The Wolf Of All Streets - Bitcoin Pump | ETF Is About To Get Approved & Bring Billions Into Crypto | Macro Monday

Episode Date: October 23, 2023

Join Dave Weisberger, Mike McGlone and James Lavish as we break down what's going on in macro and crypto! Dave Weisberger: https://x.com/daveweisberger1 James Lavish: https://x.com/jameslavish Mike McGlone: https://x.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 #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.

10-year treasuries tapped 5%, putting pressure on global markets and definitely on the stock market, although it's now receded back to about 4.97%. But is the real story here that while there's fear of a Black Monday that people have been calling for, although stocks are only down about 1%, while people are calling for a Black Monday, Bitcoin is up and testing almost its yearly highs, touching 31,000 today. As you know, the yearly high around 31,800. Can we finally celebrate a lack of correlation between Bitcoin and other markets? Or is this once again, just the Bitcoin traders getting extremely excited before an inevitable letdown? We're going to talk about everything in macro and of course,

Bitcoin with Mike McGlone, James Lavish, and Dave Weisberger right now. 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 and hit that like button. I'm going to go ahead and bring everyone on now. I was having some technical difficulties. That's why we're a couple of minutes late. I've got Mike McGlone, Dave, James Lavish, Dave Lavish and James Weisberger.

James Lavish and Dave Weisberger, who's giving us the side view today. Very, very nice. He's switching it up. Dave, give him the side eye to Mike. Yeah, we get permanent side eye, Dave. We get permanent side eye today from Dave. Thank you. Too early for a victory lap, Scott.

Too early. All right, Mike, I got to ask you first. Same question from the beginning. 5% yield, calls for Black Monday, death of Marcus. It's all over and Bitcoin just rising. Can we celebrate yet? I'm bowing in Dave's gentle direction at the moment, which virtually everybody who has any position in stocks, bonds, are losing money this morning, and yet Bitcoin is up. Now, it's Bitcoin's dragging out cryptos.

And I think, yeah, hopefully this is the beginning of something. Certainly for Bitcoin, this is what a lot of us have been hoping for. I don't want to be a hopeful person. I want to be a more definitive outlook person. And this is a really good sign. And as far as Black Monday, I mean, the one thing that if I can share screen, first, I'm going to show what is mattering. This is just a chart of Bitcoin and gold and Bitcoin breaking out higher and gold kind of languishing. This is pretty significant if that continues. But if you scroll out, I just like to do the natural, you scroll out a year, you see the battle Bitcoin has to fight. Gold's just hovering at this level. It's ready to break out higher and Bitcoin dropping lower. I just want to go through one key thing that's been notable for gold that's really significant the last year is total holdings of ETFs and gold are down about 10% and gold's up about 20%. That's

virtually never happened since ETF started trading almost 20 years ago. And I think what might be happening is people are making room for Bitcoin in their portfolios. And that's showing up in performance. So that's obviously it's the central banks buying gold. I mean, the deepest pockets on the planet. But that to me is part of what you might be seeing this morning. Now we have to see how the stock market works out. But I'll end with one key chart is the S&P 500. It's just hovering on that 200-day moving average. It kissed it a few days ago, which is a kiss of death.

And I think it's just a matter of time it breaks down. It's just a normal recession. And what I overlay with this chart is industrial metals. Industrial metals already show deflation leanings on a global basis. Yeah. I don't think there's a single person among this group who is bullish on stocks right now. Right. So the question then becomes our age old debate about the correlation. Here's what you said. My Bitcoin is 31 K as gold offers bullish cues. I'm sorry. Like these assets have not been correlated. And just because they're both going up for a

couple of weeks doesn't all of a sudden make them correlated. I would love to make the Bitcoin is digital gold price argument. But to me, this is Larry Fink calling Bitcoin a flight to quality on national TV, ETF hype, and all the other things that Bitcoin and losses by the SEC to the court system, to be frank. These are all sort of the things I think that are pushing Bitcoin up in the midst of this. It's just wonder if it can keep going, right? 31,000, we're talking about yearly highs here, starting to push towards a level that I think most sellers would actually be interested in taking some profit. James, what do you think? Yeah, I think, you know, I agree with you, Scott, that I would love to say that bitcoin is uh is now becoming

the flight to safety that um you know it's the it's that asset that everybody's been waiting for to to mature into but the reality is uh i i believe that it's just like like you and mike have been saying it's it's um it's trader hype um that uh and that's actually maybe a little bit harsh. I think it's recognition of the reality that we are going to get a Bitcoin spot ETF soon, whether it's by the end of the year or first quarter next year, we're going to get it. And so you've got some speculators are trying to get ahead of that. Will they make money off it? Yeah, I believe they ultimately will.

You know, there's there there's that there's a little bit of of a verbal battle going on whether or not this is a buy the rumor, the news may dip slightly, but long term, it's a massive, massive financial boost to the underlying value of Bitcoin. And I wrote this right before we got on the show. It translates Bitcoin, BTC, into a language, into a securities language that institutional investors, they know, they speak, and they do business in every single day. And it just, it makes it so much easier for them to avoid not just, you know, operational risk, but it's career risk. So it simplifies it for them, makes it super easy. And it's just reality. This is not people thinking that BlackRock is going to come in and put $2 trillion into this. This is people understanding that BlackRock's ETF and Fidelity's ETF and maybe GPTC will allow institutions to come into the space really easily. That's all it is.

Yeah, I like that. the rumor by the news dip Sorry It's a simple fact is what we all experienced last Monday, which was enormously fun is as clear proof as I have ever seen in my entire life that it's not priced in. And you don't have to ask, you know, you don't have to question, you don't have to whatever. I mean, it would have been 35,000 within an hour if that news was verified. Now, the reality is that news was idiotic, which I said at the time, it was like BlackRock won't be first. I mean, because, you know, GBDC at the court case, blah, blah, blah, they're going to do whatever they're going to do. They're

going to do a bunch together. It's very, very clear that that's true. Anything else and, you know, some political donor will be very, very angry and they don't want that to happen. And, you know, with all due respect to Bitwise and Kathy Wood, I mean, I think that they will get included, the ones who have played ball with the SEC, but there's no way they're going to prioritize BlackRock over Fidelity or vice versa. It's just not the way Washington works. So I don't see that happening. But the thing that's really important, what James was trying to get at is, and what Mike was getting at, are a couple of very important points. Very important point number one was institutions.

Mike, James said it perfectly. I have nothing to add there. It is absolutely true. And that is, you know, some very large number of trillions of dollars of assets that a very small percentage will start migrating into Bitcoin. But Bitcoin on the margin is a half a trillion dollar asset of which less than 20% is acting like free flow. So you're talking about a hundred billion dollar asset. So it doesn't take much to start pushing it up on the margin. And that's why people like Mark Yusko make the statement that by his math, the institutional adoption alone at half a percent to 1%

across the institutional portfolios that are legitimately 60-40 type, you know, asset allocators is easily enough to bring Bitcoin. And it won't happen overnight to 150. But there's a couple of other things people need to understand. Thing to understand, number one, Bitcoin's adoption is hamstrung by the greed of all the crypto pros in the space. I'm going to say that again, because I want that to get quoted. Bitcoin's adoption is being hamstrung by the greed of the Bitcoin maxis who claim to be holier than thou in the space because right now retail will be able to buy an ETF for zero commission at a spread that is somewhere less than five basis points. And if you try to buy Bitcoin in your own portfolio

and pay whatever you're going to pay a custodian to hold it which is going to be more than you're going to pay the management fee to blackrock of fidelity or you know if assuming you want to have you know you want to have estate planning for everyone around you uh unless you happen to have very technologically oriented spouses uh then you're going to pay something but even if you didn't, the numbers are small. But the average retail commission or spread to buy Bitcoin from all these crypto bro platforms starts at just under 1%. So what I'm talking about is a 95% discount for trading and investing in Bitcoin in your portfolios, which is something nobody talks

about, but I don't know why. I mean, everyone talks about the fact that retail brokerage platforms, which make up multiple trillions of dollars, would now be allowed to trade it. And that's important. But it's also important to know that people who buy and sell on Swan Bitcoin or Abra or God forbid Coinbase, you know, in their pure retail platform, will get a 90 to 95 percent discount if they decide to use their brokerage account again instead. That is a very big number. And even if the management fee is 30, 40 basis points, it probably that's what it is. Think about it. You have to hold it for three years to break even, even against self-custody. And that is a big deal. So Bitcoin adoption is going to get a massive boost. Now it doesn't happen day one, but it happens.

And anyone who ignores economics, and James is going to laugh, our government is going to find this out very quickly if they haven't already. When you ignore basic supply and demand economics, you're on the wrong side of history, full stop. And understanding a 90% to 95% discount is going to occur to the entire US investment market is something we can't ignore. And I think that's why the inevitability of its approval is getting traders positioning. Everybody who traded last Monday figured out that shorting Bitcoin right now is like picking up pennies in front of a steamroller. And so the amount of people willing to short it are negligible. Well, what happens when you take the short side out of the equation?

Well, guess what? We're now above the price that it was trading when we were talking last Monday. And that's why. It's not for any specific reason. It's that people said, oh, God, it's too expensive to short this. And the whole speculative world, as you know, was speculating short. So that's what's going on here. It will fade, you know, when buying, you know, says, wait a minute, we've gone too far. Unless we get, you know, unless something happens on the macro side, et cetera.

But that's what's going on. OK, first, Dave, when you said you said we were being hamstrung by the crypto bros, at first I thought you were going to blame the altcoin traders and you rightfully blame the maxis. So I appreciated that. But I have to say, speaking of altcoin traders, and I never say this time is different, but last Monday, what we saw on the ETF hype pump while we were live was that Bitcoin went up $2,000 and altcoins suffered massively against their Bitcoin pair. We know that the liquidity was largely coming from crypto traders who were doing the usual, holy crap, Bitcoin's going up.

I'm getting out of my altcoins to be in Bitcoin. I'll go back into altcoins another time. Interestingly, right now we have Bitcoin rising to 31,000 and altcoins are absolutely ripping. That cannot happen unless there's at least some new money coming into this market and not just the washing machine. So maybe that's crypto people who have been sitting in stable coins and are waiting to trade and are just feeling confident in the market. I don't know. But just very quickly, a few charts just to illustrate this. Solana, I mean, in October, $21 to $29. Link just left. Accumulation that started in May

of 22 has finally broken out. Now, given a lot of these look like they're topping, as we speak, to be quite frank. You got to go back a bit because I know how much I'm down on my link. Yeah, exactly. I'm not going to show the whole chart, but right. Launching off the EQ of this range, $7.20 up to over $11, right? In a matter of days. Injective breaking out right now of a range it's been in since May. Obviously, these are all massively overbought. I think Recharge. Matic potentially breaking out, also putting it at top cap. But we're seeing right now for the first time across altcoin charts, some actual liquidity, an increase in volume, and some technical moves. Listen,

these end up usually being fake outs. It goes back to Bitcoin, whatever. The point being, does this finally show us that there's real interest in the whole market and there's actual liquidity coming in from somewhere outside? Because they can't all be going up on increased volume without new money. Anyone, Mike, you could give me your first thought because uh yeah you're in line i was afraid you were gonna ask me that because um i'm i'm really suspect of the altcoins because typically um this is altcoins thrive on liquidity and we all know we see what's happening in broader stock market industrial metals fed funds everything liquidity still being pulled from the system. I can see this case for Bitcoin and ETFs and digital gold replacing analog, but I'm more suspect of this altcoin rally being on the back of Bitcoin. It's going to reverse and

say, okay, we still have a problem. We're pumped on liquidity from that. The facts have changed. So that's where time's going to tell, but I still am biased towards what's happening. Bitcoin is quite significant. So that's where I'm really worried then it would be to me more definitive if altcoins are following the stock market and Bitcoin is in its own place, which is important right now. But just the fact that they're up and everything else is down in the morning like this is quite significant. Yeah, I think it gives confidence to altcoin traders with Bitcoin up. And instead of the reversal of Bitcoin dominance, it's just Bitcoin up and having strength in the face of so many problems in security markets right now, especially this morning that I think that just gives confidence to the entire space,

you know? And it's, it's not, I don't think it's symptomatic of anything between Bitcoin and, and all coins as much as it's just that there's more confidence in the space for, for a day like today. I mean,

I think it's, it's very, there are a couple of points I want to get back to on as far as altcoins are concerned. Don't underestimate the importance of two news stories that came out last week. News story number one was Mr. Fink, who specifically talks about, I mean,

I mean, I didn't write his speech for him, but I could have given it, right? He looks at Bitcoin as a monetary instrument. We're going to get back to that because I want to talk about the demonetization of gold in a heartbeat. But he also specifically looks at crypto as an asset class, as one that's very important. Now, consider what that means, because the other story that came out last week is people are starting to file for Ethereum spot ETFs. Now consider what that means because the other story that came out last week is people are

starting to file for Ethereum spot ETFs. How long is it before BlackRock and others start creating an index of high profile altcoins and then apply for an ETF based off of that? And so, you know, look, we're talking about if we had a different administration, that would happen within weeks, maybe months, but probably weeks. If Commissioner Peirce were the SEC commissioner, we'd have it already. But think about that. And index inclusion is a big deal. And so who knows what will be there? Now, why is Chainlink ripping?

Chainlink's ripping because people are saying that DeFi will need an oracle and all these things will happen. Why is Solana ripping? Solana's ripping because they didn't die when SPF died. And there's technology there. I mean, seriously. I mean, it's as simple as that. It's like people watch the thing, watch the trial, and they're saying there. I mean, seriously. I mean, it's as simple as that. It's like people watch the thing,

watch the trial and they're saying, wait a minute, this thing's not dying. Well, okay, look, there's some actual statistics there. And so people go crazy. Why is Matic rising? Well, there's use cases in DeFi, et cetera. And you can go up and down the line. You know, Filecoin, Arthur Hayes talks about Filecoin

and how important that will be for AI. I mean, look, it's early, but people forget that stocks were early too in 1998 when the internet bubble started. Every one of these sea changes, people are early. You need to understand that. Now, is this a formation? Is this the basis for a sustainable rally in altcoins? Absolutely not. But if Bitcoin does rip, will it happen? Maybe. that. Now, is this a formation? Is this the basis for a sustainable rally in altcoins? Absolutely not. But if Bitcoin does rip, will it happen? Maybe. Do I want to be short these things? Are

you out of your mind? Well, I think if Bitcoin chills here between 30 and 31 for a while, then we'll have this sort of temporary moment, right? But I agree with you. Bitcoin has to do a lot more for us to see. But I want to get back to two other themes. Theme number one is demonetization. I don't believe Bitcoin is going to demonetize gold overnight. I do believe it's inevitable. I think it's as inevitable it was that gold demonetized silver. Because the gold-silver ratio went from 15 in the earth's, which is where it is in the earth's crust. And as silver, as prices started to rally with various central banks and all sorts of things going on with gold, as prices started a rally and demand for it happened, then guess what? Silver was too damn heavy to use for transactions,

right? And gold was much more portable and it demonetized silver. It's as simple as that. It was much more convenient to use gold than silver. We can talk about bimetallism. We can go back to history. It doesn't matter. The fact is gold effectively demonetized silver, not completely, but partially. Is Bitcoin going to demonetize gold? Talk to me when Bitcoin is approaching three or 400,000. Until then, this squiggles on a chart. This is not that. Mike may be right, but if he is right, then maybe Mike Alfred, who's calling for one of the all-time great god candles, will turn out to be correct. But I don't believe this is it yet. That's fair. I think that people get crazy about that.

Now, as far as the economy goes, going back to macro. That's too bad. Yeah, I mean, it's kind of important. I look at this and it's interesting, but the real economy is just not cooperating. It's just not cooperating with what's going on. I'm just going to show Chrome 10. You mean it's not cooperating with rising rates?

No, it's not cooperating. I mean, so this is a zoom out of the Baltic Dry Index. We all know what I care about, but look at it. Where are we? Right. So obviously, if you go back forever, it's right at the top of its normal range other than crazy economic breakouts. But notice I'm saying top of the normal range. You can see it. And when you look over the last year, that was since the rate rises, it's not looking bad. And this is shipping of real goods. And when you see this up here and not down here, that is not what a Black Monday is made from.

Right. Just isn't. And there's lots of other indicators. But, you know, it's the point is, is I know that I used to look at this a lot. I always look at this a lot. You know, the fact is we had an employment report. You know, you could argue that a lot of it was part-time, whatever. At the end of the day, it doesn't look incredibly weak. The Fed's job hasn't been done for it. And now we're sitting in a situation on the macro side, which I really want Mike to talk about. Someone who I think I thought was really at his pulse on it was going on about how the Fed wants higher long rates, which I think is absolutely completely wrong.

If they want to die. I think they don't. But I think the Fed is looking at the fact that long rates are creeping up and are terrified. And they're saying things like long rates are doing the job. We don't need to raise rates. The Fed is reactionary. They react, they react, they react. And now they're exactly, Dave,

they're looking at that saying, oh, well, maybe we don't have to raise as much because the bond market is doing the work for us. Do they want to decimate the market? No, they want the soft landing, the Goldilocks scenario. They're not going to get it, but that's what they want. I was arguing with someone yesterday who told me we've already had a soft landing. I mean, but the point is that the 10-year, 5% on the 10-year is a big deal. It's a big deal. That's one thing we haven't even touched on yet today. Yeah, I was going to say, that's what we actually need to talk about right now, because that's what's causing people to call for this Black Monday idea.

Listen, as if the world ends when you go from 4.99% last week to 5% this week. It's a huge mental level. It is. You're up huge. Yeah. Go ahead, James. Let's... Yeah, let me just...

If I can share a screen, I'll start there. I've been lining up a few charts and that's it. That's the tenure. It looks like it might have peaked. It's at 496 at the moment. But this is a crash. I mean, in terms of bond market crash. We all know how bad it is.

I mean, it's just a question. I like to overlay the 10-year note with copper on the same scale. It looks just like the peak of 2007. Copper's almost at the same level. I think they're going to drop like they did to two or three. It's just the way things always happen in a normal recession. Here's 10-year note yields here. Here's copper. Same scale. Just to remind people, the point is, Mike, and what some people are missing is that it's not that it's at 5%. It said it went from zero to 5%

in a year and a half. It's incredible how fast this has risen. And how much money is lost in unrealized losses throughout the entire banking system. And it's not just the banking system. It's corporate balance sheets. Lots of things. Everyone who does treasury management, there's huge gaping holes. And by the way, you know, the inverted yield curve, which we all know that I was the dissent on this panel. I've been the dissent forever. I said that the inverted yield curve doesn't mean anything other than the Fed and the government trying to keep their long-term borrowing costs down.

And now the 30 is now flat. So this is about to un guys. I mean, I hadn't checked it today, but we're at minus 0.147% here on the OCA. Now, a lot of people have pointed out by the way, that Lynn Alden actually wrote about this recently. It's, it is a little different this time because it's a result of one going up, not the other one coming down, but they're both going up. It's not because of FedEase. That's one going up, not the other one coming down. They're both going up. It's not because of Fed Ease. One going up more than the other, excuse me. It's worse. It's worse.

Exactly, Mike. It's worse. Yes. And let me show you one key headline from this weekend. I enjoyed, I mean, I don't enjoy seeing it, but this is what's happening. Americans fall behind at car payments, the highest rate on record.

This is just normal stuff kicking in from spiking rates on the back of the biggest. You give people free money. They buy cryptos and stocks, and then you take it away. Everything goes down. It's just getting started. Yeah, and who gets hit first? Subprime gets hit first.

Subprime always gets hit. Yeah. And I just want to show two other charts. This is the same scale, S&P 500, divide by 1,000, over copper. It's basically the same price. And S&P 500 should go down to here if it just follows that normal thing but i want to show you also two key things a big difference between bull markets and bear markets here's a bear market this is crude oil and i love how scott

sometimes you're you're nice to me sometimes you don't always remind me when i'm wrong but this is part of the reason i'm bearish crude oil because it doesn't go up this goes back to 2008 it's been going down i show you in white is crude oil in a year which is kind of the reason I'm bearish crude oil because it doesn't go up. This goes back to 2008. It's been going down. I show you in white is crude oil in a year, which is kind of the adult version. And then the first contract, it goes to a little bit of backwardation. And here's a bull market. Here's gold and Bitcoin. Why should I change that view? Gold, the thing is gold's just hovering at its level.

Bitcoin going up over time, both in log. And Bitcoin getting a little pump recently. But if you scale that back, Bitcoin's got so much further to go just to catch up yeah but that's the key thing i i point out as far as three things here first deflation that's deflation i want to absolve you on oil because i don't think you predicted we would be uh on the potential cusp of not one but two world wars you also called the i mean you also called the top at 120 ish when some everybody else was talking higher and we are significantly lower than that and there are other factors at play here as far as that goes by the way factors that that are

100 percent uh part of the thesis to invest in things like bitcoin uh right you know distrust in institutions etc et cetera, and whatever. But so there's, we have three macro factors that we, you know, I don't really wanna dig into some of it, but we can't avoid it. One is war and geopolitics. The other is the election.

And the third is what James was talking about. The fact that you can't group, when you do S&P divided by copper, you're doing a gross generalization of the entire economy. There is a difference. The biggest difference between Main Street and Wall Street is Wall Street is dominated by the rich, who are more insulated from this stuff in the beginning than Main Street. And so things that are collapsing Main Street, like defaults on car payments, like inability to move to go to a new job because you're stuck in a mortgage that you can't possibly afford to move to a new city, those things affect the middle class and down. And the middle class

and down own an incredibly small percentage of equities and so we need we need to be be mindful of that they also happen to compromise the majority of voters and so as we go into an election cycle where the mainstream narratives that put the biden in office are collapsing around him faster than anything else uh you need to understand or we need to understand that the political pressure on the fed to play ball with with the administration to not allow main street to feel the pain is going to be intense uh that's been my i've been saying that for a year and saying we need to wait. Well, we're about to enter the fourth quarter. And I think that this will start showing up. And I don't believe the Fed, if the Fed doesn't tighten in November and December, I think they're done in this cycle. And I think they're done and

the next move is down. And yeah, that might spook investors. I think that's the funniest part about it is I think when the Fed starts easing, it will cause, you know, it will spook investors, because it always has, it probably always will. And Mike, you've said this extremely well, but we can't ignore politics. We can't ignore the collapse of narratives such as, you know, open borders, and you know, what's going on and certain mainstream, you know, leftist things that are going on right now. And what you're seeing, what you've seen over the weekend, which by the way, chills me to the bone. And while I don't really like talking about geopolitics, I am appalled at what we've seen in higher education over the last month is bad. And I've been a critic of higher education for a

while, but I think many, many people are appalled now. And I think, you know, we may be reaching a seminal moment or not. And, and if not, then I'm in big trouble, given what my last name is. So you know, we'll, we'll, we'll, we'll put that off to the side. But there are many cross currents going on here. And whether you believe in the fourth turning thesis, or any of the other Bitcoin standard style, you know, collapse of civilization is and the rise of Bitcoin thesis, which I do not subscribe to, by the way. There are people who are looking at that. And so there's a lot of cross currents here. But I'm really curious, you know, Mike, you know, your perspective on the yield curve, and you know, what a normal yield curve would do. I mean, you guys, your

economists must look at this. What is the budget deficit in the U.S. look like? What percent of GDP is it if the long bond was at, say, six and a half, which would be normal with interest rates this high, about a percent and a half positive smoking yield curve? That is the significant thing, if I can share screen again, that I've heard my entire career that, oh, yields are going up because the deficit's increasing. But at increasing at 8% almost of GDP, the deficit and never increasing that pace without a recession or a war is significant. But that's the key thing I'm showing you here in terms of the Fed. They right now, this exact same chart I had on my screen. Yeah, they still don't care. And this is the key thing that we've been focusing on a few months.

We still have tightening priced in the system. You have Fed funds at 5.33. The system's still priced for January of 5.42. That basically for markets to bottom, you typically have to go to ease. And that's why this is a lose-lose for everything. Bond yields are going up. Short yields are still hiking. And right as we speak, Dave, you'll love this.

The bond yield right now is 5.13. And the two-year note yield is 5.11. So we've re-steepened. But it's for the wrong reasons. And this is where a lot of it is, yeah, obviously the deficit. But to me, this is more the classic capitulation of the bond market that's akin to October and I'd say Q3 1987 before the stock market crash. It's just not good. And that's what's tilting everything lower.

It's not just one side of the equation, right? Because if you have rates that are up over 6% on the long end of the curve, something will break, meaning that we will have a washout, a watershed moment where unemployment spikes, spending crumbles, just craters and earnings crumble. And just by extension of that, GDP and tax receipts crumble. So if you think that you're going to sit at $2 trillion of, of deficit, just because of the interest rates higher in 12 months, you're out of your mind. Like the,

I don't think that I'm trying to, I'm trying to, I'm lobbying you guys soft. Yeah. But, but, but the ultimate softball is this. It's is it,

you know, in a world where the administration is cheerleading union demands, print spending money like drunken sailors, telling the Fed, you deal with inflation, we'll deal with everything else. At what point, with long rates going up and stresses in the banking system happening, entering a political year, does the Fed sit on the sidelines, particularly since China is no longer buying our debt? Yeah, they'll go in the back door somewhere and we'll have another acronym. They're going to do QE. Yeah, they'll have another acronym.

It'll be quiet QE. It'll be just a stealth QE somewhere. It's a new VTFP program. That's going to get re-upped. That's not going to expire. That's going to get extended. What do we have, $100 billion in there right now? That will continue. I was going to ask, where do reverse repo and BTFP stand right now? Because it seems like that's still the quiet reason that everything hasn't collapsed? Two separate questions, right? Because when reverse repo gets drained, that's when the treasury market really starts to stumble and look and they've got problems because all they're doing right now is just teasing money out of the reverse repo on the short end of the

curve in order to keep issuing T-bills, right? But once that reverse repo is, once that's drained, the treasury market's going to have to turn somewhere else. And that's when, like Dave is saying, you're going to have that stealth QE in the back of the curve where the treasury is out there somehow allowing the Fed to buy and execute some sort of yield curve control in order to keep the market going because you cannot have it stumble. And that was my point. So China's not buying our debt anymore. Central banks around the world are buying gold. Who knows? Some might be buying Bitcoin.

We can't tell the smaller ones on the fringes. But the reality is right now, Scott, you had a chart that the Fed was a net, was one of the only net sellers of bonds, right? Over the last quarter. What happens when that flips? When the Fed, when there's no buyers? Who else is going to buy them?

Not no buyers. Let's be, let's talk like economists. They won't go no bid unless there's a major catastrophic. No, no, no. When they become the biggest, not the biggest handle the issuance. That's the issue. That's the issue.

That's why the long end of the curve is going higher on the yield. That's why period. That's right. But at some point the Fed steps in because the Japanese scenario is a hell of a lot better than the crash scenario. And that's literally what my thesis all along can they step in and control this though because when you look at the debt and you look at the situation it seems like it just too far gone and here's the funny part at the end of this year my favorite

maxim don't fight the fed there you go don't fight the fed. People are going to get killed if they start shorting the 10-year and the 30-year if the Fed decides no mas. They're going to get killed, carried out, body bags. And traders know this. And so they'll dance in and out and whatever. But a severe bet that we can allow interest rates. Because, look, we you know, a severe bet that we can allow interest rate because look, we all know what happens. If the long end gets up to if the 30 year starts approaching six, not five, people are going to be like, Oh, we have a new normal. Let's look back at the 70s. We had

interest rates get to double digits. Oh, okay, I'm going to make that bet. And then the Fed realizes, well, if you do that with the jet debt, the GDP that we have the government, it will be it'll be a complete disaster. We're at structural deficits before spending a dime. That doesn't happen. So I think the Fed will act. You know, the playbook of QE is still there. They don't like it.

But, you know, someone pointed out this morning on X, well, you know, these guys really just don't want the things to break while it's on their watch. They don't care about what happens five years from now. And I think that that's been the scenario I thought would play out in 2024 for over a year, which is a Fed becomes, you know, maybe they don't recut interest rates, but they become accommodative on the long end and there's stealth or less stealthy QE. That's always been what I've thought. There can't be tremendous damage inside the economy from all of this. What happens when Japan lets their yields, their 10-year go over 1%? Well, they can't. They can't afford it.

What happens when they do that at the end of this year? If they do that at the end of this year, if they, if they do that at the end of this year, then suddenly, you know, you don't have that, you don't have that flight to, to yield for the for the U S treasury. It's that's yet another, that's just a, just another large factor that people aren't thinking about. Like that. I think the fed's going to have their hands full, the fed and the treasury are going to have their hands full trying to keep yields under control.

And, you know, at the end of this year, and that's without having a recession. That's without having some sort of event. So I have one counter on that. And I think it's the classic case and observation of we've had the biggest pump in liquidity in the history of mankind and zero interest rates that I think is just starting to dump. And one little signal is S&P 500 breaking below its 200-day moving average. Next will be 200-week and then 200-month. It's just the way it always has happened when you pump that much. I think we're just getting started. And that was the biggest push on inflation. I think that's the key thing that has to happen is wealth needs to be destroyed. And the Fed has stated it indirectly.

And I think that's what we're doing right now. And once you just start destroying wealth and people shut back and lose jobs and you get negative GDP growth, inflation will collapse. The Fed will ease. And then we're going to have to worry about this deficit. To me, the first trade is the bond market prices taking off and collapsing. It's just the next trade. But all this discussion inspired me to bring up this next chart, which I was working on as we're doing on the same scale. I show leading indicators in orange. They're minus 8%. We've never been minus 8% without a recession. That's what I show you in magenta, but also in the same chart is our budget deficit. It recently bounced from minus from 8% to just about six as a student loan payment started coming. What does that mean? Your average 30 something has all that cash they had is now being pulled away and say, oh my gosh, this is part of my great reset. I don't see what stops

at this point. And the key thing that's the trigger is the stock market going down means all boats fall. Yeah, I brought up a screen earlier when Dave was talking because he mentioned it. Car owners fall behind on payments at highest rate of record. Like you said, we know that credit card debt is a sort of historic highs that defaults, small business bankruptcies, all these things. But is this that the old sort of situation where the market and the economy just aren't the same thing and people seem to get them? We haven't even talked about the housing. I mean, stocks are dumping, by the way, pretty, pretty hard right now. But yeah, go ahead. But we haven't even talked about the housing market, which is where so much wealth is tied up and asset prices.

That's where people borrow from. I mean, when this housing market actually comes to turn and it starts to trade again, it's locked up, completely locked up right now. The question is, where does it go? Where is that bottom of pricing of housing in particular? You've got the commercial real estate issue that we've been talking about for a long time that every single bank is trying to shore up their balance sheet on. You're going to have asset managers just walking away, giving back keys, non-recourse loans, and just walking away from these more and more and more of them are going to be doing this. And then when interest rates do finally come down, where do the housing prices go? So it's kind of like a second, it's

going to be a second leg down for the financial markets. I laugh because everybody expects housing to crash now. It's the second that people feel like rates are coming down and that they can sell or buy that everything's going to crash. But the supply is going to come on the market when there's actual buyers. It's definitely going to be a reset, a pricing reset. What's that, Mike? Well, it's a key thing. I've been really concerned about people who are in the weeds of the real estate market telling me, oh, yields are going to come down.

It'll be great. And then prices will go up. I'm like, no, it's the opposite. For yields to go down, as James said, you have to destroy wealth. It's just inevitable. When you see condos that have jumped 10X in five years, you know, historically, they always pull back and they always do with oomph that's harder than ever. And this is why I want to show you when people talk, I was showing the screen, we talk about housing. I go back to 1976 it's the fh a fh fa house price index it's just the simple lessons of markets when you pump to this velocity they get to near 20 the average home price in us

you almost always dump at double the velocity you go up on the escalator down the elevator into recession and we're just getting started the market market's seized up. It's like that wealth destruction is inevitable. And unfortunately, I don't see any sign of it stopping anytime soon. No, it's going to be wealth destruction that people are not expecting because of exactly what Mike said. People say, well, the rates are going to come down. People are going to start buying again. No, they're going to start selling. And it's going to be through that wealth destruction.

That's right. I mean, so what I don't understand then is the soft landing camp. I know we talk about it every single time, but like I said, I mean, I was literally debating with someone. There's never been a soft landing. It's a soft landing. It happened. They said, listen, it's October. Mike, can you bring up that chart with all the soft landings for us? I tweeted that the other day.

No, no, that's where I got into the debate, actually. I tweeted that, and someone responded that my post was stupid. Yeah, well, it's because it's because obviously, no, they're vested interests, but it's also classic human nature and never

underestimate the hope of self-sight. But keep one thing in mind, guys. There's one thing that's very important here. We always talk about inflation and consumer inflation. And you know that my biggest cause celeb has always been that we've had raging inflation since we started expanding our budget deficits and running accommodative monetary policy back in the 80s. And people say, well, no, look at the price of shirts or look at the price of computers. And I respond, no, look at the price of things

you can't import from overseas or automate away, such as education, medical care, et cetera, housing being one of them. And basically, with the pandemic, we let a genie out of the bottle, we being collectively the entire Western world, that was disastrous. And they saw it to be disastrous, which was instead of a philosophy of encouraging capital substitution for labor, which prioritized, which meant asset inflation

would happen and consumer inflation wouldn't, it reversed. Now, the supply chain contracting part of the pandemic is gone, but the fact is, is now entering the part of the cycle of potential wage push inflation is a problem. The policymakers are, I mean, some of them are dumb, yes, admittedly, especially the ones that got elected, but the ones that are in there sitting in their seats at the Federal Reserve are not dumb. I may disagree with them, but they're not dumb. They understand this is true. And so they're not trying.

They're using the word soft landing. But what they really mean is re-engineer a return of asset versus consumer inflation. That's what they're really looking to do. They want to see, they don't, because they know if house prices did do, had a cataclysmic drop, then that housing ATM, which is one of the ways people continue to sustain the U.S. consumer, goes poof. They know that. If it reverses, it's a real problem. And, you know, so there's all sorts of things that are real problems here. And so we just need to keep our eye on the ball. The ball is the Fed says their mandate is a stable currency. That's a joke. And low inflation. That's not a joke. They do want low consumer inflation.

They don't care about asset inflation. In fact, if anything, asset inflation is good, although I don't think they care about it. And I think that's Mike's point and has been. And he's right, which is they don't care if the stock market crashes as long as it doesn't impact Main Street. But they do care about Main Street because for lots of reasons. And so there's all these factors going on. And the Treasury does care about inflation because they care about nominal GDP. And if it goes up because of inflation, it's fake productivity, so be it. They like their problems.

It's good. It's the only way to actually pay back the debt. That's right. So they like asset inflation. As I said, they like it. I believe all roads in 2024 lead to QE. That's my point. And I don't know what it's going to mean

for interest rates. Turn in Japanese. But I believe, but that's been my thesis. I feel stronger about it now than I did two weeks ago. And I suspect in a month, I'm going to feel stronger still. But Mike, to your point then, isn't that only if the stock, that happens because the stock market crashes, right? You can't have the stock market stay up here and have a return to QE. Something has to massively break. And you always say that's going to be stocks. Stocks are the number one real-time indicator. S&P 500, the most significant beta measure on

the planet. When I was in a hedge fund, we did everything versus S&P 500 and our value at risk models. It's indisputable. If people feel wealthy, they're going to spend, just like Dave mentioned. But I also, I want to a screen a little bit. It's just, that's why I would love for it not to happen. But I love addressing things like soft lane. I had a push back in soft lane. I just want to show you, narrowed down to one chart, money supply collapsing, federal funds rate going up. But if there's one simple chart I want to show you, it's this one. Let's just keep it simple. The Russell is heading lower. It's down in the year. Christopher Altman of CalPERS said, yeah, he thinks S&P 500 could end up down in the year. OK, so we'll get another drop, another 12 percent. It's just a simple fact of the 100 week moving average of Russell's turned down.

The Fed's still hiking rates. Next subject. What can I do with my money? Two-year note, 5.1 percent. Click. See you. Call you back in two years. It's just not that complicated. But it's now that what's happening is classic human nature of so every wealth manager on the planet is almost every person got overweight equities because it made in that way, but they got so used to world where they had to work with against no alternative. And there is, it's 5.1% right now on the screen until you know deals. But keep one thing in mind while you're right, if you don't have it, pension funds, generally their actuarial assumptions, the bottom, the cheapest one is 6%.

A lot of them are at 8%. So when you go to your board and you say, I'm going to lock in for two years, a deficit to our actuarial assumption of one to 3%, you tend not to keep job security very long. It is easier for these people to explain a bad year in the stock market than waving the white flag and saying, we can't do anything. I'm totally not disagreeing with you if I'm a discretionary manager and I know I need to ride things out. And if you look at it over 20 years, if you manage to successfully ride out the two or three, the two worst two-year periods, you do really well. But that's not how our, what have you done for me lately, society works. Yeah. But Dave, there's a legitimate question. How many of your average investors who go to a real estate advisor are actually paying a major attention to the rate

of inflation versus the rate of return that they're getting on those treasuries. I feel like- No, I'm not talking about pension. No, he's talking about- Oh, pension. Very, very fair. Okay. Sorry. I thought you were talking about retail. I'm like, they see 5% and they're like, I'm making 5%. They don't think I'm losing 2% or 3%, right? Right. No, no. I'm not talking. Mike is 100 percent correct with discretionary funds. People, you know, I am talking specifically about pension funds who have actuarial assumptions of what they need to make. And human beings making investment decisions where it might very well be the right decision. In fact, it's a very good argument that in the stock market that you might very well say, you know what?

Let's take a one year rate of return or a six month rate of return. And at 5.6 months is what 5.4. Is it that why hedge funds theoretically exist to do better, you know, to lose less? Absolutely. But there's a lot, the point that I'm trying to make is there's a lot of people who quite frankly are paid, their jobs are paid to invest based on hopium. I hate to say it, but that is kind of the point. And that's all I'm saying. I'm not disagreeing with Mike. Yeah, you're saying that we have to be cognizant of that because that- They have no choice but to allocate to some risk assets because of that shortfall, period. That's right. And so that's what tends to

cushion the downside. But the truth of the matter is the markets are vulnerable. I saw a stat this morning, which is crazy. I don't know if it's true, but I'm assuming it is. We're going to announce it on your show, Scott. No, no, no. This is a question for Mike. I saw a tweet. I don't know if it's true. You probably know this, that half the companies in the S&P 500 or half listed companies, something like that, are no longer profitable in this quarter. Yeah, I've heard that.

It's similar to Russell 2000. But I think I'm glad you brought up that actuary assumption, Dave, because you said it before and it makes complete sense. That is what I'm calling for. There's always been periods in history you look back and say, oh, that is no longer the case. It's time. We don't have that 8% guaranteed returns anymore. And every single time we get that, which we always have, that's when the time to buy and get back into risk assets. And to me, what better time in history than now for this to revert towards pushing that old mantra down then the setup for how we got

here. Remember we had just three years ago, we all were afraid we're going to die. Well, that's the best reason in the world for most liquidity in history all the rules of liquidity and massive when you pump it and take it away are what's happening now and what's collapsed in cryptos and court's deflation now we're not getting into bond yields that but to me that's part of that slow moving mantra that what i think it's going to switch over to from those days of it's going to go up because it went up to it's going to go down because it went down and that's going to go down because it went down. And that's why I started the program with the S&P 500 dropping below its 200-day moving average. Once it starts becoming self-fulfilling, we're overdue for that. Yeah, it's going to go down. It's going to go down. We just haven't had that in 20 years. We have three minutes left. I want

to ask you a practical question for the audience. 60-40 portfolio has been what investment advisors have been pushing. What should it be at this point after what we've seen? Now, you don't have to say whether you believe gold, Bitcoin, but it's my belief that there should be at least 5%, if not more, of alternative assets in your portfolio. I'm just curious how you guys would view that in light of the historic just collapse of 60-40? Well, I certainly would not have a 60-40 bond portfolio with a significant amount of long duration treasuries. Two year or less. I do own treasuries, but they're all on the very short end.

Like Mike said, you can tuck it away and get over 5% return on that. You're crazy not to do that just for a little while. Hide there. There's no probability, zero probability that the treasury is going to default on anything. So that is a good spot to park cash for a while. You should own gold. You should own some Bitcoin, in my opinion. And I would definitely be more on the defensive end, on the equity side. You can't time these things perfectly. So you have allocations that you can move around rapidly. And that's the point. So be nimble. That's why short-term treasury is because you have some liquidity and you have flexibility.

Dave, what do you think? Exactly. Your interest rate risk is in basis points. It's not in percentage. Right. And I think that that's a critical point. But my answer to that question always depends on the first question I'd ask back. What's the time horizon for the portfolio? If you're talking about a 30 to 40-year-old, I'm going to have 5% in Bitcoin. I mean, I know it sounds a lot, but not a 75 year old though. No, but a 75 year old, I'm going to have, I may not have anything in Bitcoin, probably maybe a small amount, but it's, it's, it really does matter what your time horizon is and time horizons matter. So for example, you know, and if you're a nimble trader as opposed to an asset allocator, I mean, at some point, I believe if you believe my thesis, Mike's right.

And the long end is going to top. And when the long end tops, that drives really good performance in owning the long end of the curve. I just don't think it's here. I think the 30-year will have to get close to six before people start panicking. But I could be wrong. I'm not trying to trade it. So it time horizons matter. I would be there. Look, in this particular environment, I would be in long term assets, and in not so much

on the risky asset side, meaning you know, too heavy, you know, much heavier on the short end of the Treasury curve. You see, Mike, I actually agree with you. I just would be depending on where I'm rising. It's more fun when you disagree. You put much. I mean, think of it this way. With 5% interest rates, you could literally have a risk-free portfolio where you put 95% in two years and 5% in Bitcoin. If Bitcoin goes to zero at the end of two years, you have to get your money back. You can have a principal protected note on Bitcoin with 5%. If you're willing to take more risk, double that to 10.

And what are you worrying about? Now, are there other sectors that look interesting? Yeah, of course there are. We talk about the market in the macro sense. You do a deep dive in. Do I think most things that say the word AI are overvalued? Absolutely. Do I think it could get more overvalued? Absolutely. Long Island blockchain off iced tea, right? There's all sorts of stuff that can happen. But the truth of the matter is, we are in the most uncertain times we've had in my memory. Even in the global financial crisis, markets seized up, but we

didn't have a geopolitical situation like this. We didn't have a situation where we have no idea. We still are looking down the barrel of choosing between two octogenarians who half the country doesn't trust. There's no person to rally behind right now that could actually get anything close to a governable majority. I mean, look at the dysfunction in the House of Representatives. Look at this. Go down this path now at 10.02, Dave. No, I know. But I'm just saying it is the time for safety. I know I sound like Mike. I'm sorry. But, you know, but he's right. Don't be sorry. He's right. Mike, final words.

I think we're entering the greatest reset of our lifetimes and not losing money will mean you're better off than everybody else, most other people. Which means treasuries, maybe some cryptos, Bitcoin, and gold. I love it. Guys, this is an absolutely epic stream. The audience clearly agrees in the comments. And I think at one point there, we had our highest traffic ever on this show. It shows what happens when you write Bitcoin pump at the beginning of the topic.

What? But guys, I want to encourage the audience. Seriously, I don't say this enough, but obviously the four of us come show up every single Monday. And these are the guys I view as the ultimate experts on these topics, which is the reason that it's just the four of us at this point where I can learn and ask these guys questions. You should absolutely be following all of them. You should be, Mike, I don't know how people subscribe to you, but 100% also subscribe to James's newsletter. You should be checking out Dave's channels on CoinRoutes. Everybody here is sharing endless alpha outside of this hour just on Mondays. So you just got to follow all of them. Their Twitters are down in the description and I highly recommend checking out all their content. Guys, I got to run to Crypto Town Hall. James, I think you're going to be there today. All of you

are welcome. But see you guys. This was amazing. Appreciate all of you watching. Let's just hope that this thing keeps going. And next week, we're not talking about $25,000 Bitcoin. All right. That's all I got. See you guys next week. Bye. Let's go.