The Wolf Of All Streets - Bitcoin Is Boring! Here's Why You Still Should Not Sell | Macro Monday

Episode Date: May 13, 2024

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1  James Lavish: https://twitter.com/jameslavish  Mike McGlone: https://twitter.com/mikemcglone11  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► The Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://thearchpublic.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  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘25OFF’ FOR 25% OFF WHEN VISITING MY LINK.  👉https://tradingalpha.io/?via=scottmelker ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd  ►►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   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 #MacroMonday 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.

Bitcoin has officially entered the bore you to death phase of the four-year cycle, causing many to call for a top, a new bear market, saying the Goldilocks zone is over. I call it time-based capitulation, and it's only May. We could be doing this for months, but we'll tell you why price chopping sideways is not cause for concern. But more importantly, we're going to talk about macro. A lot going on with housing. Biden has a proposal to solve the housing crisis. Rent's still going up. Inflation's sticky, maybe even rising. It's Macro Monday with Dave Weisberger, Mike McGlone, and James Lavish, and we've got a lot to talk about today. 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. Hit the like button. Going to bring on the team right now. Dave had his morning coffee, Red Bull, maybe meth. I don't know. The guy is fired up pre-show. Fired up pre-show in the car, ready to go. But Dave, we're going to wait till you're in a better spot. And we're going to let Mike review the morning meeting first.

Good. Dave's pumped up, but we'll have to suppress him a little bit. Yeah. So from our colleague, my colleague Ana Wong, her points about all the data this week, CPI, PPI, retail sales is one thing that's significant is a financial service component. It's been 7% or so of core PC. And last month, April, the S&P 500 was down 4%. That's the biggest monthly drop since September of last year. She thinks that'll be a bit of a drag on the data. I think it's less cold because I think it's more of a lagging factor. But one key point I really appreciated is what she said about expecting retail sales to be about 2% nominal, but still adjusting for inflation. They're negative. And her point is consumers are increasingly under pressure. said about expecting retail sales to be about 2% nominal, but still adjusting for inflation,

they're negative. And her point is consumers are increasingly under pressure. Consumer weakness is going to be laid bare in the second half. So she's sticking with that bias. I came in and pointed out, if you look at the Bloomberg Industrial Metals Index, the level right here, it's so significant on a global basis. They've bounced this year, industrial metals, but it's the same level as the basis they've bounced this year industrial metals but it's the same level as the peak in 2007 right before the crisis and one thing i wanted to point out is since then um chinese cgb bonds were running around four percent now they're 2.3 and the china just announced they're going to be issuing a bunch of longer-term bonds that's part of what's boosting the market lately industrial metals that is a correlation to everything it's also an indication of the fact that they have to do that to support

their economy and the yields are plunging. So that's one thing I wanted to bring out. And here's another thing I brought into. If you look at crude oil, everybody watches crude oil. The price on the screen right now is the average price for the last year. High is 95, the low is 67. I think it's just more likely to head towards the low than I, because you know what happens if it heads so high on a shock, that's just a global recessionary trajectory, and it usually gets lower. And one other key thing from my colleague, Ira Jersey, please, chief strategist, pointed out this, what's been kind of the key pivot in the 10-year yield has been about 451. He thinks that might be shifting to the upper end of the range. From my commodity standpoint, I fully expect that because I'm still

quite bearish in commodities. And one thing I did publish this morning was just pointing out how U.S. stock market at two times GDP is basically the highest since 1930 in terms of market cap. So as my colleague Ana pointed out, it's kind of hard not to expect that to matter for everything. I mean, stock market up, inflation up, stock market down, inflation down. And they also pointed out managed money net positions in terms of things like crude oil, looks like they're rolling over pretty high in copper and a little bit of short covering in corn. That's basically the outlook for me. Yeah, I mean, the article this morning on Bloomberg, actually yesterday, stubborn inflation poses risk to recently upgraded U.S. forecasts for economic growth.

To your point, consumer spending has lost momentum amid recent bump in prices and disinflation rate cuts form the present premise for the strength this year. And now, as we've long predicted, we're seeing those rate cuts kicked further down the road or the expectation of those rate cuts kicked further down the road. And we're seeing sticky inflation in other areas other than the stock market. So Mike, just quickly, or James, one of you can answer this. But if the stock market comes down, people expect deflation or disinflation. But we have other factors that are clearly driving inflation up, right? And we'll get into housing in a second. But right now, it seems to be the big narrative is rent set to be last domino fall in global inflation battle. We'll see. Rents are the Fed's biggest stumbling block

in taming U.S. inflation. And then we'll get into the Biden proposal in a bit. But like, can we basically see your stock market drop, but inflation still be sticky? Very unlikely. So just quick comments, and I want to definitely hear what James and Dave have to say on this. My key point is, the evidence is becoming clearer every day that inflation is sticky because the stock market's going up. And part of that, the reason the stock market went up, obviously, is the unprecedented deficit spending, which I'm sure James will be over, but also Powell's pivot. And to me, I wrote about it this morning, it's just illogical not to expect that $55 trillion of net worth in the US stock market, which is double GDP, which is the most in our lifetimes, is not going to matter in terms of everything. So to me, that's my point,

I don't think the Fed's going to ease, inflation is going to go down until the stock market does go down. It tells them to. That's been my base case. It hasn't happened yet, but we'll see. And that's part of the reason I'm still kind of worried about that high beta fastest horse in the race. Bitcoin may be leading that measure. So thank you. Yeah. I mean, I, I, I tend to agree, Mike, that, uh, you know, the stock market will, it's, it's going to be a huge factor. The question is with that deficit spending, which you're, you're right. That's that's I'm zero Dan on, you know, because that's, it's been such an important factor of the fiscal dominance over this last call year, almost, almost, uh, 14 months now, you know, so we're,

we're, we're seeing something that we haven't seen before. We're seeing non-wartime non-recessionary deficits that are just, they're, they're incredible. They're, they're just pouring money into the economy. So, um, how long can that go on for? How long can it go on for that, that you have people that have left the work, the real wages are not going up, and there are just pockets of the economy that are being sold for 12 cents on the dollar. Like this is just this insanity. Now, of course, that's a very isolated pocket of the economy, commercial real estate. However, the important part about it is that it has far reaching dynamics of contagion, because when you have banks that are holding this paper that is, it's underwatering, it's impaired, then that impacts those banks negatively. You should be seeing either massive

emergency borrowing from regional banks in the coming months or some failures. And those are going to be important to be watching. And so my eyes are on the treasury auctions and how they perform and whether rates start to creep higher with the fear of long-term entrenched inflation. We've got the CPI and PPI this week. Those are really important numbers. Everybody is watching those and on in Fed Watch and uh and so we're we're uh we're kind of

we're kind of on the not not on the sidelines but as Scott said we've been grinding sideways here in risk assets and Bitcoin in particular for months now And so I tend to agree with Scott. That's not a bad thing. I mean, if you look at technicals, which I'm not, I'm no longer just a trader. I mean, I did this in my early years. But if you look at the technicals and you're just trying to figure out which way this thing is going, this is a huge bull flag that's been formed here. And so, you know um especially on the daily and so you just wait and and and continue to add to uh bitcoin opportunity opportunistically if you can and uh

and you know pick your pick your spots and and just know that this capital could be tied up for a while. But in my opinion, this is, like you said, it is the best horse in the race. And long term, you will make money in it, in my opinion. Yeah, Dave, I don't know if you're available, but here we have, you know, Bitcoin is in a bore you to death phase. There you go, bore you to death phase. There you go. Can we go back to, I want to tee James up for something because I was reading multiple articles over the weekend talking about swap lines and other facilities of the, of the, the, the Fed and, and, and the central banks and basically saying that, that more liquidity is being pushed into the system than people realize in terms of bank reserves, et cetera, et cetera. And to me, you know, it's follow, you know, Mike's always

talks about the greatest liquidity pump in history, where we disagree is I actually think the greatest liquidity pump in history is still going on. And I think that's a large part of why risk assets are up. And I'm just curious what you think about it. Yeah. I mean, I have not seen confirmation of the swap lines open, but I said this weeks ago when the Japanese yen started to collapse, that the first thing the Fed's going to have to do, the Treasury, and they're going to talk to, they're going to all kind of get together and talk to Japan and say, hey, look, we'll open up, the swap lines are open. You know, this is a function that's different in this day and age where these swaps, swap lines are just

sitting open and they can start lending dollars to Japan if they need them. And the reason they would do that is to avoid and prevent really Japan from having to sell their $1.1 trillion of US treasuries in order to get dollars to defend the yen. So they need dollars to defend the yen and we can lend them to them. And so like we've talked about before, the Bank of Japan is playing chicken with the Fed. They're holding on as tight as they can and just hoping that the Fed lowers rates soon. And so the hope is the Fed lowers rates. They've borrowed these U.S. dollars to sell and protect the yen. And then they can buy back the dollars cheaper.

And that way, they don't decimate themselves. But that's the game they're, they're hoping for rates to come down and for, uh, and for them to just find pockets of liquidity themselves in the meantime. That's, that's my, that's my, uh, my guess and my, my, uh, expectation, but I haven't seen the confirmation yet. If somebody has, please let, please let us know, but I have not seen it yet. Mike? Yeah, Keith, I want to back up on that a little. The key thing I like to use in the macro for liquidity is you just take effective Fed funds and minus inflation.

So I'm just looking at effective Fed funds minus inflation. It's 3.4% above. And I'm using PPI, above annual PPI. The spike we had back last year was 8%. Fed funds above PPI was the highest since 1986, actually 87 before the crash. And so a lot of the levels I just look at it is that just, as Chairman Powell clearly was restrictive. Now, as far as liquidity, it's harder to measure,

but to me in the macro, just looking at still M2 money supply year over year, it's still negative. And the key thing is, it's the hangover from this biggest pump ever when it got up to 25% and 40% from the 2019. So to me, that's macro. Digging into details is what James is much better at. But to me, that's where it stems from. And in that environment, for gold to be rallying, even with total ETF holdings of gold just absolutely collapsing, down to 80 million ounces, that peak was 110, 30 million ounces of selling gold. That's central banks buying almost 100 million ounces of gold

during that period. And I tilt that over to Bitcoin. At some point, I think Seif Eddin Amas is going to be right in his book, Bitcoin Standards. Central banks will be potentially holding some Bitcoin. But right now, deepest pockets and planners are still buying gold, which is why I'm still bullish gold. And at some point, we just get a little bit of normalization in the U.S. stock market, say that 10% correction. Wow. bit of normalization, US stock market, say that 10% correction, wow. The deflation things that I'm seeing in plunging demand for diesel, plunging demand for unleaded gas, demand for corrugated

boxes declining, inverted curve, all that stuff, leading indicators, the stuff that used to matter, will start mattering. It's not going to matter until the stock market tells us to start looking back at it again. Preston Pys again. So Mike, as I brought up the inflation, obviously in rent and still the lack of supply, obviously in housing, does that effectively get solved if deflation starts? I mean, those things just pivot and fall and that's why. Owner's equivalent rent, one third of CPI. So I remember learning about that in the trading pits in the 80s. And it's more of a factor now than ever, but still, it's been sticky. But also, just feel the wealth effect. Anybody who owns a home, a whole stock, it's the

most extreme since the late 1920s in this country. We just don't really have good measures for back then compared to what we have now. It's just one of those times that it makes a good case, a long-term case for Bitcoin, but it makes a good case for just the normalization towards severe deflation, which always happens on the back of extreme inflation when you pump money in the system. That's basically what we all did. It wasn't something like the 70s. It took decades to build it up. That's the difference now. A comment on that wealth effect. I agree 100% for wealthy people who own hard assets, specifically stocks. But I will say when it comes to housing, I think the wealth effect. I agree 100% for wealthy people who own hard assets, specifically stocks.

But I will say when it comes to housing, I think the wealth effect is a bit less. People see that the price is going up, but they are trapped because they can't leave and afford to finance a new home and buy. So even if the price of your house is rising, if you sell it, you still need somewhere to live. And that's more expensive and more difficult than ever. I don't disagree with it, but it's like when people complain about aging. It's like complaining about aging. Consider the alternative. There's only one alternative.

When you own a home, the average price of a home in this country has gone from about $200 to $400. You own that home. You feel the wealth. You can take a home equity loan. Just imagine if you go to $400 to $200. It's the exact opposite. So, yes, it's harder to sell. But I just had a colleague who's doing it, and he's basically doubled his money in a few years. It's the exact opposite. So yes, it's harder to sell, but I just had a

colleague who's doing it and he's basically doubled his money in a few years. That's the best trade of his life. Yeah. As long as he's not trying to buy a bigger house. But yes, I do agree. Now that Dave is here, we can talk about POTUS. So by the way, I have to say though, so here we go. My housing plan would provide a tax credit that would give Americans $400 a month to put toward their mortgage when they buy their first home or trade up for a little more space. That's breathing room. So I read this and I'm going to admit I did not read the entire bill when I read this. And my knee jerk reaction was this is only the demand side, not the supply side. Dummy printing more money or however they're going to cover this, obviously not increasing supply. This is just going to increase demand, making houses more expensive

anyways, net negative, more inflation, blah, blah, blah. No way to understand supply and demand. As I dug in, now they do address supply and we can talk about whether that works or not. So here, one of these things is provide mortgage payment relief for first-time homeowners. That's what we just talked about, up to $10,000. But then it does say they will also give a tax credit up to $10,000 to middle-class families who sell their starter home, which is defined by a home under the medium home price in the county. So I can't say whether this will work or not, but as I read it, they are at least attempting to address supply as well i still think this is just a populist policy to buy votes just like everything else but you're just raising prices here yeah that's right well i mean come on i mean look this is basically a bunch of

of 30 something year old staffers that are sitting in the Biden administration, none of which would have passed the macroeconomics class that I took back at what used to be a fine institution Northwestern, I'm not so sure anymore, you know, in the 80s. I mean, literally, they're giving out economics degrees, you know, in Cracker Jacks boxes these days. The law of supply and demand, we don't need a law of supply and demand. We can just control it. It's like, what do you think happens when you subsidize something? Well, the price goes up. Okay, great. What is this going to do? Well, of course, what it will do is it will basically tilt the bar toward first-time homeowners and people who are stuck or screwed. If they're not in a starter home, they're screwed. And no one really cares.

I mean, they don't care. You know, they don't care what it actually does. It's like, you know, we all understand. Everyone says, I don't understand why the cost of higher education. And I use that term in the in the in the arithmetic sense that that that college comes, you know, are later grades than K through 12. I don't know how higher it is these days, what we're seeing on college campuses. But the simple fact is the reason education is much more expensive, there's two reasons. First, we've subsidized the crap out of it. And we've also encouraged people to take loans for it, which is more encouraging. Provided federally assisted loans. That's right. Exactly. At the same time, we've doubled, tripled, or depending in some cases,

10X the amount of administrators relative to professors. And they make as much money. And so you have all this administration. So what do you do? Well, you created incentives for all of this stuff. The fact that these people think they can repeal what are basic economic concepts is insane. It's mind boggling. The next headline we're going to get is Biden administration solves gravity. Yeah. Well, it's not even that. We watched it last week. His chairman of the Council of Economic Advisers can't even answer the simple question, which is, if you can print money, why do you need to tax people? And, you know, at least Stephanie Kelton, who's the generally credited as the as the the founder of modern monetary theory, at least she actually says the truth. She says, well, you need taxes in order to disincentivize things that we don't want people to do.

Right. Or, you know, she talks about that. I mean, literally, that's what these people are doing. But you want to disincentivize tax. That's for sure. Let's talk about housing. Mike said as early in the show, a very important stat, which is the price of the house relative to GDP. I mean, he was talking about the stock market. The price of housing relative to GDP is incredibly high. So why is that? Well, because we've already incentivized the crap out of housing relative to GDP is incredibly high. So why is that? Well, because we've already incentivized the crap out of housing, right? And we also talked about the housing ATM, which people thought was a perpetual motion machine. Because as long as things are going up, it is.

You know, prices go up, you take more money out, you feed the economy, creates more aggregate demand, generates prices go up, you take more money out, feeds aggregate demand. Unfortunately, what happens to a flywheel and the flywheel is broken. And if you think that's not what Powell is looking at, you're nuts. He cares about this more than almost anything else. He cares about the collateral underlying the debt in the financial system. I don't care whether it's commercial real estate, which is looking like a disaster. God forbid residential real estate goes down. The MBS market, which by the way, there's still plenty of that on the Fed's balance sheet. That is something people have to understand. So if you want to understand, yeah, interest rates, there's doing what he's doing to try to do aggregate demand. But that's why I believe liquidity firehose is alive and well, because this is the stuff they're really

worried about. And this Biden administration They're not really trying to do anything except buy votes. Let's just call it what it is. They're soundbites. They're just soundbites. The tax rates,

the unrealized capital gains tax, these are just soundbites for votes. That's all they are. That's a nonstarter. That's DOA. It's not going to happen. But you're going to have swaths of people, millions of people who believe that it did happen because they heard it in the media.

And that's what should happen. They believe, yes, tax the rich and all that. But it's the same thing with this. It's just a very expensive gimmick to buy votes. That's all it is. It's going to wind up long-term hurting people who are later on in the cycle. It's going to hurt people who are not, not benefiting from this, this little subsidy, you know? Right. And look, there's obviously no way he could get it passed. We all understand that it's, it's just, it's idiot's idiotic. And it's also small,

relatively speaking, relative to the magnitude of the problem. But it's just, it is emblematic. There's not all of it in the administration. He's fighting for the people. Yeah. I hate going into politics because it gets me into rant mode. But the truth is that you're talking about a government who, and we're facing it in Bitcoin, a government, and we're facing it in financial services in general, who thinks that they can control and fix everything. I mean, Comrade Warren sounds very much like, you know, like, you know, Comrade Stalin, you know, in terms of the five year plan. Well, I'm going to fight for this. I'm going to do this. I'm going to do that. At the end of the day,

there's been one force that more than anything else that has unleashed economic prosperity, and that's free markets. So the problem is we don't really have free markets today. We have crony markets. You know, we kind of evolved. You know, I was commenting with on Twitter or X this morning that progressivism, the reason we turn ourselves into into knots in the crypto community, because there's just as many progressive types as there are free marketeers and libertarian types, is that progressivism started. People don't realize this, but it started with Teddy Roosevelt. It was trust busting. Well, what is that? Let's use the government to break up what economists will call externalities of monopoly control. Well, guess what? You know, progressivism today has kind of morphed to become the more monopoly control. It's just government monopoly control. And so, you know, everything has gotten twisted around.

What is crypto at its core? Its core, it's private money and the ability for individuals to be self-sovereign and transact. And of course, that is anathema to anybody who wants government control. So whether it's government control over the college market or the student market causing what it is and then student debt relief. And so if there go more government control and or in the housing market, it's all symptomatic of the same thing. It is there are people who believe the government can fix everything. And most of the rest of us who know that that's complete and unadulterated fantasy. Did you guys see, did you guys by any chance see this? The Robert Reich video. Rent is skyrocketing and home buying is out of reach for millions. One big reason why Wall Street, let me explain. And he breaks down the fact that effectively hedge funds and

private equity have bought up all the housing in America, leaving nothing left for the little guy to buy in some neighborhoods completely bought by these companies. And so, of course, if Wall Street wants you all to rent higher from them, we're going to see price inflation in real estate. So is this fair? Well, there's one place where I agree with them, and that's because of the carried interest deduction, which they should have gotten rid of a long time ago. Hedge funds can, in fact, buy real estate slightly more profitably. But the truth of the matter is, it's just, if you make something artificially cheap, smart people are going to figure out how

to buy it. It's just that simple. And so, you know, anything you do that makes it artificially cheap is bad. And, you know, we've seen this through, you know, in automation, in terms of outsourcing. If you make things artificially cheap, you will get more of it. And so to some degree, he's right. But the answer isn't to try to stop people from buying. This will come up with new structures. The answer is to get rid of the things that are artificial in the first place. That's my answer. When you have huge companies that have massive balance sheets and you're giving out free

money for a decade, they have access to the money. So they're going to go get the money. You wrote about that yesterday. You wrote about that yesterday in your newsletter. Cantillon Effect. The simple Cantillon Effect. Exactly. The Cantillon Effect, Cantillon Effect, however you want to say it.

I don't know how to pronounce it. Exactly. And that's the point. I think any of the listeners, you should summarize that, James, because that's a really important point. And that's why I believe risk assets are doing what they're doing. Well, so the Cantillon effect is it says that whoever supply and you have exactly what we're talking about here, and it comes back, you know, it comes from this French, they say he's an economist,

but he really was an investor, Richard Cantillon. And he himself benefited from this huge trade, the Mississippi bubble, which burst. Then he wrote about it and then he was killed in a house fire. And, you know, there's there's kind of this there's a debate whether it was it was murder and whether it was his cook who was disgruntled or if it was people who were upset about the Mississippi bubble. But that's a rabbit hole. I did not go down. So go ahead. You can go explore that yourselves.

But the point of this is that the ones who are closest to that money supply and the expansion of money supply, and when you expand reserves at banks and you have, and you have banks who are lending out very cheap money, whoever's closest to is going to benefit the most quickest. And so you can see M2 expansion and, and bank credit expansion, and then the wealth of the top of the, the, the, the top, I guess the most wealthy is the top 1% or top 0.1%. That correlation is startling. I mean, and if you just scroll down a little bit more, Scott, you can see one of these charts. The next one I think is the bank credit. Yeah, right there, the bank credit and the top 1%

wealth. I mean, it's just obvious you know and you don't have to be a genius to see that this is the way it works um and so that's the canton effect and so and it happens not just in in money supply expansion but you all remember we've talked about this before you all remember the stock all remember the tech bubble in the 90s. Well, we saw there's QE when the Fed goes out and buys assets. Well, who benefits from that? I mean, come on, it's obvious. They're buying assets. The assets are getting more expensive, and the ones who own the assets are the ones who are benefiting, the top 1%, the top 0.1%. But this can happen. It's not just

money supply expansion. Oh, yeah, that was an interesting one there. That's just the top 1% versus the bottom 50%. You can see that over that money supply expansion, like, oh, yeah, it looks like the rate of change is not that different. But the problem is you're talking about $14 trillion gained for the top 1% versus $1.6 trillion for the bottom 50%. So it's 1% getting $14 trillion versus 50% sharing $1.6 trillion. I mean, it's just massive, you know, it's just, and that's reality. So yeah. But the reason I teed you up for that is because all of this, the rants on policy, you can talk about it, whatever you want, is if you sat down and you said, OK, I want to create wealth inequality. I want to create exactly what our political leaders say they want to fight you. What would you do? Well, you would do two things. You would do exactly what you were describing, i.e. you would make money very,

very artificially cheap for exactly the reasons you said. What's the second thing you would do? Well, you would regulate the crap out of the economy because regulations get written by the 12,000 plus K Street lobbyists. And who employs those K Street lobbyists? Well, the largest company. Who creates economic mobility for people in the economy? Smaller businesses. So what do you do? You stack the deck in front of large businesses, whether that is against industries such as crypto, which we all care about, or whether that's because it's just in every other industry. I mean, it's the same thing. You could go through the same stuff in pharma. You could go through the same stuff in healthcare and insurance companies. It doesn't

matter. It's the same thing. But we all care about this. And why do I mention it? Well, because people are getting fed up and this jig is starting to become obvious. And by making crypto and economic freedom an actual issue that people start to care about, it starts doing like the little boy in the emperor's new clothes. It's starting to point out this to people. And people get angry when they see it. And that's the kind of thing. So, you know, it could very well become relevant. But the truth is, there are a lot of people who believe that Bitcoin, for example,

is a way out of this mess. Now, is it true or not? Look, we all know I think it's an option. We all know that I think it's too early to make that statement, although I tend to think it will happen. The fact is that that's where all the nexus of everything is going. So you see these political nonsense things such as, I'm going to forgive your student debt. I'm going to forgive your mortgage debt. I'm going to do that. I'm going to do that. You know, all these, yeah, they used to call it a chicken in every pot for those who remember the history books, right? You see that, but that's what's going on. But at the same time, you have a Federal Reserve who's sitting there and having to fund these deficits or helping to help the Treasury fund these deficits and keep the banking system from not imploding because commercial real estate is dropping and are terrified that a spiral in residential real estate, a negative spiral in residential real estate could trigger another great financial crisis. That's the backdrop on the macro side. That's in essence why I think that is that I think Mike's right in terms of interest rates.

I've always said that, but I think that the liquidity spigot is going to stay on for those reasons. That's my very long-winded way of saying it. Total pivot here, Mike. I think we covered that well. We love to talk about the wealth effect and froth and signals that things could be high. I'm not sure if you saw this, but Roaring Kitty is back. This is the GameStop guy. I like the stock. 10 million views on that post. 10 million views. Hasn't tweeted in three years. He simply tweeted this image, which I assume is somebody starting to pay more attention,

right? But if you guys didn't miss it, this is the real story. GameStop shares jumped 40% as trader Roaring Kitty, who drove meme craze, posts online again. This post, after hours on a weekend, drove up the price of GameStop 40%. Mike, is that a signal of anything or is this just a nice one of those crazy things? We're going to tell our grandkids these stories about massive speculative excess of Throft and markets. All the signs are there. And we just point out some levels. As we were all speaking, I was just just point out some levels. As you were, we were all speaking, I was just pinging out some data on the terminal about what we talked about

earlier. So total valuation of the US stock market right now is about $55 trillion. It's the most ever versus GDP in our lifetime. You have to go back to the 30s. So I checked that there's a data piece from the Federal Reserve. House household net worth is 156 trillion dollars so most of that is you know most people 62 percent or so in this country own a home that's the vast majority so about a third is stocks if you compare that to gdp the peak in 2007 was around like 4.5 the peak right before we started hiking rates in 21 got to six now it's back down to 5.5 so it's quite lofty um and so there's potentially going to be some reversions and all it just it takes is a spark and that's why i point out as well what's the most leading

significant leading indicator on the planet i talk to the stock market and you see stuff like that i mean we all remember i remember trading dot-coms in the 1999 and then that was fun in 2007. And I had a good time and yeah, I just traded some minimum money, had a good time with it. And if people take it like that, it's just fun gambling, but that's only happens in when you have speculative froth in markets, a lot of liquidity, which Dave points out, and you see that inflation. And here's the thing I think we're going to all see from the future. And that is the lessons that Jeff Booth wrote about, spoke about, but more he wrote about

in his book, The Price of Tomorrow, is that humans are all about error correction. We made that big correction of too much liquidity inflation. The next time there's pressure for the Fed to cut rates, we just went up on the elevator. We're going to go down on the escalator. That's what's changed. I think that's what's going to change. I think one thing that I find disconcerting, I presented at a Bitcoin conference on Saturday, and I was on some of these Twitter spaces where Bitcoin people come out and make a statement of fact about an opinion

that is Bitcoin is going to outperform the stock market when it goes down and Bitcoin is your savior and all that. And I'm like, okay, prove it. Let me see that sign first. Right now, we have to admit Bitcoin came of age in 2009, right? As we're going to that global financial crisis and it's wrote a nice wave of massive liquidity and everything increasing. We haven't had the correction yet. And we had one. We had one that was during COVID. I have to point out, from the peak in 20, or it was right around 20 before it collapsed, Bitcoin corrected 80%, and S&P 500 corrected 25%. That's just what it does. It's the fastest horse in the race, but that's what I'm worried about. And it's just, you're looking for little tweaks. And that's just what it does it's the fastest horse in the race but that's what i'm worried about and um it just you're looking for little tweaks and that's why i'm you know we're getting

to i think close to those catalysts that are going to create some just a little bit of normal reversion in markets well look this is the core where we disagree i think bitcoin is correlated in uh in major moves in the stock market and uncorrelated when there aren't major moves. It's that simple. And I think that the narrative around Bitcoin is limited supply, fixed supply, and potential unlimited demand. And the sole question with Bitcoin, does it go to new highs at the end of this cycle is, is new money coming in? And if the answer is yes, then you're going to be wrong. And if the answer is no, then you're going to be right. It's that simple. Because at the end of the day,

with a fixed supply asset and new money coming in, it will adjust the supply demand curve up. If that does not happen, then you're absolutely correct. Then it's, it is a function of global liquidity, like every other risk asset, and it will go down if every other risk asset goes down, and it will go up if every other risk asset goes up. And maybe it'll do both, it'll do both in an exaggerated way, which is what you're talking about beta. And that's fine. The fact is, the correlations have been pretty low, you know, low over its history, but it's been low because some, I don't know the exact stats, Scott, I don't remember, but it's a very, very small number of days that are where Bitcoin's price rallies have been from. So if you look over thousands of

percent of increases. It's almost always sideways. It's most of the time sideways correlated with risk assets. And then there are these epic rallies when fixed supply is confronted by a new wave of demand. And that's what we've seen. And so it is hard because macroeconomic data doesn't allow you to look at discontinuous... Economists want to turn every single thing into a continuous function. And so does statisticians. So does every stat art group do. I mean, I'm used to it. We all talk in step functions because human brains comprehend it and think in terms of curves. But the entire world of statistics that we're banking upon is assuming normally distributed outcomes. Well, Bitcoin is not

normally distributed in its price outcomes. It has never been that way. I've had long conversations with very smarter people than me that are expert in option theory who won't tell me the secret sauce of how you map. Because if you look at black shoals and other sort of options models, they all assuming normal distribution of returns. Well, Bitcoin's not normally distributed, not even close. Yeah.

And also black shoals breaks when you have an abnormal distribution. So that's my point. So the fact is a lot of what we're saying, where we actually disagree is really on a small thing, which is that I don't believe that Bitcoin is normally distributed. And therefore, those events, which I think are going to happen, if you took those out and looked at the series of returns, you and I would agree. But I don't think you could take those out. That's really important.

Well, I mean, look at also. Yeah, go ahead, Mike. Sorry. Just one thing I want to follow up on that. Scott's been all over it. Is that you sit in front of your value at risk model and you owe all assets. You just take beta and say if it drops 10% and you tweak your value at risk model, you know what's going to potentially, the model's going to save for the price of Bitcoin.

This is a key thing I need to point out. Six months ago, you guys nailed this. We had the perfect storm for Bitcoin to make new highs. That's over. Now it's a hangover. The question is, what do you have now? You need to have inflows. You need to have beta go up. I'm just checking as we're speaking. I'm just checking the month of April, 400, 600 million of outflows in Bitcoin ETF. So far this month, 90 million of outflows in ETF. So, okay, it's outflowing. I get it. They're falling in price. But to me, that's the problem is that's how you know how markets work. We know how smart money works is you are over leveraged it. They're falling in price. But to me, that's the problem. That's how you know how markets work. We know how smart money works. You were over leveraged. You made some money in Bitcoin.

You didn't sell. Now you're hoping. Here's the key thing. The thing is we don't have – we have those – we need the inflows. The halving is over. ETFs are over. Beta has to go up. Good luck.

I mean, that's what I like to say as a regular trader. I'm like, yes, i need to see the proof and i just keep saying that's absolutely right but but keep in mind every the having over i mean every having cycle i mean we all know how much i mean how ridiculous it is to look at three data points and yeah you could draw a line yeah there you go it's perfect it goes up every time right the simple fact is is every time there's a halving, there are a crowd of people, a crowd of people saying, oh, this is going to kill the miners. Oh, it's going to cause a debt spiral in the network. Oh, it's going to do all this.

And a few months later when that hasn't happened, it's like, oh, okay, well, maybe not. And that's when the real rally happens. Every time the halving rally has been three to six months after the halving. Every time. And yes, it's, so if we're going to talk about halving, I don't care. The issue is, and James and I have talked about this, and you know this is true because your colleagues have been all over this. The fact is that the initial wave of buying from the ETF is the small wave.

It's like the IPO wave. The companies that are successful, most of them, even like, I remember Twitter. Twitter came out and everyone was, oh, this is so exciting. People had yachts with me, Twitter on it, et cetera. And yet it did okay post IPO for a week. And then it went into a death spiral down. Had you bought it at that bottom of that death spiral, when it first fell, you'd have done extremely well until, you know, obviously now it's private. But a lot of IPOs follow that. So you get the retail buying. Yeah, you get some holders.

The real buying is when institutions are able to allocate. And they're sitting in front of their value at risk model saying, well, wait a minute. If I had owned Bitcoin as 2% of my portfolio for the last 10 years, what would have happened? And that is still ongoing. And we always said. It's just starting. It's not still ongoing. It hasn't even really begun.

The approval is when you expect to start seeing money. Well, okay. The approval is in January. So that means we're starting to see it. And we've seen some. There's no doubt. I mean, you know, there were stories about Susquehanna. We talked about it last week.

But the real system, the real money has been predicted in every scenario to start over the summer and into the fall. Which means that it's not necessarily that you need all risk assets to be rising, but you just need a shift of some of that risk capital into Bitcoin and to be one of those holdings that becomes a core holding. So like when the stock market drops by 30, 40%, yes, you might take some of your, say, call it Apple or Microsoft off your sheets, but you have a core holding that you're not going to give up once bitcoin becomes that it's going to be a completely different story and that that it we have a long way to go until it gets there but remember bitcoin um and i tend to agree with you mike on the fact that it is the fastest horse in the race it does lead it's i've called the tip of the spear so when when risk

risk is coming off yes bitcoin goes down like you have to just recognize that you have to you have to stomach that or just be aware of it and be very very uh careful about what you allocate to it so you're not over allocated if you have capital needs that That's obvious to me, but not obvious to some of the new people on the street. But when you look back at the catalyst of change for Bitcoin back in March and April of 2023, you're looking at banks failing and Bitcoin rising. So this was a different, this was a, it's kind of a different set of outcomes that people didn't expect. They're like, wait a minute, Bitcoin's going up. Is this, is this really actually money that, that is it a place to store your value rather than worry about it in regional banks? And I think that's probably one of the things that had,

you know, as, as Dave likes to call her, Comrade Warren, who offered kilter back then. I mean, she was going nuts about it. So this is something to pay attention to. This is a signpost to pay attention to. In times of deep distress in regional banks, Bitcoin was going up. That was an interesting development so is will that continue well it all depends on what the catalyst is for the market we don't know what the black swan is going to be that's why they call them black swans so there you go well i'll tell you i do want to just because you said that you teed it up it's clear the u.s government is going after tether ripple ceo i don't know if you guys saw this, but Brad Garlinghouse in an interview said that clear the U.S. government's going after them,

and it will be an interesting one to watch. And it got people fired up because it was as if he had some knowledge that this was definitely happening. And there was an implication that this could be the next black swan for the crypto space. Paolo from Tether obviously responded. This is a great framing of Brad in this case, not that I necessarily agree. An uninformed CEO leading a company being investigated by the SEC, launching a competitive stablecoin is being reported spreading fear about USDT. And obviously then he laid out all of the facts about USDT. But, you know, that still, it's amazing how recycled this fund gets.

But it does let you know that the possibility of other black swans for crypto are always on the horizon. Look, go ahead. No, you go, Mike. A hundred eleven billion dollars in tethered. And never you click on volume on CoinMarketCap, it's the number one traded crypto on the planet.

I did appreciate pointing that out at Bitcoin Day on Saturday at the Mammoth Day College. Most people are not aware of that. All they talk about Bitcoin. I'm like, the world is not about Bitcoin. It's about the technology where they can get from their phone, get access away from their currency. And the first thing they're trading, number one thing they're trading is a dollar. So I can go off the tether all you want. I enjoy that. New York Attorney General did already. And every time it happens, you get those little dips. You're supposed to buy. It's just the way it works. It's just the technology is overwhelming. And by the way, I call them crypto dollars. They're, what, 12th largest holder of treasuries

now. Any US leader or regulator that messes it up is an idiot. Well, they are idiots. That's the thing. The point that I wanted to make was when you say the U.S. government is going after Tether, the answer to that question is who in the U.S. government? Because I am sure there are people. I mean, look, we just told you there are our government is being written, run by Elizabeth Warren's placed, you know, 30 some odd year old staffers with, you know, Cracker Jack oriented, Cracker Jack valued economics degrees that ignore it. But there are still some adults in the room.

I mean, Secretary Yellen is no fool. And she knows. And you took it down. Yes, it would take down the crypto economy until USDC came in and other people came in, yada, yada, yada. But there would also be a crap ton of U.S. Treasuries getting sold to no bid.

And there is no way they could allow that to happen. If they're willing to open up swap lines and do what they're doing with Japan, which is, yeah, admittedly, it's 10x the size. Which we have not confirmed what we expect, yeah. Well, okay. We did see the USD-JPY chart, though. I am a big believer in following the money. You know, as long as USDT does two things, which they are both doing.

Yes, there is threat to them. There's no doubt. But let's talk about those two things. As long as they, number one, use their proceeds to buy U.S. treasuries and prop up the treasury market and support the dollar because they are dollar based mostly. And number two, work with Interpol and OFAC sanction, you know, U.S. government and others to go after bad actors, which they are doing. They are going to be allowed to exist outside the United States, inside the United States,

inside the United States, which they're inside the United States. Inside the United States. Inside the United States, which they're inside the United States, there is definitely a threat. This the stable coin bill may very well force Tether to work with banks and the banks and there will need to be a bank if the if the most aggressive terms of it come through. I don't think that'll happen. I think that'll get challenged in court. I agree. That's what's laid out. Yeah, no, I understand that. I mean, look, this is all gets done in where this is the problem with having the sausage being made in the way that it's made in this country in terms of the way bills are done. You have all the lobbyists. Obviously, the U.S. banking lobby is going to say, if you have a stable coin, you have to be a bank.

Equally obvious, the question becomes, does that actually make sense? Do you need to be a bank to do that? And how does it work? Is it a free speech issue? There's lots of legal issues. I'm not a lawyer. I don't want to get into it. But it is very clear the U.S. policymakers want to make sure the assets are held in a transparent way that can be regulated. That is very, very clear. I don't think anyone in crypto disagrees with that, that where the disagreement comes into is, do you favor one type of institution over another? And what's the providential regulation, et cetera, et cetera. But let's just game theory this out. Let's say Tether stays as the largest US dollar stable coin outside the US to keep crypto dollars flowing around the world,

keep the dollar, but they can't operate in the US. Does that hurt crypto? Well, it hurts Tether. Does it hurt crypto? Not really. I mean, it's annoying people. People will not be happy. I mean, Coinbase, Kraken, others list Tether-based pairs. They'll lose their market share to the ones outside the U.S. U.S.-based market makers will move even more offshore, and it will hurt the U.S. economy long term, but it's a microcosm. It's a tiny little bit, not that big of a deal. What is a big deal would be if Europe, if the Eurozone said we're going after Tether or basically any of the other regulators outside the US, Japan, et cetera, which we haven't seen happening. So the notion, so in other words, both Paolo and Brad Garlinghouse could both be right and it wouldn't make a damn bit of difference that's kind of the point that's all I'm trying to say it's yes there are probably people in the U.S government who want to go after of course well we know the anti-crypto army wants to go after it because after all it's crypto right you know it's it is what it is they're just doubling down I mean people forget that when you get more and more desperate, you get more and more outrageous.

And so and that is so expecting, you know, Gensler and Warren to go quietly into that good night as that as my favorite. One of my favorite poems of all time, mostly because Rodney Dangerfield, for those remember that. Of course. Come on back. It's a great scene. Lindy, triple Lindy. Anyone who wants to watch that movie. But they're not going to go quietly into that good night because until they're beaten, they're going to double down. They're going to double down and double down. They're like the person at the roulette table who's bet on

black and says, I can't lose eight times in a row. And by the time they finally lose, it's because they've lost all their chips. I mean, they're not going to leave the table until all their chips are gone. And so expecting them to back off, the only way they can back off is if the administration basically makes them back off because of the polls. Which is funny because I guess this is a nothing burger. U.S. House McHenry says bill on crypto market structure will get floor vote, but then there's an expectation it doesn't go any further

than that, right? And I think we know that. So as much as we actually have had this positive news, it got out of committee, it's going to be voted on, should actually pass Congress. We've already seen that Biden is willing to, you know, proactively say he's going to veto things that haven't even passed yet. So this has no chance right now. Well, but this is really interesting, actually. I disagree. I think that if it gets to a floor vote and people have to be on the record as being against it, that is not going to be comfortable for a lot of Democrats in swing states where the polls that came out last week are very strong. And there are a lot of people who are rethinking their strategy right now.

I mean, for those who didn't see it, basically, if you do the math in terms of percents of percents, it worked out to be about 12 percent of voters in swing states think that crypto is actually an important issue to them. They're mad about it because they're being told about it or it's money about it there's you know 40 some odd million holders of it the this bill is interesting the story that you should also put up right next to that bill is mark cuban's rant this weekend which i retweeted which was which was great and effectively he laid out the case that said that what the sec is doing and Elizabeth Warren, and he names her, by the way, Elizabeth Warren is doing is literally the opposite of what they're supposed to do. They are hurting investors. They are encouraging scammers. They are pushing GDP offshore. And when you get people like like him basically doing this the week before they're going to bring it to a floor vote. It is a non-trivial thing. I mean, this is getting, you know, look, every NBA fan follows

him for Christ's sakes. I mean, this is not a small, he doesn't have a small number of followers and it's not just Mark Cuban. But the point is there are lots of people with loud voices who realize that the only, only crypto firm that that had a good audience, good pathway to talk to Gensler and Warren was FTX, right? You know, this plays really well. Think about the 30, what could you get into a 30 second commercial to tar your opponent?

And if you think that voting no on something to establish a regulatory framework, that this post, everyone should see it. There's quite a few of them, actually. This isn't the only one. He also kind of- No, I know. I responded and retweeted a bunch of them myself

and added some points that he didn't even include because there's a lot more to it. But we're a soundbite world. I mean, I don't like it, but it's true. It's really easy in a 30-second commercial to say, so-and-so voted against proper regulation. Now, cut to Sam Bankman-Fried being let off in chains. He had meetings with, you know, it's like you could see the commercials write themselves.

And that is going to matter. So I do think that that's an important story. I just don't think it's an important story now. I think it becomes an important story into the fall as the election season starts. I will say the disapproval, honestly, the angst and just disgust that some of the very strong supporters of Biden have come out of late, especially last week. I mean, Scaramucci, obviously, he despises Trump. He's a Biden voter, tweeting relentlessly about the fact that what Biden and Elizabeth Warren are doing right now will lose the election. Novogratz is a well-known Democrat saying the exact same thing. And Mark Cuban, obviously, who is a defender of DEI, is out here saying the exact same things. There are places that everybody agrees.

I think it's disbelief for those who actually want to believe in the democrats and also are in crypto i mean james i could see you kind of i'd say it we can just sum it up as this is an election year this is going to be a a hot button for the election and it's clear um they're i i mean, not to get into politics, but you can you can see just how out of touch. I mean, you could just see how out of touch Democrats are with their constituents. And so, you know, and there's infighting and they're gaslighting, they're gaslighting people saying everything's great. You know, the economy is great. It's you. You're the problem. It's your attitude. Your attitude is bad. Everything's great. We don't understand, you know, you stop crying. And so, you know, you can only do that so much until you have everybody standing around saying, it's not that

great. Inflation is killing me. I can't keep up. I have three jobs I can't keep up. That's not okay, you know? And so this will be a hot button. It will be a hot topic because it is important to young people who feel like, number one, this is an important way out. Number two, this is a way for them to try to keep up with inflation by trading these things, or it's a way to store their money in Bitcoin in order to retain its value, retain the value of the work they've done over long periods of time. These are important topics. And I want to use one of Mike's favorite words, because it's so apropos in this case. You're seeing lots of basic progressive Democrats who feel betrayed with using what I'll call copium.

And I told Scott I didn't want to go off on the rant about it, about the BlockWorks editorial by Molly, whatever her name is. You got like two minutes, so have fun. Basically, she said, stop being crybabies. It's only your wealth. There are more important issues. We can't really attack the administration for this to which uh i and many others say uh effectively i don't know that she said you can't attack the administration she just said that we're getting gaslighted by both polis uh parties using

crypto as a talking point and there are more important issues just to be clear you know and but but she also said that it's about spoiled rich people. I mean, look, it's bad. I felt very offended. I know a lot of other people felt offended. I took the plunge into crypto for two reasons. I thought it was a great idea when Ian, our CEO, and my son came to me with the idea seven years ago. But I have lots of conversations, and I did a lot of digging before I decided to do. And what I decided was, as I get toward the end of my career, my last major push, I want to do something that actually is meaningful. And I genuinely believe that digital assets will usher in a more inclusive, better, more efficient financial system that's more egalitarian.

And I really believe that. And if someone wants to go on print and call me a liar, well, she can do that. And I'm going to say to her, basically, F you. I am not a liar. I have many flaws. I am overwhelmingly arrogant. I talk too much, et cetera. But when you question my integrity, that's when I get upset. Now, Ryan Selkis, who is a very kindred spirit in that regard, who literally, if you would, I did not have on my bingo card, Ryan being at Mar-a-Lago on a stage with Trump before the year started, but he's correctly analyzed and said, listen, let's back the horses, let's back RFK and let's back Trump because that's what can get us out of this mess. Otherwise, we're going to see an entire industry of entrepreneurs being pushed offshore because

of Comrade Warren. And so if you think that there aren't tens of thousands and ultimately millions of jobs at stake when the world of financial services goes digital, if the U.S. is left behind, you're smoking something. And that is literally why I think it actually matters. People want to prioritize the next couple of years versus prioritizing the next generation. Sure, ignore the next innovation in financial services that actually brings the Internet of Money to life.

But if you do care about next generations, it's pretty hard to find a more important issue, in my opinion. Rant over. Sorry. Rant over. Mike, you got locked out there for a while. Any final thoughts in this last minute as we go?

No, it's entertaining. I think that's the key thing to remember about the American system is the discourse is so important. We need people like Elizabeth Warren to show us the dark side so we can tilt to the right side. And I'm not, obviously don't endorse her, but to me, that's just what Churchill says. We'll get to the right conclusion. It's just kind of fun enjoying it and watching it. And I sure hope it doesn't bring us back to a Trump 2.0, but oh, well, that's what it does. It does. The pendulum swings and then it swings back. Right. And so hopefully we'll get a swing back regardless of the politics. I don't know what politicians will take, but we can't swing all

the way to Elizabeth Warren. I think we all agree there. Guys are 10.03. Went over time. I appreciate it. Always the best hour of the week. Great summary of everything's happening. Of course, we will be back next Monday and Twitter Twitter Spaces is now in 12 minutes. Thanks, guys, for giving me so much time to prep. Really, really nice. Dave. I blame Dave. Anyways, guys, that's all we got. Thank you from all of us. See you next week. Bye. Let's go.