the

market. They have nominal rates at 5%. I mean, 5% in the long term. I mean, yes, you've said this a million times and yes, you were right a long term. I mean, yes, you've said this a million times. And yes, you were right a million times. The pace of increase, the rate from where we were to where we are now is the fastest in history. And it isn't even close. It started at 50 basis points. So going to 5% and exit rates, that's just insane. But the long term, you know, if you look on a long term, 100 year chart of Fed rates, the aberration was the ZERP, was the zero interest rates. I mean, we're not at high rates, I mean, you know, by any stretch of the imagination. And so I think that the liquidity that's going on back here while they're trying to get a bit of a deal with the pretty bear is what's going to actually matter. I mean, admittedly, I am a cynic. I understand that I am massively cynical, but that's the difference. I mean, the funny thing is, is I think you and I,

given exact script of what is going to happen between Congress and the administration and the Federal Reserve, what they're going to be doing in terms of liquidity programs and all that, I'm pretty confident that we would agree on what would happen to the markets in a particular script. I think we just disagree on where the script will go. And I don't know. I mean, I don't have any particular edge in understanding this. So it's not like I would invest. I mean, my thought process is DCA. But there is one point about gold that I think is really important because I also read this over the weekend. China is now, you know, has been buying gold. A lot of other central banks, central bank gold buying is what's fueled this rally.

And, you know, we haven't seen any central banks buying Bitcoin yet, except for El Salvador, obviously. But, you know, it's clearly gold is going to outperform at the central banks of the of the of the non the United States all decide that they need to hedge. And that's something that we'll see how that develops going forward. But that's a large part of it. I mean, there are many people. I do not have any. I do not subscribe to this because I just don't have enough information. I'm not saying no. So please. I'm sure there are a lot of people in your listeners, Scott, who will disagree with this statement. But I know that in the gold community, there are many people who believe that gold is not a ten thousand dollars an ounce right now or at least five because of paper derivative price suppression being done by Central Banks or Center money Center

Banks kind of you know whatever Mike is laughing because crap I have I am not saying that is true I am not saying it is unfair I am saying there are many people who believe that and it's it that can't happen if the major Central Banks of the world want to accumulate physical gold. It will overwhelm that. And so that's a large part of what's going on. And in Bitcoin, by the way, just because I had an argument, not really an argument, but a couple of disagreements with various Bitcoin maxis, where I made the point that they're going to try the same thing, but they can't do it in Bitcoin. Because unlike gold, where you can say, oh, I request delivery, you know, I don't really have the shifts.

It's really hard. You know, there was a story 10 years ago. I think it was Germany was trying to get stuff from the New York Fed. And it took years. It just takes forever. With Bitcoin, it's instant. And so if you want to demand physical settlement in Bitcoin, you cannot stop it. And so that's a very big difference between Bitcoin and difference. I know it's not the biggest deal. You did mention El Salvador, but we did see that Bhutan has been

mining Bitcoin. And we saw that the Central Bank of Russia is mining Bitcoin. So I do think we have a slight trend in that direction. But to both of your points, and we have some people calling us boomers in the comments and saying long bonds and gold, we must be nuts. Perfect. That's what you want to hear. First of all, that's great. Second of all, not everybody is in crypto, guys. Everybody was keeping it.

99% of the world is looking at these assets. But I just wanted to show central banks are boosting stockpiles of gold in the reserves amid a backlash against the dollar. And if you dig in further, this was the largest quarter in history of gold buying by central banks. Yeah. I think it was in 1967. Fact. Fact. Well, it's like I'm going – so I'm in New York this week.

I'm going to a metals mining conference, and I'm going to be speaking about metals. And I get a lot of questions about silver, and I just like the pointy thing about silver. You get so many bugs in this space. They all want it to go up because they're all long it, and they their books which is normal and that's why i make points and i usually if i get disdain from people i usually mean i'll be right because they're just talking their books um but promise center ranks aren't buying silver they're buying gold and yes some of them are buying bitcoin i fully believe in the long term just like kathy wood and jeff booze and everything bitcoin's the one to go but you know you got to get through this recession first and let's get through this we even started

recession so the point i think is important to make here where we differ is i am not saying jam at a level i am saying average it i'm saying for the average yeah when i because i get asked all the time and i don't want to give investment advice and in fact i don't give and nothing should Yeah, yeah, yeah. to say that to agree with my worldview that Bitcoin is poised for a very large long-term move up, probably right on the heels of some really bad things happening in the economy, then the answer isn't to say, let's defend the 28,000 level of debt. The answer is dollar cost average. Dollar cost averaging at varying times is is is kind of a tricky subject because i've been taught to say to realize that dollar cost averaging is often used by people to turn speculative assets into long-term holdings despite no change in their belief but when you do

have a long-term belief then it might make a huge amount of sense, right? You don't dollar cost average into casino chips or the coins you put into the machines. I'm not dollar cost averaging in ApeCoin. Yeah, Pepe. That is not an investment. Know that you're in the casino. Have fun. Get the hell out before they give you the next free night. Yeah.

I mean, look, I'm sure people will hate on me because you go you know the labs are are actually doing some interesting things with it and yes i own some apecoin i bought it in the on the initial it's down 50 it's going to sit there because it either pans out or it doesn't but these me the the thing about it is when you see you know thousand percent moves uh in in coins and people are are hop they're hopping on reddit and discord and twitter to pump up the holdings and to try to get the to try to get someone to to basically to give them exit liquidity uh my favorite not not necessarily my favorite um medium post by arthur hayes who i always quote but But it was good because they're always good. But the point of don't be exit liquidity is, I think, a really important point that people

should understand. You don't want the smart money guys to be dumping to you because then you're holding the bag at the top. And that is important in all of these things. So, you know, meme coins, okay, whatever. I mean, not my expertise, boomer maybe. But the fact is, I don't think anyone's exit liquidity if they're buying Bitcoin slowly. I agree. This is the Pepe chart. In case anyone was wondering, Mike, we, you know, we often talk about, well, if jobs are at historical lows, there's only one way to go up for the mean reversion, right? I mean, eventually what goes up must come down, right? I mean, this is, that's a ridiculous chart.

I don't even know how to read these fractions, but I mean, it bottomed with like nine zeros there and topped with like five. I don't even know. Thousands and thousands of percents on manufactured money. Like I said, have fun guys. Do it with 1% of your portfolio with a drink in your hand. The one thing I do enjoy when having been a young person, and typically I'd get on a trading desk.

The thing you learn when you get on a Wall Street trading desk is the old guys who made good money, you'd listen to everything they say and you'd heed it. I do love the young people who trade cryptos and say, you know nothing about cryptos and it's just wonderful to hear because like okay well i've been there i learned that lesson the hard way sometimes and like dave mentioned so um that's why i fully expect this fomo um because it's so much the the thing about trading markets the market's been traded since the beginning of time and they're all the same as far as the psychology of like dave said you don't want to be that person providing those stops at the bottom

now we had a lot of those the key thing is um so dollar cost average don't leverage and that's the key thing i think that's happening in um in things like the equity market is the boomers have had a wonderful decade and the best ever on a global basis, US stock market. If you're a boomer in the US, which most, a lot of us, and this is the boomer area and a planet have crushed it versus the rest of

the world versus GDP versus sales versus housing. And they all see this too, you know, that 4% and say, cool, thank you. I'm 72. And why would I take more risk in the equity market? That to me is what we're going to face in the next year. And those young people who are doing their 401ks and stuff are going to start feeling that pain. It's always worked. I've had colleagues do this. Oh, I put $20,000 in a bunch of cryptos and I was worth $1,000.

What should I do? That's what they're trying to do. And they're still not getting, they still have to learn that lesson of cost average. Never put it all in one place. As Dave said, diversify. But you can't hold Bitcoin without Bitcoin. I'm sorry, you can't hold gold without Bitcoin. I agree with that.

But then I just look at that gold-Bitcoin ratio. Trends down. And there's good reason for it to keep going down i mean gold outperform um um i'm sorry it's a bitcoin gold ratio um it's it's a good reason for gold to keep up performing but we can keep going there it's just this is let's never underestimate the human nature human nature will never change and we're still at that stage where there's a lot of crypto people are just so bullish and so long um and this is a bear market but now they're bullish and long pepe i mean this is literally where the liquidity is so that's what changed for me in the past couple weeks but we are here we're gonna get to binance

day but we're talking about risk assets obviously heavy risk assets i've got got the Pepe chart here, but other risk assets, PacWest Bank Corp. And KRE, the S&P Regional Banking ETF, right? I mean, these are trading like a Pepe on the way down. I mean, PacWest was a $30 stock that last week was $2.50 and has bounced all the way back to $7 before dropping today. I mean, I love that people are like, why did it go up 30% in two days? I'm like, because people are lunatics and are gambling. And because now we're in a crazy volatile market where no news apparently is good news. They didn't collapse this weekend, so let's buy it, right? Well, that's the key thing about bear markets.

They have to make it as difficult as possible to trade, as hard as possible to hold a short, and take money from everybody. And I think we're just early days of that. Yeah. I think more bank – regional banks. I obviously think the regional banking crisis is not over, but yeah. Yeah, I don't think it's over. I think that there's a lot of issues and there's a lot of pain in real estate, which is traditionally the biggest source of collateral for regional banks, particularly on the commercial side. The residential side seems to be, I mean, willfully firm in certain markets that I can't figure out, but just generally overall. It's going up here. It's going up in my part of Florida. I mean, price per square foot has continued to rise come hell or high water, but real estate is hyper local.

But yeah, the problem is the locality side. So there are going to be issues there. I think that the smart people in the government understand full well that they're going to need to backstop deposits completely. I mean, I think that's fairly clear. The question is, is, you know, what do they do after that? I mean, do we now have a nationalized banking system? What does that mean? You know, yada, yada, yada. But the other point

is when you go outside the United States, you have very different, you know, conversations. So we have this weird dichotomy going on in Argentina of all places, right, where the government is trying to ban Bitcoin and the central bank is doing it at the same time that the front runner right now in the presidential election coming up is massively pro. And so who knows what will happen there. But, you know, because in countries like Argentina, Bitcoin is a lifeline to people, right? You know, and because it's really hard to buy gold, you can't buy gold, sew it into your clothes anymore and kind of get out of the country.

It's not so easy. So there's a lot of things going on. This is a global set of circumstances that people need to understand. But the US banking crisis, I mean, look, you can't do, you can't have rates going up 10x in a scenario where the banks

weren't ready for it and you know why they weren't ready for it is kind of mind-boggling to me but they weren't that's just a simple fact and so there's going to be major drags on parts of the economy i just suspect that uh that the policymakers don't want to get voted out on their asses and they're going to try to do everything they can. And they'll talk about inflation, but they really care about not seeing waves of bankruptcies. I mean, Mike, what do you think here on the regional banks? Oh, what you're seeing in the charts will show up in the economy in a year. And it's going to be really bad.

Just Antidoto, I've been driving all over the eastern seaboard. I had a sunup in Maine. I'm going all the way back to Miami in a year and it's going to be really bad just anadolu i've been driving all over the eastern seaboard i had a son up in maine i'm going all the way back to miami in a couple days and just a good inside connection of some commercial real estate in connecticut um someone i know who just bid a couple million dollars for something half a million below the actual the best bids because all the other bids fell out because they were leveraged. They had no, they were borrowing. They couldn't get their loans. They couldn't get the right. They're just not there. This guy knew he was bidding cash. So he was able to bid much more below. It's just gone. It's just starting. It's the, the rules,

the key thing I'm worried about from commercial real estate, like we also mentioned residential is fine, at least for now. It's the lessons of history here we see now are clear. And that is this is a severe economic reset just getting started. So what you typically do in this environment, as Dave said, you have to backstop the banks. You're not going to force them to lend yet, are you? But the macro is you don't raise rates in the banking crisis. And we just did twice. So it's just getting started. So I look at for the dominoes to prove I'm going to be right. And that's where I'm sticking with that key dominoes. Yeah, I'm

waiting on the stock market. But what's going to go down before the stock market? Bitcoin, unfortunately. Well, we'll see. I do think, however, that history doesn't always repeat, but it certainly rhymes. I think that it would not remotely surprise me if we have a very ugly fall in much the same way as I, you know, when I'll keep pointing this out. When J.P. Morgan bought Bear Stearns to, quote, flush out and end the crisis? Not so much. And all the things we're talking about, I think, kind of come to a head. It's eerie how the setup looks so similar. You know, as we're getting to August and September, as a lot of the things that Mike is talking about, without some pretty interesting policy actions,

you could very easily see issues. I mean, just look, the other part of history repeating, I mean, we learned in 2008 that banning short sales was a monumentally stupid idea. But that's the history of the country. It's like there's not anybody who knows. People used to be executed for short selling short in history. It's just that's never changed. I'm just saying that this is just not that long ago.

15 years ago, we learned that emergency measures to ban short selling was a monumentally bad idea. It caused all sorts of problems. It didn't help. It didn't do anything. And yet, what are we hearing now with regional banks? Oh, ban short-selling. Human nature will never change. It's like,

I don't even have words for how dumb that is. But there you go. Do you think they'll ban short-selling? Do you think they're really going to do that again? No, but it's what to expect in all bear markets. You expect that.

You expect threats to people, help causes. Sorry for Mr. Powell's negativity of the problem with his point in time. He's just not thinking like an economist. I'm sorry, like a strategist. Unfortunately, he's not going to go down in history. He's the best person for what's happening. It's the trajectory. It's the it's the trajectory it's the human nature that will never change when dave said that's the history of i mean they were guillotine

in france it's just the way it's always been it's it's just why are we a freedom of press in this country it's so important that's why to me it's like what we're doing right now what you do scott is so important as we tell what we say what we think with the repercussions there's most places a lot of places in the world you can't do that and that's why i think here's my outlook what i think is going to happen is the whole rug pull is going to go down every risk asset none of the plants going to go down what i'd love to see is a divergence stock market making new low and bitcoin and crypto's not and i fully expect things like the bloomberg galaxy crypto index which tracks 12 of them, or the broad crypto

index to go to make new lows with the stock market. Maybe Bitcoin will show that divergent strength. That's my outlook right now. And to change that, I need something significant as far as massive liquidity pump. And that's the key difference. I have to end on this. What's so important is it's human nature to always look back at the last crisis and compare. That's just what we do.

It's the way we do it. I always look at them as, OK, well, what's the difference? Liquidity is still being rug pulled. The Fed started easing in 2007 and inflation was still heading higher. Why? Because CDS and the housing crisis at the time. Now it's worse, but they can't ease because of these backward inflation metrics, which I see collapsing. And by this time next year, we're going to be saying, wow, this is severe deflation, yet Fed funds are still 1%. Why don't we go to negative? And QE, I don't think they're ever going to do that again. They're going to say, well, we learned that mistake the hard way.

Yeah. I mean, I don't know. I think the mistake that they learned the hard way was don't give money directly to the people. I think, you know, helicopter money to the rich is all well and good. I'm not for it. I'm not making a statement. that is specifically designed, whether you want to admit it or not, to increase wealth inequality by prioritizing capital over labor for 30 years. And you immediately switch that in a supply constrained environment during a pandemic and hand money to people. It's sort of like you throw gasoline on and you gasoline soak a bunch of wood and a forest and then you throw a match on it and you wonder why everything is burning you know it was pretty as day follows night so now i think that's

the lesson the issue is is uh you know what do you do about it and and it's it's a conundrum for them and when you throw in the debt ceiling debate it's really not really a debate it's do we hold the line or not and who will win all of these are the cross currents and and we'll see i mean there's not going to be an answer for this week or next week but this is a very interesting period of time and the other stat i saw which you could pull up you know mike or scott is that m2 i think is has had some one of the biggest backups in history. I'm glad you mentioned M2 because, you know, having traded bonds forever, you didn't care about M2. But I like to point out when a statistic like this that historically really matters,

when it reaches the highest ever and it goes down to lowest ever and you have data that goes back that's longer than most of our lives our loss are alive you respect it and you know minus four percent is just the same as a bank index is just the same as um deposits leaving banks and that's the kind of stuff and so what's the fed doing in that environment i just look back hopefully i'll be alive to tell the story and write the textbooks to tell my students yep i remember doing that and the key question will be what did you do professor mcglone or whatever i'll be who knows what i'm doing if i'm still alive and i say well, well, yeah, I've warned the world. And if I don't, I'm remiss. So I just have to say I'm willing to take risks that the hurricane's coming and batten up the hatches. And if it doesn't come, blame me.

Because this is just like that. But we started pointing that one out last year. That M2. So you can't see it there. You have to use a year-over-year change. It's not giving it to me. That's on the 12 months. So, yeah, it won't really give it to me. But you can see that it there. You have to use a year-over-year change. It's not giving it to me. That's on the 12 months. So yeah, it won't really give it to me.

But you can see that it is declining at least. Every listen of booms and busts, the book by boom and busts written by Turner and Quinn. I fortunately had to read that one again. But yeah, I could have written some of it. Every lesson in history is all lined up right now. And the key thing is don't fight the Fed. They're so tight. Oh, God fight the Fed. They're so tight. Oh, God, the Fed.

We have to, listen, we got a couple minutes left. We got to talk about Bitcoin here for sure, because, wow, quite a moment here. Obviously, Binance halting withdrawals to give people some context twice in the last 24 hours. Of course, that meant, and I don't substantiate or unsubstantiated rumors. I have no idea.

That meant an excuse for people to come out and say that Binance is insolvent, they're criminals, all those things. But what Binance said was that we basically can't get these transactions through because the network is congested and the fees will be way too high. So they're sitting in the queue. That is substantiated by on-chain data, of course. And that is because of BRC20 and ordinals. There's a hilarious tweet here, guys. I do not take this seriously. There's a hilarious tweet from Zero Hedge here that says, BTC's selling off after people realize it makes for a poor ETH. That's really funny because the reason, obviously, that Bitcoin is congested is because people are

making memes and NFTs on Bitcoin effectively. And then I saw this one right below it, which is really funny. It says, Bitcoin's a store of value, puts BRC20 experiment on Bitcoin effectively. And then I saw this one right below it, which is really funny. It says, Bitcoin is a store of value, puts BRC20 experiment on the chain. Bitcoin is better than other L2s despite having 400K unconfirmed transactions. I heard this morning, this 400K unconfirmed transactions and the total is more than like all of the 2021 bull market combined. Just to give you guys an idea of how much the the network is congested so i would long way of saying i i would tend to believe binance that uh the network is massively congested and they basically just can't do this also to add to that and dave you might have some thoughts here but people who are saying that it means binance is insolvent don't understand that you can still

still just sell your bitcoin into another coin or usdt or something a finance and withdraw yeah i mean just bitcoin withdrawals at the end of the day i don't know i have no personal knowledge there are people who i mutual friends of ours who i have lots of respect for you know mike you know uh alfred uh and others who are very bearish on Binance's outlook. I just don't think that that this has anything to do with it. I think the word we use in quantitative finance is orthogonal. I think it's completely unrelated to it. I'd say that what is interesting is people jumping into Bitcoin ordinals and all of that.

It's like, yeah, you know, it's like as long as it's the same, it's the flip side of Pepe is the gold rush of people to, you know, get bullshit and hope for greater fool theory. And just so that's overwhelming Bitcoin now. I mean, it's not dissimilar to, we've seen this before in Ethereum, CryptoKitties or how it paralyzed Ethereum's network. I mean, we've seen this from time to time. We were talking off air about signal to noise ratio. I look at this as noise, but it's important noise, right? It creates people's worries. And the fact is, look, the big Bitcoin conference in Miami is next week. Traditionally, that's not a good sign. Well, it's not. I mean, if it was a 30,000, this is the interesting thing. So where will we be when we get to it? Will we still be sitting in the trading range or will it break down through the trading range to another one, you know, before, you know, we get a V bottom after it? Who the hell knows? I mean, I don't know. But what I do say is, is historically, that is not the time. Buying on Euphoria going into the Bitcoin conference is probably not a really good thing.

And I think we'll hear a lot about ordinals over three days from people and the network and yada yada. It'll be interesting when I first start seeing Bitcoin maxis start yelling about you trying to hijack our money. You know, which will be it'll be. Oh, you mean that the you mean that the fans of permissionless blockchains want you to get their permission to use it? Yes, I love that tweet of yours. I had I mean, that's mind blowing. Permissionless and trustless unless you use it in a way I don't like and then yeah, exactly. And so exactly. And look, at the end of the day, when you have something that is public and open, it is look like you might break it people panic when you get to the top of the range people are like declaring it you know the war is one and you have fomo into the moon and the reality is

almost always neither are right unless it's a macro event and mike's talking about very important macro events but i think that the key thing about binance is to remember it's a tree in the forest i mean that's the big tree but we wouldn't have had the issues with FTX. We wouldn't have the issues with Bear Stearns and Lehman Authentic if the asset prices and everything didn't go down. It's the macro that matters. And then you have these stories. 100%. Yeah, and that's what's kicking in.

So one thing I do want to point out is markets like these, they oftentimes provide awesome opportunities. One example is what's happened with GBTC this year. And I'm not pointing out bullish or bearish, but it's up about 94% this year. And I've had people last year point out, oh, that's pretty damn cheap when it was at 50% discount. And if you hedge that versus futures, they're only up 70% this year, Bitcoin futures. Obviously, you've got to rule them. But to me, that's still an ongoing trade that's going to continue and probably work in favor of Bitcoin. But it's the tree. The finance is just still part of that ongoing. What I say is still this is still a bear market. And it's a lofty

one. But so it's like an example. When did Bitcoin reach that recent high around 30,000? Right during consensus. Oh, boy. Here we go. What are we doing Bitcoin next week? What happens after Bitcoin Miami next week? This leading indicator, I just respect it as leading indicator. And it's telling me that your bigger problem is the macro. And it's a tree in that forest still. I tend to agree with that 100%.

For anyone looking for more color on either the Bitcoin conference or GBTC, actually, the podcast I or GBTC, actually, the podcast I released yesterday with David Bailey, who's the CEO of Bitcoin Magazine, the Bitcoin conference, all of it. And I had Mike Germano, who's planning the conference just a few weeks ago. So a lot of color there, a lot of fun around GBTC, to be quite frank. And I do got this. Actually, I'm not going to Bitcoin Miami this year. It's first in many, many years, unfortunately.

So you guys are going to have to report on it for me. I'm sure you'll both be there. Yeah, we're a sponsor. Everyone come by the booth, visit us at CoinRoutes. We'll be there in force. Perfect. Well, guys, that's all we got for you today. It's 1028 here.

I'm actually jumping on to another show, DCA at 1030. And then at 11 o'clock, I'm going to miss most of that. I'm actually really interesting. I met one of the eminent llamas in Dubai. I don't know how llamas are ranked from Dali on down, but he's actually a pretty cool guy and understands blockchain and crypto. And I'm interviewing him at 11 o'clock. So that should be interesting.

I need to brush up on my terminology. I believe it's eminence, but I will inevitably butcher it with the llama there. Good luck with that. Thank you. It should be interesting. Yeah, you're going to be quite a day. Guys, thank you very much.

Everyone, tomorrow, Twitter spaces, of course, with Sandeep Nailwal from Polygon. So we're going to be talking about largely, which will lead from this conversation we just had about how important Layer 2s are going to be as we see all this congestion and the increased prices. Mike, Dave, thank you guys both very much. See you guys next Monday.

Bye, everyone. Bye. Let's go.