The Wolf Of All Streets - Big Crash Or Soft Landing? What Will Happen To The US Economy?

Episode Date: September 11, 2023

Macro Monday with Dave Weisberger and Mike McGlone.  Dave Weisberger: https://twitter.com/daveweisberger1 Mike McGlone: https://twitter.com/mikemcglone11 ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Janet Yellen says that she's feeling very good about a soft landing for the U.S. economy. Here's the exact quote. I'm feeling very good about that prediction. I think you'd have to say we're on a path that looks exactly like that. Now, I have a feeling that maybe today's panel, Mike and Dave, might take issue with that statement and might have a different position. We're going to talk about it right now. Guys, it's Macro Monday, my favorite day of the week. Let's go.

What is up, everybody? I am Scott Melker, also known as the Wolf of Wall Street. Before we get started, please subscribe to the channel. Hit that like button. Now, this is Macro Monday. Next week, I think it's going to be Macro Tuesday once again because I will be traveling back from Singapore. I'm obviously leaving tonight, as you guys know, for Token 2049, the conference over there.

Pretty crazy that to go to Singapore for a week basically means sleeping on an airplane half the time and sleeping in a hotel the other half the time. Three nights on a plane and four nights there. So I have a feeling not much sleep going to be happening. Got some epic interviews lined up there that we're working on right now. We're going to be doing some in-person shots. Formula One going to be pretty crazy.

But yeah, I'll be landing on Monday and therefore we're going to have to do back or Tuesday. And I don't know what's going to happen with YouTube this week, to be honest, between jet lag spaces and all the work I'll be doing during the day. So that's a very long way of saying you better enjoy it today because I don't know when you're going to get it again. I've got Dave and Mike coming on right now. We got the topic here, big crash or soft landing. Mike, I know where you stand on this, obviously, what will happen to the US economy. But what I do want to note is that there's a major uptick here in the rhetoric. As I said, we've got Janet Yellen saying she's feeling good about the soft landing. Wall Street,

too hot economy as recession bets plunge. If you're looking at any predictive markets, it's almost like nobody believes there's going to be a recession anymore. too hot economy as recession bets plunge. If you're looking at any predictive markets, anything like that, it's almost like nobody believes there's going to be a recession anymore. I don't get it. I mean, Dave, you know what? You take it first this time. Go for it.

Well, it walks like a duck. It walks like a duck. Maybe it's a duck. I mean, you know, look, I said for every week, I say the same thing. The Fed wanted an inverted yield curve because they were going to raise rates in the short end to combat inflation. And the long end went up and we didn't have an inverted yield curve. The government wouldn't be able to afford its debt. We already would have debt service being the largest line item in the budget. As it is, it's the second largest line item, and it's causing people enormous amounts of angst in terms of what will happen.

The reality is, is what they want is they want, you know, they don't say it, they'll never admit it, but they kind of want a Japanese style, you know, stagnation to get shit under control so they can resume money printing and resume misallocation of capital over labor and all the other good stuff that allows you to have asset inflation with consumer without consumer inflation. model. And Mike is the one place where Mike and I completely agree is that the Fed, A, doesn't give a crap about what happens to the stock market within reason. And B, well, that's not true. They don't give a crap. They do give a crap. They just don't care if it goes down. That is going to be, once it gets beyond a certain point, the thing that will stop them from raising rates because, frankly, inflation metrics are unlikely to get them where they want to go. So, you know,

of course they're going to start talking about soft landings because they want to prepare people for them, you know, to, to not have high inflationary expectations. They're always trying to draw those down and they're always trying to, and they don't want to have to keep raising rates because they understand what that is.

And remember, we are going into an election year and I keep talking about this. So, you know, look, a stock market crash in September, October, that's muted, that that, you know, helps dampen inflationary expectations. Do they really care about that? Probably not. The big issue is the one that James always brings up and he's not wrong, is will they create a credit event? And if so, what will they do? And my opinion is if they do create a credit event, they will bring out the fire hose of liquidity. But if they don't and it's just the stock market breaking, they'll just pause and dissess. So, you know, look, of course, that's what the rhetoric is going to be. The two things you can count on, you can set your watch by are that Powell will continue to talk hawkish no matter what in the face of union negotiations and things that he believes he can influence to keep inflation down.

And that other members of the administration are going to talk soft landing so that they don't make people panic. That those are both... Yeah. Down the road as far as possible. What if they could just kick a recession down the road until right after the election? Well, of course they would love that. There was a cartoon of literally Powell kicking the can that went around

Twitter that kind of like moved out. But look, Mike and I both know one expression, and that is people talk their own book. And Yellen's book is to say, hey, you know, we've declared victory. You know, yay. You know, we're more like the Cowboys and the Giants last night. You know, we've. Yeah, that was an oh, my God game. You know, I'm thankfully. Well, whatever. Well, we don't want to talk. I'm not going to talk football right now.

Mike, go, well, whatever. We don't want to talk. I'm not going to talk football right now. Mike, go for it. I guess it's probably more fun to disagree, but completely agree with everything you said there. We can just, let's not waste too much more words on what Yellen said. I saw the headline. Yeah, okay. This is what you've got to say. But I think the thing I can bring to the table right now this morning is we just got off our macro meeting, and it keeps tilting.

We have all our major people in BI who don't have positions. That's a cool thing when I do. I've been both buy side, sell side, trader, non-trader. I'm not really allowed to trade. So we have very open views. And so Ana Wong says, we're going to have a recession by the end of the year. Yes, we're delayed. Expect negative retail sales this week and expect deflationary forces just to start getting started. That's cars and rent. pointed out that the Fed's unlikely to cut rates, IRA, Jersey. Our mortgage strategist said record, we have record low mortgage affordability index.

And then our equity FX strategist said that we need a dovish adjustment for the Fed, for the dollar to stop. So what I like to add to that is I see overwhelming forces now on top of risk assets. And Dave said it. I don't see any chance for the Fed to pivot away from this. They have an 800-pound grill on top of the market. And that is, if you just look at the baby step, the next key meeting is not September,

but November, is there's a 40% chance they're still going to hike rates. The key question is, what takes that away? Maybe they don't hike. The bottom line is risk assets question is what takes that away? Maybe they don't hike. The bottom line is risk assets going down will take that away. Maybe, but as Dave said, unless there's a credit event, there won't. But you know, the best way to have a credit event is just to have a lower tide. So I look at this as the key thing in the macro is this is all, what's the best leading indicator on the planet? What's it doing again on this Monday morning? Bitcoin is right near,

if you close here, where it was this morning, it's going to be the lowest since June. And I completely believe that I'm probably going to write about it partly because there's still disputes, but there's no other asset I've ever seen that doesn't close down and trades all the time. And it's the best performer ever during a most historic event ever when we had zero interest rates. So I like to tilt over to, I'm getting a lot of people

pushing back in my call for crude oil. I'm still very bearish crude oil. I'd like to point out, well, here's a good bear market. The average price this year is the same as 2007. Like, oh yeah, well, why should I be excited about that? So here's a good bull market. The average price for gold is the highest ever. Well, okay, well, I guess I can get excited about that. Give me a reason for that to change. So in the macro, I see what's happening here is epic historic. I mean, we all know that I'm looking forward, looking at this, look at it for 10 years from now, what's happening is just look at CPI is going to be the story this week, it's going to

come out around 3.6 or so it's right 3.2 core is going to be 4% means the Fed can't cut because it's their rate, their target's 2%. But if you look back the last time they started cutting during the in 2007, right before the financial crisis, CPI peaked at 5.6%. It's much lower. It's almost half that now at running 3%. Yet they started cutting rates. Why? Because, as Dave mentioned, there was a credit event kicking in. This, to me, is going to be the biggest credit event of our lives. And it's just getting started. The bottom line is the Fed is still hiking.

So I look at people saying they're getting bullish copper. I'm like, OK, well, good luck. Fed's still hiking. China is still tilting over. And there's a major shift there. And then you look in the macro. OK, that's a problem because they mess with their best customers. They have complete lack of confidence internally and for good reason.

And then you look over at Europe. What's the entire content of Europe? The PMIs are all negative, below 50, and they're still hiking rates. So this is what you'd expect, I think, in the tail end, the biggest liquidity pump in history that's still dumping, and this is early days. So, yes, I've been early, but a few months from now this should get ugly and if it does yeah i and i hope and here's i'll end with this dave and i started this bet right and that is that um i think it was a steak dinner that what gets first 42,000 either way by the way if you guys just invite me it's one of those things i hope i lose I don't have a vested

interest in this. I have a vested interest in overall being right in the long term not being an idiot and losing my job and at coming on your show neck like I know stuff. That's my best interest. It's true. I mean, I'm not gonna deny it. But so that's a bet I hope I lose. But I can't see I can see crude oil doing it going back to it was before COVID around 40 bucks. I can see S&P 500 going back to around $3,000. Yes, those are far away from now. But in a normal recession, with the Fed still tightening, it's never happened.

Okay, but it's probably going to happen. And what's the fastest horse in the race? Why shouldn't Bitcoin do the same? So, yes, accepted trade in the history I've ever seen of markets is, yes, it's bullish for Bitcoin when all these ETFs launch. And then I always go back to Benjamin Disraeli. What we anticipate seldom happens. Yeah, I don't think I disagree with that. And listen, I mean, there's you can say you've been early.

The thing that I didn't expect and that I know you didn't either is that they would still be tightening at this point. Because I think we all imagined that they would have stopped. Let's say, I think we all believe the Fed should have probably stopped tightening. I mean, I think it was four months ago we were saying six months ago. So 10 months ago, 11 months ago at this point. And if Bitcoin, by the way, is a leading indicator, then what are altcoins? Because this is what the crypto market looks like right now. Well, I mean, the crypto markets are Bitcoin is there. Look, you've all heard me say this.

I'm sorry for fumbling around here. There are two use cases in crypto. OK, two. I always think they need to be considered separately. Yes, they have historically been highly correlated. Yes, Bitcoin has led in both directions. But it is really important to understand what those two use cases are, because I think we're going to see something different. Use case number one is a non-sovereign global store of value.

And that is Bitcoin's use case. Yes, there are some altcoins that claim to do that, but frankly, none store of value. And that is Bitcoin's use case. Yes, there are some altcoins that claim to do that, but frankly, none of them do. They're either not as decentralized, they don't have network effects, etc. They have small, dedicated communities of crazy people who, you know, scream from the rooftops of how great they are. All you have to do is look at any of our tweets and all the various bot, you know, nonsense that comes on the back of them. And by the way, if Elon Musk is listening, I'll refer to them as posts instead of tweets when you'd stop allowing bots to post on people's threads or give people the ability to- Or when I can't type in twitter.com and get to my feed yeah yeah so that's right so look the reality is that that bitcoin's

use case is unique but there's another suite of use cases out there which is no different just a different funding mechanism it's decentralized it's open source but the end of the day it's still technology and for altcoins to not be correlated to NASDAQ, to me, makes no sense. And I think that the altcoin market is carrying the coal mine for NASDAQ. NASDAQ still has lots of index fund buying. There's no index fund buying of altcoins, right? There's no natural buyers of technology stocks. There's none of the trillions of dollars run by registered advancement advisors, financial man, financial advisors, sovereign wealth funds, pension funds that are can only invest in equities and bonds are in altcoins. And so altcoins are going to be the tip of the spear. And will the correlation of Bitcoin pull Bitcoin down? Yeah, possibly. No, no doubt it's possible. But you have to look at those things separately.

We also have a dearth of liquidity in the market. And it's not that much of a dearth as much as people say. I mean, we look at the order books all the time and liquidity costs are creeping up, which means liquidity is creeping down. And we have the news that FTX is selling some altcoins and those will also bring that down, much less likely that they're selling on any impact on Bitcoin or Ethereum. And Ethereum, by the way, kind of straddles both, right? But Ethereum has to go down when altcoins go down for the simple reason that one of

Ethereum's use case is, guess what? Drumroll, creation of altcoins. You know, you have to look at it this way. So if you are a bifurcated market, I know I sound sort of like a backwards, you know, a backdoor way for being a Bitcoin maxi. But at the end of the day, I'm not bullish on altcoins for the same reason that Mike's not bullish on stocks. I'm just kind of, you know, hanging out there. I'm bullish on Bitcoin because, frankly, we've seen unbelievable news every single day.

The only thing that matters with Bitcoin, because it's an option on its own adoption, is what will happen with long term adoption. And there were two stories last week that were both massively bullish long term for Bitcoin. And every time we've seen this in the past, I think the fact that Bitcoin is not dropping, given the macro environment, it would be if it wasn't for all the bullish news. And we can talk about that. But I do think you have to look at what's going on in the altcoin market, as a tip of the spear for what will start happening in small cap, you know, NASDAQ growth equities. So I guess it could also really quickly, Mike, it could be leaving the next Bitcoin move down. We've seen that many times. I'm not making a price prediction, but I'm saying sometimes when we see altcoins selling off on a Monday, it's telling you, hey, maybe Bitcoin's about to break a level of support here. I'm not saying it will happen. Thank you very much, Dave and Scott, for that. You helped hone my weekend view. I was doing more analysis. I want to publish on, to me, it's indisputable that Bitcoin's the most significant leading indicator in the history of mankind. I've got

to say, for people to it because you know that's part of what i do but and to probably add to that well all kinds are a little bit more the high band leader so far but i want to start with one key statistics i'm not just bearish i'm bearish all risk gases i mean literally all of them um because of what's happened historically i'm i'm saying 10 years from now if hopefully i'm alive or years from now, how are we going to view this period in history? And that is most people who've been trading Bitcoin and cryptos for 10 years don't realize how historic it was. Zero interest rates, negative interest rates in Europe, still in Japan. I mean, it's global. And that's changed, flip of the dime, particularly leading in the largest country. So I want to start with this, 2.5x. I'll give you that statistic. That is the two-year note yield in US, how much it is higher than the

weighted average of the top three other countries combined, China, Japan, and Germany. Now, I said weighted because Japan's a bit distortion because it's so low. But if you take Japan, China and Germany, their total GDP is about the same as US. Yet our rates are 2.5 times higher. That is an accident that's breaking already. And you're going to see every day that goes by, you're going to see scrambling to do something about it. Like we saw this morning, China's trying to do something. Japan's trying to do something to help support their currencies. It's just it's the force is overwhelming it's not gonna you can't do anything about it to me that's what's breaking in the short term so the key thing is you got to get the monkey the 800 pound grill off the back of all risk assets and that's the fed and i just look at

baby steps at the time until you at least see the first sign that they're not going to hike at the next meeting they might start cutting and if they cut the first time the first time they do cut which is not going to happen that's the crash it takes two years so this is how different and how unusual this is so if this doesn't happen the way i think it's going to i'm so happy to have to write those textbooks and i look like yeah i was completely wrong all those lessons but this is where we rope in the minor things like this morning you look at ethereum down almost two percent well that's just the day you look at compared to friday the down lower because we only have one day here but um that's where the macro is so overwhelming so significant that's one thing i do enjoy when people said i've been doing this for 20 years like you have to have

been doing at least for 30 or 40 years and the sparing spare markets because 20 years means 2003 that was the best time ever to buy because what happened was in the back of a very bad bear market that collapsed massive liquidity and boom it's time to buy and then we had the crisis during 2007-89 massive liquidity i just keep looking at markets rolling over, still rolling over. The Fed's still hiking. That's not that complicated. Turn off CNBC, two-year notes at 5%. Thank you very much. See you in two years. Yeah. I'm looking at the chart that I always bring up as you're talking, because you said, obviously, two years. So you have the Fed. I just want to look. I was looking at the Fed pivot here and basically, I mean, you could call it that they sort of started in June, but throughout and then November-ish of 2000, stock market took until

late 2002 to bottom, so over two years there. And then you have the pivot in 2007 and the stock market took almost two years. Yeah. It's not great, right? So after the pivot, you generally get a year to two years of downside, and then another couple years to get back to the point where the pivot was. I mean, four or five more years. Well, that's all the lessons of history with zero interest rates. And that's what's going to happen, I think, is we're going to find out, and we haven't even seen it yet, what happens when the tide goes out in this most significant period ever of what people do, what they shouldn't have done with Airbnb and buying new homes and VRBO and all that starting to roll over. But one thing I want to turn over to is a little bit what Dave said is one thing that I think I'm at least ahead of the game on is trying to predict when markets start showing divergencegent strength or weakness. And I completely agree with Dave. I have for a while that Bitcoin is going to trade more like risk-off asset treasuries and gold.

But the signs are it's not. It's still actually doing the opposite. Until I start seeing signs of that again this morning, again, it might take a while. And that's why I'm worried it's going to have to get really low and cheap before it starts doing that. And everything, I think, is going to have to get low and cheap before people realize, OK, this asset, which is unstoppable, unlimited demand and decreasing supply, it's going to at least show those signs of strength. Show me the beef first. And that's, again, I just look at it on a two-year basis, it's down, what, 30-something percent in the stock market basically unchanged. It's like, come on. Bitcoin's down 42%. S&P is unchanged on a two-year basis.

On a one-year basis, same. It's still underperforming. You have to risk adjust that. So typically, Bitcoin used to be 10x the volatility of the stock market. Now it's like two to three X, depending on which index you're looking at. It should outperform on the way up and outperform on the way down. It's underperforming on the way up and it's still outperforming on the way down. At least show me signs of that divergent strength. It's not doing it yet. Maybe when the ETFs are launched, but it's a no, no, we all know it's coming. I feel like it's just doing nothing, though. I understand the leading indicator argument and I understand the correlation argument, but it feels like, I mean, stocks, I'm looking right now, the QQQ is pre-market 375 up from 372. Nice big bounce.

And Bitcoin's going down. It just feels like it's completely untethered at the moment because we're in that part of the cycle. But maybe I'm wrong. I don't even really see either argument is my point at this moment. I mean, look, not to throw cold water on both, but nothing that gets argued about that we were just talking about has anything closer to statistical significance for it. I mean, look, I'm going to say it again. The significance of this is lost on people, but Bitcoin trades like an option on its future adoption. Its future adoption of doing what gold did to silver, doing what silver and gold jointly did or silver did to seashells is historic and it will either happen or it won't. The market is pricing it somewhere. The difference between the market pricing it at 4.2% or 4.3% or 5% is a squiggle. It really

doesn't matter. Either Bitcoin will become that hard money digital alternative or it won't. If it does, it will be 20x of here or more. And if it doesn't, it probably slides back down to being a niche product, which stays within the niche of people. And who knows where the bottom is on that? That is literally the asymmetric outcome. And markets aren't stupid. And because what you're seeing here is a smaller and smaller group of people as a percentage of holders are setting the price because the long-term holders, the ones who believe in that 5% is woefully small of a percentage, aren't selling. And so what you're seeing is price discovery is happening on the basis of speculators. And, you know, we saw this multiple times. You said the ETF is a known, known horse shit.

Yeah, we every time people talk about the first time BlackRock filed, all the animal spirits got in. The speculators chased it up. But the long term buyers were like, I don't see any. Where's the beef? It's not going to be there. Right. You know, not until it's actually approved.

And I'm not going to underestimate what what what, you know, this SEC will do. I mean, this morning's, you know, this morning's editorial in the journal about, which I didn't even realize on financial information, this SEC is literally trying to stop the U.S. economy. I mean, they are literally trying. On every single dimension, it's unbelievable. So why would anyone expect? And so, of course, it retraced. Then they lose in court. It's like, well, now they have to listen. Well, guess what? They didn't. No, it took two days. At the end of the day, the ETF that people are talking about, all it does is allows for the

potential for asset allocation. And that is a very big deal. And it will be a slow thing. And it's like slowly, slowly, and then suddenly. That's what you'll see. I don't know when you're going to see slowly, slowly, when you'll see the suddenly part, but slowly we understand. And we've seen this before, but it's different. It's like, who knows where it goes to. And I just think that looking at those cycles is fascinating because, you know, people talk, well, you know, the four year cycle is set in by Lord Satoshi. You know, let's you know, it's like it feels like a Star Trek episode where there was one where they were inside a spaceship, but they thought it was a real sky. And, you know, they had to go in and talk to the people. It's like Truman Show. Or something like the Truman Show.

Or like Foundation, what Harry Seldon did with Psycho History is Satoshi Harry Seldon. You know, my favorite book series of all time was Foundation, by the way. The series is painful for me because they deviated from the book, but I know it's a good show. So I'm going to get back into it. But my point is nothing is predetermined. The only thing that is certain is that, you know, people, markets don't learn, people don't learn, greed and fear happens.

And the only thing that we know for sure is markets are always trying to anticipate. And so every time the timing is different. And so timing cycles have been compressing until the point is people are always trying to look, they say markets are forward looking, but people, you know, there are other trends. I wonder how long it is before we start hearing about the boomer aging effect and how people need to take money out instead of putting money in the markets. That's getting started. But there's a few things you said I think are quite profound.

First of all, the world is realizing how unstoppable the U.S. system is. First of all, autocratic leaders like we have in the SEC right now will not last long. And history will judge him like Aaron Burr. And also, he's not the most attractive. It's just funny how this is playing out. Like, I can't wait to write the book. I mean, if Mr. Gensler raised his hand and said, yes, I want to be the bad guy of history. Okay. Well, good luck with that one. Pushback in technology. Just good luck, dude. I mean, the thing is I've seen it before when a CFTC, I worked

directly with him with regulators and okay, that worked okay for him, but it's just a matter of time. So one thing also I want to push back and not push back and point out where we need to disagree. If we don't, we're not worth anything. I agree with you. Bitcoin will. I disagree with you. It's not trading like it's an option in the future anymore. And that's where I want to give you where I came into this space.

I started at Bloomberg 2017 when I saw that big pump. I wrote about it a little bit. And then I saw, OK, this is going to dump. This is silly. And I wrote about it for months until 2018. Got a lot of pushback. Put some calls that are really low. We got almost all the way there.

But I flipped my switch. And that was April 2019. And I got really bullish. But here's the big difference. At Bloomberg, it was still major pushback. The amount of coverage, and it was still, ah, this is no one cares about it. And that's what I felt as a strategist. That's what you want.

I was a contrarian. No one really agreed with me. McGlone's an idiot. This is just silly internet money. That was kind of the pushback in this major, you know, this most significant financial organization on the planet. It's the opposite now. It's just, we have so much coverage of Bitcoin and cryptos and on my screens. That's what's changed versus the last time I got really bullish when it was around 5,000. Now I have to keep the bear stance until I think something trades in the macro. At least show me

that option and the option you're showing me, show me outperformance it's not doing it it's still underperforming again on a daily monthly weekly basis for about the last two years yeah let's look last week so there are two two news stories one was covered significantly one was really not covered very much uh but it's fascinating and the one that was covered significantly but it's a very big deal is fasbi's rule changing which will allow uh corporates to hold bitcoin now for those who who have a story it's a big deal uh because you can't before this rule change which takes effect in 2025 for some godforsaken reason but But before that, if you hold Bitcoin on your balance sheet, it is held at the lowest price that it reaches. So let's say you buy it at $30,000 and it's at

$25,000. It touches $25,000 during the previous quarter. You're holding it on your books at $25,000. If it goes to $50,000, you're still on your books at $,000, 5,000. It drops to 24,000 and then bounces back to 40,000. So now you're holding it at 24,000 and you continue. No corporate treasurer wants to have an asset like that on their books because it makes their books look, it makes their book values and whenever the fall happens, whenever there's a downside in the quarter, it makes them look bad. It's asymmetric and it makes you look like an idiot. So Michael Saylor had 2000 CFOs come in to talk to him about why put some Bitcoin on the balance sheet. And they all basically went back home and the board of directors told them, you are freaking nuts. We're not going to do it. Here's why. Boom. Dead DOA. The fact is there's trillions of dollars that's sitting out there that is now going to be unlocked in 2025.

That goes along with the second piece of news, which was the IMF and Financial Standards Board, FSB. Hold on. Let me look at the exact. Yeah, the FSB, the accounting. Don't ban Bitcoin. With a policy on crypto assets. Okay. Now, we all know they hate them.

We all know the IMF is decidedly against Bitcoin. They want to keep control over the developing world so they understand it. But they finally got it through their heads that they can't ban it. And so what do they want to do? They have a very reasonable sounding document on how to be regulated, but they want to try to control it. Well, if you think about the significance of that, it's huge because El Salvador, they tried to pummel them into not allowing it to be legal tender, but El Salvador didn't make it their reserve currency. They made their dollarized. Right. So, you know, but they did make it legal tender. They tried to pummel them, but El Salvador is actually doing pretty well. So that's failing. And the people in the IMF are

probably like, okay, we probably don't want to try to ban this crap, but that matters, right? That's a, that's a massive policy change away from banning and towards control. And then eventually it'll be, you know, it'll go the way it is. Those two stories are both very, very relevant in the long-term and the short-term, the market didn't even blink at either of them at all, which is another way of saying we don't, the long people who care about the long term are just nicely, gently buying and buying dips and whatever. And the speculators are like, oh my God, there's an expiration on Friday or, oh my God, there's this this or, you know, or Mike's right. You know, we got to get the hell out, you know, or whatever.

And that's what we're seeing. It's a fascinating situation, but we've seen it before. I mean, the last time I was this bullish was it was a six-month period several years ago when it was trading between 7,000 and 10,000. And every time it would rally up toward 10,000, it would get smacked back down towards 7,500 or 7,000. But every time it got below 7,500, buyers would step in. And we saw it. That was in the wake of Paul Tudor Jones' first use of the word fastest horse. And we've seen this before. And the beauty of Bitcoin, where you don't get this in any other asset classes. You can see it on chain.

The on-chain metrics are extremely strong. And that, to me, is the divergent weakness that we have. Now, is divergent weakness something I want to sell? Well, I mean, one of these days you should have Mike Alford come on with us because he and I agree on a lot of this stuff. And it's like, I think that the long-term risk calculus has never been more bullish. It doesn't mean it can't drop 25, 30%. It doesn't mean that at all.

Yeah, I think that's the qualifier. As you can say, I've never been this bullish, but that doesn't mean you think it's going up anytime soon. Because I'm not going to sit there and, you know, it's like smart people let markets come to them when markets are coming to them. If they if they don't have a lot of competition. The problem is, is when it becomes competitive.

So when the market turns and people are trying to accumulate it, there isn't enough. And so, you know, it's like I've seen some of the stupidity. And the thing that's interesting is, is if you want to know why this is happening, Mike, because people in the crypto community are literally there are so many opinion leaders in the crypto community, some Bitcoiners that are excuse my language, but I will say it. Fucking morons. Absolutely dumb. People say, oh, BlackRock having ETF means we're going to lose decentralization. But they don't do math. They literally don't do math.

Gold, which is one of don't do math. Gold, which is one of the most successful products, well, not BlackRock, that's more spiders, but IAU is still pretty big. If you take GLD and IAU, it is a total of $80 billion. Even with Bitcoin, as small as it is, that ETF, those ETFs would represent 20%. And that just assumes that you could get 20% of the supply into those ETFs at the price rise, in which you can't. So you're not talking about a majority of Bitcoin owned by BlackRock, yet all these people keep talking about that. And they look at it and say, well, it hasn't happened yet, whatever.

And we're not going to let it happen and all sorts of other nonsense. So to me, sitting with a perspective of someone who's been in finance, but understanding the values underneath crypto, it's amazing the silliness on both sides. It really is. I see silliness everywhere, unfortunately. I wish I could be more sanguine about the IT. You don't have to be. I have to say, you talked about, obviously, El Salvador, and you talked about that there won't have to be. I have to say, you talked about, obviously, El Salvador, and you talked about that there won't be enough Bitcoin. There's an interesting story right now, which is that Argentinian economists lambast dollarization proposal as mirage, right? We've all been talking about how Argentina will likely dollarize. They literally, like the economists,

were like, the country lacks the needed amount of dollars and efforts to build up supply would entail absurd increases in debt, further compromising public finances. So is this just another silly narrative then? And does it matter? Well, every single time these countries that get themselves into this cycle try to do anything, what they end up doing is it's like how many different currency regimes and Brazil is better managed than Argentina. You know, how many currencies has Brazil had? I mean, you know, it's like basically what they have to do is trash the old currency and start a new one. Right. And say, OK, we're going to do it better this time, which is basically

that does seem like going to the dollar is the more reasonable and responsible thing to do in that regard. It just seems like it's impossible in this case. But as you said, El Salvador is dollarized and they can't get attacked in the same way. Well, I mean, they can't get attacked by the IMF in the same way. Right. You know, every country. Can't attack their currency. It's the dollar.

Every currency, every country is different in terms of the way their economies have to work. I mean, El Salvador, the other thing is that the leader there did is decide to say, okay, we're going to approach the gangs with the military, right, to try to actually recreate, to actually create safety in our country, which will allow people to spend and become tourists again, right, and to attract in new money. So, I mean, you know, there was that. So everyone says, oh, you know, El Salvador is a Bitcoin miracle. It's like, well, yeah, I mean, Bitcoin is not harming things. It's probably helping things and it's bringing in money into the economy. But don't underestimate. In fact, the bigger thing is how he basically went toe to toe with the gangs, took the military, got the support and made it a safe country as opposed to one of the most dangerous. I mean, that is a non-trivial thing. So, you know, Argentina has a lot of issues, right? You know,

their hyperinflation has been systemic, you know, and there are other countries that are like that, and there are answers to it. Generally, the answer is some form of capital controls, which only works if you're making structural reforms at the same time. Otherwise, you end up with a cycle of, well, you know, capital controls looks good for a while. It bleeds to the edges, black market, kaboom, and lather, rinse, repeat. Mike? Yeah, a lot there. I just want to follow up a little bit with Dave. I just checked the latest statistics.

The total amount in gold ETFs is about 180 billion which means two things like you said maybe it means bitcoin's overvalued it means it might not not be that much going into bitcoin because it's 180 billion gold and it's been around since what 2004 all is the first one um or the key thing i'm worried about is that nothing one lesson in life is never forget where you're from and the key thing i'm worried about is nothing one lesson in life is never forget where you're from and the store value i'm worried about the value of the store so i'll just look at a few statistics about bitcoin if you bought bitcoin in 2017 right about december so it's six years seven years ago and you bought the top top. Well, no, well before the top. So it's always you bought, I think it was around, uh, well, I have it well before. So it was 12,000, 15,000 or

so well before the top. Um, and you bought the NASDAQ at the same time and the whole year, if you just did the average, you're at the same level, same performance as a NASDAQ yet your volatility has been so much higher. So this is what I'm worried what's going to happen is we all say the same thing. It's the known known. It's all the institutions are coming. I just heard it so much. When we launched the Bloomberg Galaxy Crypto Index, I fully expect at some point we're going to have ETFs tracking that.

That's been five years. It's going to happen. But the point is, it's the value to store. If you're a money manager, and for the first time in history, in 20 years, the Fed's not there to help you. You start losing money. The boomers are taking out all the condos, all the property you bought in the last 10, 20 years goes down in a normal recession. When the Fed's still tightening, despite collapsing PPI, you don't have value to store. Why would you buy an underperforming asset? And I just pointed out, it's been versus the

NASDAQ. Now it's almost seven years of underperformance. Now, more recently- This one, I have to push back. It was only at those prices in the end of 2017 for two weeks. If you pick any other time around that, other than the two weeks where the market topped in December of 2017, Bitcoin is up massively. If you can even go back to October, two months before that, and Bitcoin was 5,700. I'm not saying you're wrong, but I'm saying that is a very specific window to compare to when you have the entire year before on the run-up or the entire next year through 2019. Okay. So here's, let's do this. Good point. Let's look at the peak from 2019. It's the same price. Let's look at from 2020 Bitcoin NASDAQ ratio. I'm just looking at

the Bitcoin NASDAQ ratio. I'm still like, I just pointed out, I just pointed out how this is, let me just finish. This is well, institutions are going to put this in their value at risk model and say to themselves, okay, show me the outperformance on a risk adjusted basis. It's compared to 20, which is go to 2020, the peak from, I got 2019, the peak from December 2020. This NASDAQ, this Bitcoin NASDAQ ratio at 1.6 is the same and volatility is so much higher in Bitcoin. That's what the value of risk models are going to show. But there's one massive difference. You have an openly hostile regulatory regime in the United States and a cabal of the most powerful person in the United States in terms of regulating the financial markets, openly hostile to one and openly cheering the other. That is a big flip.

Okay, so the flip, yeah, that flip, but that might do it. I mean, seriously, you literally have the sitting US Senator from Massachusetts, who we know has placed her people in the financial regulatory space, who controls the economy in this administration, who has literally made the mistake, and I'm sure she regrets it, of publicly declaring herself the leader of the anti-crypto army. Yeah, that's silly. And by doing so, yeah, when you look at investment returns of Bitcoin versus the Nasdaq, when we've had public policy up until the last year, openly cheering the stock market. We've had both, you know, every president, Trump talks about it

by everybody, every political leader openly cheers the stock market going up. And at the same time, we're now into our third year of an administration that's been openly hostile to what you're comparing it to. And you look at it and you say, well, on a risk adjusted, OK, fine. But understand that that is the situation. So if you told me that we are going to have another six year, five and a half years of openly hostile regulatory environment in the United States toward crypto, if we knew that for a fact, then I would agree with you. I just, I can't help but being somewhat optimistic that this is so bad for the long-term future of the United States, us eschewing the digital revolution in finance

when the rest of the world is openly adopting it, that that is such an unbelievably dumb position that they won't win in the next election. Yeah, I think we all agree with that. The courts just proved that's not going to happen. That's the cool thing about the check and balances. We have a few politicians, not the majority, just a few who are being crushed by the courts, by the system. So I have to push back in a little bit. And of course, the rest of the world, particularly this engine of economic growth and wealth

creation in Asia, China is potentially imploding. That's the value I want to start with. Store value or the value to store? It's this value to store that I'm worried about. Just doing the normal reversion. But not being political, I agree with you. But if you get four more years of this control, if they decide to go after the court system, then the last check against this sort of centrally planned, diktat-based economy could

happen here. It's much more of a risk. I am much more concerned about it than you are. I like to believe in the, but I think that if we get a Biden Trump repeat, it's possible. And that is exactly why the markets are doing what they're doing, because a lot of people are just as worried. You know, we're, it is non-trivial to look at that, but I,

but I just forget the future for a second. Let's just say that you hope that somehow that there'll be open Democratic primaries, in which case we'll end up with somebody in all likelihood that will not be this way. Since Elizabeth Warren polled less than 1%, I don't think she wins. And I doubt anybody else other than the current president will give her the power that she has. So, you know, who knows? We could be lucky that way. There's a lot of things that can make us lucky. But just looking backwards, all I'm saying is when you cite the fact

that Bitcoin has underperformed the NASDAQ, and certainly, you know, considering what's happened, you need to take into account a few things. You need to take into account an openly hostile regulatory environment and an absolutely openly i mean just chronically plagued by fraud environment that was exposed in 2022 i mean between doquan and luna i'm sorry scott you know yeah just take a deep breath uh breath. I made peace with it a long time ago, if you can't tell. The key thing is you have to say to yourself, is that over? That's one thing that struck me about this space early on with Kali.

That's a valid question. Very valid question. What more? Great question. And I just, you look at what's happening in Binance. Just how many resignations we had as senior executives in the last two, three months? I'll say it again. Binance is why the crypto markets and

why Bitcoin has retraced everything. But their market share has gone from 80% to 30% in that time. So the best hope I think we have is that a very, very slow wind down before any action comes. Their market share in spot trading, yes. Their market share in spot trading, yes.

Their market share in derivative trading, no. In professional derivative trading, it's extremely high. They literally have a similar profile today that FTX did, maybe more than FTX did before it crashed. So if Mike is right and they go kaboom, it will set crypto back a lot.

You will have all those speculative traders everyone who's doing that all those people are it's going to be a big problem right i personally don't think that it's the same situation i mean but what the hell do i know uh i'm just saying i think that story is what's capping is the cap on the market that's the negative black swan that is another another. Is it a known? Well, I don't know that it's a known, but it's been, we are so, at this point, if you, very few people would have in the office pool

when the SEC went after, and CFTC went after Binance, would have said the DOJ is going to wait until the fall to go after Binance. But at the end of the day, we don't know what they're doing. And who knows what's going on behind the scenes. But that is a big story. I agree.

Mike, I have to ask you something because you said it kind of earlier. And I think maybe I've gone a little too far in the depending on the four-year cycle mentality. You sort of said, you know, you made a joke about Lord Satoshi and we all pray to the four-year cycle or whatever. Is that something that you think we don't have enough evidence for? You know, we've only had three cycles, so there's just not a great sample size. Do you think that it's something that's priced in? Because I just look at the charts and all of this, and it just looks exactly the same. And, you know, maybe I'll be wrong in a year, but it just feels like we'll have a having and things will be fine in a year and we'll just go up.

It's the problem. I mean, the cycle worked great when it was, remember what we're talking about is the asset that no one agreed with. It was silly in their money. Now it's in the mainstream. Now it's a mainstream. Different world now.

And then you never want to buy it when everybody loves it. And of course we have the few distractors but certainly not black rock the problem now is it's such a known known from someone like me it's like i mean i i modeled it five years ago here's exactly where supply is going to be in 10 years and people like okay i know done i remember explaining to a good colleague person a good hedge fund manager who said you you know, pointed out how cheap GBTC was back in December, which is still one of my major calls this year. Pointing out, you know, he was talking about supply.

I'm like, there's no issue with supply. It's a no-no. Next subject. So I just ignore it. And the key thing I'm concerned about is when everybody says the same thing, I tweak my Benjamin Disraeli rule about what we all anticipate. And I feel like I've been talking about it for so long and now everybody agrees. So to me, it's a bottom line. It was what it's what that's when you have to worry about.

It's also a guy who knows how to get stopped out of position and lose money. It's just the key thing I kept to point out is everything we're talking about are things that are on a scale of one to 10, there may be up to be a five. The 10 is still, I look at November Fed fund futures. The Fed is still going to be hiking rates. That is for all risk assets. And we're just talking about the best performing asset in the history of mankind.

Okay. Now next subject risk is it goes down until that's monkeys off the back. Yeah. I feel like I've been getting this sort of spidey sense that there's too much consensus, the same thing that you're saying. I've kind of showed the chart so many times. I've talked about it so many times. But you didn't, to your point, in past cycles, you didn't have BlackRock talking about the habit. Right. Or Wall Street talking about the habit. It just had us talking about the habit and nobody else.

I mean, one thing I enjoy about Bitcoin, people have done very well like yourselves. You bought it when everybody thought you were an idiot and you held on versus most people got stopped out. I mean, my son did. My son mined it and lost his computer. And he told me about it 10 years ago. It's just how most people are. I said, I don't know how many of mine, but I had a few of them. But that was the time. It's the best time to buy assets when anybody says you're an idiot. Now it looks like you're a genius because we're supposed to be all, just flip the switch of the psychology. It's completely opposite. Go ahead, Dave. I mean, the thing that, I don't want to be a broken record, I would just say that that the various things that matter on, you know, on chain metric want to admit it, but you ask the staffers, not necessarily doctogenarians who can't spell technology.

You ask their staffers, will the financial markets be digital in 20 years as opposed to an analog one that's still based on pieces of paper in a vault someplace? And they get the idea that we are going to see digitization. We are going to see digitization, we are going to see evolution, etc. So yeah, you know, those are big macro forces. But at the end of the day, what we tend to talk about here are the macro forces, meaning sloshing around the liquidity in the global markets and what's going on. And we are undeniably in a world where short term interest rates mean that certain business models are incredible. Tethers being an obvious one, if you get if people are willing to pay and get no interest, i.e. pay. And that's what people don't understand. When you buy a stable coin for the purpose of buying an asset and being able to trade an asset,

you are literally paying five percent because you could have that in T-bills. And I know that mindset is hard for non-traders to understand, but trust me, everyone who sits on a trading desk in a large firm gets charged cost of carry. That's what that means. And that cost goes up. It's fine now. But 5% in a world where people have been conditioned that a good year in the stock market is 20% just is something that the average person who's speculating is willing to pay. And so the question you have to ask yourself is, well, what the hell is going on? And the truth is there's no good place to put money if you want to try to keep up with actuarial assumptions, if you want to try to make money. And that's what's hard to say. I mean, Mike constantly says, well, I would just take my money, put it in two years and go away.

That's true. But did you ever ask the question, what's the average actuarial assumption on a pension fund? And guess what? Between 7% and 8%, which means that if you do, if the big pension fund did what Mike says they should do, and I'm not saying you're wrong, by the way. I'm saying that I'm just telling you the fact. Then you're locking in a loss of your actuarial assumption of two or three percent. When you lock in a loss of two or three percent, you don't keep your job very long. And so it's a lot easier for them to continue to roll the dice because they have what's

called the trader's option. If they're right, they do well. Right. I.e. the market goes up 20% again. And they're like, oh, this is great. Look how smart I am. And if they're wrong, yeah, okay, they get fired. But if they don't play the game, they get fired anyway. So we have this massive structural bias because of an aging population in the United States, a massive structural bias to buy the dip and take risk. And you can't ignore that as to why the stock market has done what it's done. That doesn't stop it from becoming a debt spiral until the Fed moves. I'm not saying that you're wrong, Mike, at all. I'm just saying that it's impossible to ignore the structural bias. You just described part of the main reason

I fully expect a normal bear market S&P to go around 3000. And what you just described, we're going to look back for some future and say, yeah, that was stupid. It was overdue. And the Fed cutting trading most liquidity ever. And then hiking rates the fastest ever with the world behind him was a good reason for it to end. I couldn't think of a better reason for what you just described to end. And I think it's going to happen soon. And all you need, the one final blow is for the stock market to go down. Then everything falls. It'd be wonderful if it doesn't.

But just look over at Fed funds. The Fed wants it to go down. It's just, the Fed doesn't care. I'm just making the point that everyone who tried to ask the question, why isn't it happening immediately? It's because there's a huge structural bias against it happening until there is until it happens yeah it's like you know the old thing it's like you know there's a small door and only 20 people can get through the door and you have 3 000 people need to get through the door and so and they're all looking at the door and as long

as no one's leaving they're like okay i'll stay here i'll stay here and we've all seen the cartoon we all know that what happens and and it yet it's a human cycle but that's why we have these cycles people always like why the hell do we have these cycles why is it always in the fall that people are worried or is it because the window's drafting and i have to out. There's nothing worse to a fund manager that has had a good year. Nothing worse than to see it all go away. And so if you want to know why volatility, why option volatility, implied vol goes up relative to realized volatility towards the end of the year, it's because people are locking in gains that they've already made. And they don't want to lose their job and they they want to get their nice bonus they you know they they promise their wife a vacation yada yada yada you know i feel like saying for those old enough to remember it you know the old gi joe with the kung fu grip

comment but you know that's why the fall is more dangerous and that's why implied volatility goes up relative to realize in the fall it's exactly the same thing but so let's talk let's talk about fall ethereum futures right now i use it because i'm it's just weekdays i'm sorry it's just yeah business days is the lowest since march if it closes there just getting started in early in the day and stock market had its normal short covering bounce in the morning on a monday morning and like i said i look over fed funds oh they're still gonna hike we still have to do cpi i think what you're talking about dave is the is just the start of a reversion of one of the biggest trades in history for one of the biggest reasons in history, best reasons in history. I agree with both of you.

And here we are, right, coming into 10 o'clock. Everyone's asking where James is, by the way. He's not, like, gone. He didn't quit. He's just not here this week. But I'm assuming that he'll be back next week. Like I said, guys, look for this next Tuesday. Hopefully, Mike, we're going to get your schedule, but I'm assuming we'll make it work. But next Tuesday instead, next Monday. And I'm probably off YouTube

for the rest of the week unless I can make it happen at 9 p.m. from a hotel room based on my schedule. But that may happen. We'll see. But thank you, gentlemen, as always, for all of the insight. Hope we can do this next Tuesday because I would hate to ever miss a week of this conversation. Thank you. Thanks, Scott. Dave, safe travels. You're hitting the road as well. All right, everybody. We'll see you next week. Bye. Let's go.