The Wolf Of All Streets - Bitcoin Pump Is Imminent | Macro Monday

Episode Date: April 15, 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/   ►►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 crashed to below $61,000 this weekend. Many pundits pointing at the escalating war between Israel and Iran as the cause. Many in the space saying just another weekend where leverage was flush. People were way too long and now they've had that corrected for them by the market. Going to be interesting to hear what these gentlemen have to say about the price action in Bitcoin. Of course, we have a title here, Bitcoin Pump is Imminent. That's based on the idea that the Hong Kong ETFs have been approved today. And we saw what happens when ETFs get approved in the United States. Obviously, price went up massively.

And of course, the halving at the end of this week. It is Macro Monday. Can't wait to dig into this and a lot more with Mike, Dave, and James. Let's go. me and I think I could get voted off my own island if I actually let her host again. They might not let me back. I might just have to become one of the small squares in the corner. We've got Dave, James, and Mike here today. Noelle was great. I went back and watched it. She's very impressive. And I think she was a great addition for the week. At least I know I'll be covered if I ever have to pop out again. She was awesome. Kept it very organized. There was a lot less, you know, infighting from the troops.

It was good. We did more outfighting that day. But either way, I'm very glad to be back. I was obviously in Paris for Blockchain Week, which was an incredible event, and off tonight to Dubai for Token 2049 because I hate sleep. But Dave, you are obviously in a remote location today and an interesting one. Where are you? I am at the New York Stock. I'm moderating a digital asset panel and doing a fireside with John Deaton later today. It's interesting how kind of people in the traditional world kind of accept the inevitable in terms of digital assets at this point and are simply waiting for our regulators and or legislators to take their collective heads out of their collective butts and allow things to move forward in an entrepreneurial

intelligent fashion. But it really is, the tone is so different basically than it's ever been. I mean, having coming out a year post, know the whole ftx debacle it's interesting how people just say yeah okay well if that didn't kill it nothing's going to so let's let's figure this out this stuff out yeah i agree with that i actually sat down in paris last second they had me host a fireside chat with verena ross who is the gary yenzler of europe effectively imagine me being sat on stage with the head regulator of basically their SEC equivalent, and they're far ahead of us,

but still, she hates crypto. Honest, I tried to get some smiles and some good laughs, and I called them a friendly regulator. She literally said, no, we're not. We are not friendly. I would not say that. So I think we still have a lot of work to do around the world, but the United States is woefully behind even them. Well, I mean, think of it this way. If you're a regulator and your job

has been to control capital markets that allow people to trade with a defined set of intermediaries, yes, an inefficient set of intermediaries, but a set of intermediaries and choke points that you know you can control. A bearer instrument that trades truly multi-currency 24-7 and digitally is a frightening prospect. Not frightening because it's a bad thing, but frightening because it completely upends your world, right? So the notion that you can use the same thing to invest in and spend in or transfer peer to peer, as well as trade on a centralized exchange, on-demand settlement, all these

things that make sense in a truly digital world, that's not how these regulators were architected. They just were not built that way. So we're making their lives miserable. Let's be real. They have to deal with this and they don't want to. I really think that's it. Let's dig in. Obviously, it's macro Monday here and holy macro, did we have a lot happen this weekend. Mike, first, I'm very interested in hearing what happened on the morning call. And I definitely want to talk about what's happening with treasuries in context of what's happening with Israel and Iran. And of course, this

very volatile day that we had yesterday in gold, right? Basically $100 spread. I think it topped around 2430, bottomed around 2330. A lot going on. So let's start there with gold. It's the only of gold, Bitcoin, and the S&P 500. If you close it here, it's only one at a record high or very close to it. On a closing basis, month-end basis, whatever it is now, both of them started turning lower. And I think that makes sense from a beta standpoint. We all know beta needs a backup. And that was a key theme from this morning's meeting. Our chief strategist gina martin adams said technicals are turning for rocky period um she's worried about rising commodity prices which i put a little kibosh on that it's don't

think that's going to happen it's just seen well i just point out that i can dig into that a little bit just look at managed money net positions in crudeudeau right now. They're about as net long as they were last year when Crudeau peaked at 95. Now we're at 85. See that tilt? And Crudeau right now is the same price it was in October 2007, first trade of the year. So I don't have to go there too much. We're back up the morning meeting. So Ana Wong thinks unemployment this year is going to peak around 4.7%.

And that peak would go there by the end of this year. As we know, that would be kicking in some world that would be kicking towards recession. Our FX strategist says he doesn't see what's going to stop the dollar. We all see that. That's the problem, certainly for commodities. And I'll tilt over some of my stuff that I like to point out is you look at the average bond yields in China, Japan, Germany, and India. That average of those yields, including India, they're 138 base points less than the U.S. right now. That is a severe, that's the most in our database since 2006. That's a severe global refractionary tilt. At the same time, I have

in the same chart, I showed U.S. VIX, the 52-week average of the VIX. I've taken a longer term, minus the T-bill rate, it's the lowest since right before the Great Recession and bottom in 2018. Very low volatility only means it reverts higher. Very low yields like that typically only mean it's made up, which means U.S. yields are the outlier. But the indication, I think, is very still bullish for gold. And I don't see, other than some kind of detente, maybe a pullback on the unlimited friendship that's going to stop gold from continuing to advance versus most assets. The key thing I'd like to point out is I posted this week, and it's just the risks of reversion. Historically, you go back to 71 when we came up to gold standard even earlier.

Anytime the S&P 500 is this expensive versus the price of gold, they always revert. And to me, that's a key thing tilting over the Bitcoin. The big problem right now is we just are, right now, we're still about 20% above the 100-week moving average in S&P 500. Last October, when crude oil peaked, it was about par. That's the problem. We just need a little bit of backup in beta. Now, we've only done it for a week. We're bouncing back. Maybe as Dave is right, it's just taxes. But that to me is a big problem. The number one test we have to get over is this backup in beta, global beta, and see how things react. And I think we're already seeing it from the fastest, hottest, fastest horse in the race has come off as highest for a reason. We all know the halving is basically kind of a done deal.

It's already got a lot of rally into that. And I'm still worried about the excessive bullishness everywhere. But it's about beta. Beta's got to see. We have to see. Beta can keep advancing. Yeah, sure, everything will be fine. But beta needs a backup.

It's way overdue. Go ahead. I mean, the excessive bullishness, yeah. Well, that's why we had $1.5 billion wiped out in the liquidity flush this weekend, sure. Right now, funding rates are negative. So, no, not this morning. And that's generally the exact kind of base that rallies are built from. Right now, funding rates are negative. So no, not this morning. And that's generally the exact kind of base that rallies are built from.

The best rallies are built when it goes sideways for a while in this sort of range. And so, you know, what will happen will happen. Every time I hear you talk, I think the two words that scream in my head are zoom out. And it's like you're worrying about the test of beta added around an all-time high when Bitcoin is essentially effectively in less than a year borderline tripled or damn close to tripling. I mean, you know, two and a half times in price. Something goes up two and a half times in price, then you expect along the way pullbacks and you expect flushes. And, you know, Scott and I had a little interchange on X over the last few days where, you know, he said a very, very well-written paragraph and I snarkily wrote, accumulate. And at the end of my accumulation, push the price up higher by buying sloppily. Everyone gets excited. Let leverage accumulate in the

system, then flush, start selling. And then in the end of your selling, flush to try to break the back of it, knock it back down, and then start accumulating again. And people call this the Bitcoin whale behavior. Call it whatever the hell you want to call it. It's a cycle that has repeated itself many, many times. This is not a four-year cycle. There's lots of data on this one. I mean, even from 29,000 to 26,000, remember that one, the five-minute flush that we attributed to selling on OKEx? It happens a lot. And so when I hear you talk about beta, it's like, yeah, but we do need to zoom out a bit and understand what it is we're talking about with Bitcoin. Now, that said, when it comes to the meme coin universe and what went on this weekend versus it, now you and I are on exactly the same page.

And I want to tee Scott up for this one. I don't know how much you love the wars between Pepe the Frog and Joe boden or all this other stuff it's just it's yeah that you expect because that kind of stuff is nuts yeah i got absolutely somehow annihilated on twitter by bitcoin maxis for being a meme coin promoter yeah you might not have seen it yeah absolutely the antithesis of who i. I've been so dismissive and aggressive. Some guy, Fred Kruger, which I think is, you know, from a horror movie. He showed a clip of me and Raoul Paul totally out of context where I said that whales were pumping meme coins to bring TVL to their chains. To me, that seems like a negative thing, right?

Not a compliment. And then Raul went on to say that they were bringing all this value and just eviscerated for apparently promoting shit coins. And yeah, I got on the wrong side of the maximalist once again. But I agree. I've been saying for a month, I said a month ago when we were at 70 something, this is going to be the top for a while. This is going to be one of these consolidation moments. Fear and greed's over 80. Everything's overbought. People are going nuts with meme coins. It's a complete casino and there needs to be a flush. And what we've had since then, I'm not, whatever, is exactly what you described, this big range. This is the daily chart on Bitcoin. Everybody panics at the bottom, right? It was exactly that whale behavior you're talking about. We got to

the bottom of the range and then a bullish engulfing candle right back up. I think we could just range for a while. And I don't think that there's anything wrong with that. But yeah, I've seen a lot of excess here. I tend to agree. I think Mike wasn't necessarily speaking specifically about Bitcoin as he responded there. I think he was just saying, look around, man. People are going nuts.

There's a three-hour line to get into the Louvre. Every airport is completely full. The richest man in the world now basically is not from creating anything, but selling luxury items at a 200X premium to people. Nobody feels poor right now on the rich side. Right, James? I think we have the largest wealth divide right now, I can recall in my lifetime, and only increasing. And that's the part that's probably frustrating people, because everything is good if you look at the economy. Really good. I actually read an article about that just a minute ago on Bloomberg about the the increase in wealth, the global inequality of wealth, you know, post COVID we were, it was kind of the inequality was on a trajectory lower, you know, to the,

the index was down to in going towards 60. And now it's spiked wrap up right back up to the mid sixties, you know, it just, it literally has just, you know, gone back up par the mid-60s you know just it literally has just you know um gone back up parabolic so but i mean look like you said i i flew out to austin this weekend and the flight was full the airport was full the restaurants were full uh you know the the uber prices were high which means that there was high demand. I mean, Austin was absolutely rocking. And, you know, I mean, it's not like it was spring break. We're in the middle of April here. You know, it's just it's incredible how resilient this economy is.

And like you said, it's the people who have the means and they're spending. And we just had blowout retail numbers this morning. I'd be interested to hear what Mike's desk has said about this. But we are on a no landing trajectory at the moment until we have a problem. And that problem is likely going to be in the treasury market. That's where we're headed. And so, which all feeds back the exact same thing that everybody's saying and that you will all agree with is we're going to print more money because we do not have a choice because we must keep the treasury market going.

And that's kind of where we're headed. I mean, we had another terrible auction last week in the 10-year. It was absolutely abysmal. And that's the benchmark treasury of the world. And if people are not paying attention, that is a very important thing. Of course, we had a blowout number in CPI just prior to that. And so it surprised people. That's why you had a big tail. That's why you had probably lower demand. That's why you had a rate, higher rate. But it is indicative of a larger structural problem, which is the treasury needs, it has insatiable demand for borrowing and it's going to continue until it doesn't. And that is a great issue that is facing us and it's just growing. Is it imminent tomorrow? No, but we've got to keep an eye on that because that is kind of the trajectory we're on. And that's where I get worried is that we have

some sort of dysfunctional event in the treasury market. And that's what spurns a huge sell-off and then a massive amount of printing. And I think what we're seeing is gold sniff that out. And so I'd be interested to hear what Mike says about both those things, about CPI and whether the Bloomberg economists are agreeing that, look, gold is sniffing out the fact that foreign central banks are buying gold as kind of a hedge to treasuries. Mike? Yeah, exactly. And I have to point out, I see gold as the most enduring bull market, particularly, just not to piss off Dave, when beta has a normal reversion correction. Just to point out facts of sitting in front of your value at risk model and analyzing your position, what's my risk and my positions? With Bitcoin, I think the number one risk is still a

little backup. Now, gold is doing fine. I think it's once we see that little backup, that's what it's going to take to really have... The Fed's not going to ease, I think, until the market tells them the stock market goes down. We're seeing that. The high price cure is affecting the stock market. We're seeing that in, it's not coincidence the stock market's going up, crude oil's going up, and inflation's taking the Fed, inflation, Fed rate cut expectations are tilting the other way. So the key thing about retail sales and morning, yeah, that's a surprise, but I've been comparing them versus CPI this period and they're still very subdued

and basically almost flat compared to CPI, certainly since 2022. So that's kind of the distortion of the history they're kicking in. And so from my standpoint, number one, the most enduring bull performing commodity almost always has been gold. It's the only main one that does not have the high price cure. Bitcoin does not have that high price cure. One of the worst performing commodities in history

is crude oil. It's still doing that. And so from our standpoint, to me, from a risk management standpoint, the biggest risk now is that we get – sorry, I have to decline this call. The biggest risk is that we get gold to continue outperforming the stock market. We get some little bit of a reversion in that way expensive equity market versus gold with very profound implications. But historically, on a global basis and a chart basis, it means nothing. And to me, that's what we're doing. So one thing I want to point out with what James mentioned is, yes, the big problem is what's happening with U.S. debts. It's unstoppable, then I point out.

But that's priced in in many ways if you just compare U.S. yields to the rest of the world. I mean, I saw this article this morning about how these people might be selling U.S. treasuries. I love hearing that. I'm like, OK, what are you going to buy? China's 200 basis points less. Greece is 100 basis points. Most of Europe is almost 200 basis points less than the U.S. What are you going to buy?

Well, there's gold. Just look at the chart. Bring up the chart, Scott, that I saw. So this is from that article this morning. And, I mean, look at the net interest payments as a share of revenue of developed countries. This is developed and developing countries. I mean, look at these net interest payments. This is just insane how much these have risen in just the last 10 15 years and this that is not that is you

know to to quote uh lynn alden's uh uh meme that nothing stopped this this nothing stops this train like this is the this is a direction we're headed and it's going to keep going until there's a a major break right i was going to say exactly this. This is a great chart. There's two points to be made here. Point number one is the reason the U.S. has higher yields is because the U.S., the dollar is the global reserve currency, which makes it much harder for an individual sovereign to manipulate their own bond market. QE is still real in a lot of places and people buy it. Effectively, Greece is low because Germany is one of the best debt to GDP countries out there and it's Euro denominated. And so the real question is, will Germany allow a sovereign nation in the European bloc to go boom?

We haven't seen the quote stresses in the Euro recently, but they're very real. And so that's what you're seeing. Otherwise, it's because on its face, just the simple fact of Greek or Italian debt being cheaper than the US is absurd in a sense of, do you really think they're going to pay it back or how are they going to deal with it? So that's what it is. It's the reserve currency status and the difficulty of manipulating it that makes the dollar what it is. I mean, let's face it, the 10-year approaching over 4.6 is – it's not back at 5 yet.

We know 5 generally is the panic-inducing level at this point. We saw – was it in October, James? I can't remember. Yeah, in November. But we've had a few bad auctions in November, December, January, this last week. Something that's confusing that, Mike, you pointed out that's confusing is just whether foreign central banks are selling US treasuries or whether they're just being marked down with this rise in interest rates. And, and it's, uh, it's difficult to tell because of the way that we, uh, we count the, the, uh, amount of treasuries that foreign banks own.

And so you're, you're seeing rates go up and just the value, the mark value of these, uh, bonds go down. So it's difficult to really parse that out. But that's exactly what you said. Yeah. So let me say something really quickly, just real quick, Mike. I just want to show, because this was Jan Van Eck. We went through a bunch of slides before our fireside chat. We didn't actually use them all, but it speaks to basically everything.

The topic of our chat was, why are we here? And it was this sort of fundamental lack of trust in institutions now, but also this increasing mistrust in the dollar. So he was showing, obviously, US Treasury credit default swaps are showing elevated deficit concerns to what we were talking about. Then he digged down foreign central banks shift from US dollars to gold. So that's clear to what James is saying. And this one I found really interesting, Mike, and maybe you can give me more clarity because he only touched on it. He actually made the point

that emerging market local currency debt is outperforming despite strong USD. He said that on basically a timeframe for the last four years, that emerging market debt has outperformed US debt, which seems extremely, extremely surprising. I haven't seen that so much. It obviously comes from a higher yield. But there was a story in the Terminal this morning that foreign holdings, U.S. Treasury, central bank holdings is just reaching all-time high. I can't find it right now, but that was when I was pushing back on when there was the journalist who wrote it. So what if they sell? It's something I've been hearing for almost 40 years. How bad is it going to be sell?

And I always say, well, what are they going to buy with what they sell? Well, the question was, are they buying gold? That's what this- No, that's the big question. But you're saying they're buying treasuries and they're buying gold. They're not- The point is- The big question is how much do the gold buying eat into the demand of the treasuries?

Because the demand for treasury issuanceance the demand to borrow is growing exponentially so we need the demand to grow exponentially in foreign countries as well and so is that going to continue that's the question and and as you see them buy gold it is a hedge against that and there are concerns. Gold buying up, the CFD, the protection against U.S. default going up. And what is the U.S. default? We've talked about this too. The U.S. is not going to default on their debt. They're going to soft default every single day. They're going to let inflation just keep running. And the Fed is going to lower rates this year. We're already seeing that in the last auction, I think it was a 20-year auction last week, you saw that the Fed stepped in and was buying treasuries in the auction. And so what is that? Well, they're topping back up some of

that maturing debt. So it's not really QE, it's just a slowing down of QT. They're not letting them roll off quite as quickly. Why? Because they know that the demand is not out there for that longer termed paper. Isn't issuing a trillion dollar, you know, increasing our debt by a trillion dollars in 100 days by effectively issuing treasuries? Isn't that money printing? Yeah, so it's exactly very bad. I agree with you. But the number one factor that's going to affect treasuries is if and or when we have a backup in beta. The number one fact, we have no signs of deflation in this country.

But you want deflation? The deflation that we're seeing in commodities with the exception of gold will have a domino effect once we have a little bit of back and fill in the period of underperformance in US stock market. We're nowhere near that. Maybe we've just started that. That's going to get the 10-year note yield

back down below the rest of the world. I think it's just a matter of time. That's the problem right now. Why be in anything else, even gold, when you get 5% US treasuries and the stock market's on a tear? That's got to change. I think it might be starting to point. That's why I hate to have to refer to it. Then I just point out how expensive the stock market is versus so many factors. It's a 25-year high right now versus commodities. Right. I have a question then, Mike, because you said, it was quite a while ago, actually, you said, listen, if gold convincingly breaks 2,000, it's going

straight to 3,000. I had Mike Novogratz on Spaces. He said the same thing, right? And we basically just went from 2,000 to 2,500 in under two months, something like that, or 25, 24, 7, whatever it is. Is there a way that gold can continue to rise and basically meet the stock market without having a huge correction in stocks? Because if the rest of the world is buying gold, we know it's not Americans who are buying gold. Let's be real, right? This is foreign central banks buying gold. Could the stock market continue to rip or consolidate sideways and gold goes to 3,000, 3,500 and it happens without the dump in the market? So I have to point out one key thing. Last week at the money show, I presented right after Jim

Bianco and Jim Bianco pointed out how some other people pointed out rates are just going to go up. And I came out and I said, no, they're going to go down and here's why. One simple chart I started with is a history of the per ounce price of gold, the S&P 500 on the same index. That ratio has historically been closer to one. Right now it's 2.2 S&P 500 versus gold. I just find that they're just going to converge. They always have. And also it takes a little recession. And every time there's a recession, gold's at a discount, they go back. Maybe it's different this time. I'd rather not trade for that. Maybe it's different this time. I think there's two points here that have to be made.

First, we keep saying foreign governments and foreigners and they group them as they is some sort of homogenous blob. It is not. There are there. Our geopolitical world is changing, has changed rapidly. You know, if you take your head out of, you know, kind of the day-to-day and you look at it, I mean, there was a period of time when we had a Cold War and everyone in the West was where all the money was and kind of central banks operated, you know, more or less cohesively, whether or not, you know, however you want to define it, you know, in the Asian contagion in the 90s, et cetera etc, etc. We are no longer in a

unipolar world, we are now in a very decidedly multipolar world. And whether you believe in the bricks nonsense, or whatever, the fact is, is central banks that are buying are not the same ones that are the G7. Right? So that that matters. And so you have to understand what's going on there. Mike is right. And I know people are surprised whenever I agree with Mike, even though I think we agree far more than we disagree. I agree 90% of the time. Yeah. But Mike is right in a very simple sense, which is the dollar is denominated in trade. If you need to buy stuff, you need to buy dollars. What the hell else are you going to have?

And if you're going to have to hold dollars to use for buying and trade, then what are you going to park in? Are you going to park in something which has a lot of frictional costs in and out? Or are you going to park it in a dollar-denominated treasury that's risk-free? Of course, you're going to park it in treasuries, and that's where that demand comes from. But that's from trading partners. There's a lot of other stuff sloshing around the financial system that isn't necessarily trade related. That's where that bifurcation comes from. And what does this mean? I don't know, but I know one thing that's absolutely certain. I'm a big Milton Friedman guy. You all know that I believe

this. The fact is, is people like to make the statement that government spending and government deficits at the global level are stimulative. And I suppose they are, but they stimulate a hell of a lot less than private investment. And to some degree, government deficits are pushing on a string, and that's why they're trapped. So you end up with $2 trillion deficits on the theory that, well, that's going to improve the economy. And it's like, well, what it's going to do is it's going to put a lot more money in the hands of rich people who don't need to spend to survive. They spend because they want to spend. And you and I had that little conversation this morning about Bitcoin.

And, you know, the whole Bitcoin maxi thing is funny. But if Bitcoin is used by rich people as a savings vehicle and they only spend what they need to spend, then you'll start to see price action sort of similar to what we've seen. And I think that is actually happening. It amazes me how many people came out this morning, even people who are smart people like Cliff Asness. Cliff Asness is brilliant. I mean, he and I don't always agree, although I think at the core we do. He's just not a believer in Bitcoin. He just doesn't really give a crap about it, to be honest. I don't think he hates it or he has an emotion about it. He just thinks people in the community are lunatics. But when people like him say something that's overwhelmingly ignorant, such as, we had a potential war this weekend and you see how volatile Bitcoin is, it should have gone up,

not down if it's a safe haven. That's just fundamentally ignorant for the fact that Bitcoin is literally the only liquid asset that people could sell. And people have a tendency of selling to be able to hold what they need to spend when they think the world is going to shit. And we've said this a million times. I love Mike's analogy. Big guy comes out of the floor. Okay, sell 10% of everything. Well, if that 10% of everything is on a Saturday night, that's literally, okay, what's 10% of my entire, well, what can I sell? The only thing you can sell is Bitcoin. The only thing that's damn trading.

And so it's just a fundamental ignorance of how this will play out is it just, it's still, it shows how early we are. We are so early. I can't phrase it any other way. What gets me is we have geopolitical conflict. And so the market is volatile and people dump and then it goes back up. We just did this with Ukraine, right? Everything dumped and then everyone went, okay, it's fine, whatever. This war, I do not mean this from a humanitarian perspective, people, but for markets, it seems like markets shrug these conflicts off within 48 hours at this point. Can I just point out one key thing that people get wrong about wars is using my only 40 years experience trading crude oils wars, I'm bearish for crude oil.

The first one I really remember, still was kind of young, was Iran-Iraq. Crude oil futures first started then around $30 a barrel. The bottom in 86 was around the peak. The bottom was 10, went up to 30. And then we had the Saddam Hussein's evasion of Kuwait. Crude oil popped from 20 to 40, and the bottom came around 10, and then was it 98? It took 14 years to take out that high. I just love when people say that.

I'm like, okay, maybe in World War II. But now it's different. It's just the world's changed. You see the price right now in crude oil. It needs continued some form of supply constraint out of the Middle East due to wars to stay up. Otherwise, it's going to drop below its cost of production, just like natural gas did, just like corn did. And you need to shut off what's really pressuring crude oil and has been pressuring it for 15

years. That's the excess of supply out of the US and Canada. That's just the way they always work. It's the way it always works. And I love pointing it out. And people push back and say, it's going to 150. I'm like, OK, well, with your money, only people usually say that. People who don't have money on the table have never really ran value at risk models and had ran money.

It's just what all commodities people know is you never buy it after it goes up. You sell it. It's the way it works. So I look at the price right now at 84. If you look a year ahead futures at 76, what stops it from going there or lower. So that's the key thing. Remember, wars are bad unless they get some. And also, so we just, that's the key thing. And then we just had a significant 200-year events on the back of each other. First, we had the pandemic, the biggest money pump in history, which pumped all assets.

And then Vladimir Putin's invasion of Ukraine on the back of the unlimited friendship. That's your pump in all commodities. They're all in the process of dumping. They bounced a little bit, and then they're going to probably roll over. And that's why I always tilt back to you absolutely have to have beta to keep going up. That's why I point out it's an inordinate burden. That's why I see severe deflationary forces in all the lessons of money pumps in history are towards severe deflation after the inflation.

And you've seen that in commodities. The only problem with that analysis, and I agree with everything you said about commodities, because commodities are sensitive to the ability of technology to continue to get them out of the ground cheaper. And there's a lot of it in the ground, is the chart that James brought up before. Deflation in a world where you have massive government deficits is fascinating. I mean, denominated in something, you get deflation, but if you are inflating the currency by printing, by just consistent monetary printing, that denominator makes it really hard for absolute prices of things that are sensitive to that to go down. Now, yeah, commodities where technology gets it. It's sort of like, why is it that services prices,

and I don't care whether we're talking about insurance or education or medical care are like this. And commodities prices are at best kind of like that. Well, the answer is because commodity prices technology can make more efficient and can make cheaper. You can't clone human beings, at least not yet. The complex won't allow AI into education, although I suspect that some of what's going on now might actually change that. But the absolute reality is that the monetary inflation and consumer price deflation because of better technology on things like commodities and the cost to produce a shirt.

I mean, shirt prices are more or less flat for, what, 50 years? Why? Used to be made by women. I still am old enough to remember the International Lady Garment Workers Union commercials on TV when we were kids. And now they're made in factories outside of the United States. I mean, it's cheaper. So you need to de-link between the two. You can't group both together.

We are having monetary inflation. Monetary inflation will, and I've said this quite often on this show, the goal of policymakers is to facilitate monetary inflation to create asset inflation while keeping consumer inflation as suppressed as possible. It is not an easy thing to do, but it is clearly what they want to do. But they are being helped. They would be helped by oil prices backing up. I suspect they will back up. And I suspect that inflation prints in the back half of this year when you're right about oil and oil is trading at $55 to $65 a barrel instead of $85, you'll see that will feed back into the CPI and will be helpful.

And of course, the politicians will take credit for it. But I think you're right about that on the consumer thing. All of that has nothing to do with the fact that we're printing tons of money and it's going to end up in assets because it's where it will end. James, you said earlier, so we love to talk about cuts and hikes, right? So you said the Fed will cut this year, but now one of the governors, I think it was Bostick this weekend or on Friday said maybe one, something to that effect. It was supposed to be three and it was supposed to be March and then it was going to be June, but now maybe not. And I mean, there's really no good reason to cut. Dave and I were discussing this before. I'll clarify. According to their mandate as the Fed and the data they're supposed to look at, there's no reason to cut. There are

very obvious reasons to cut if they're looking at the treasury market, as you said. Yeah. Their dual mandate is to keep stable prices and full employment. But look, we're in an election year. The Fed, whether or not they want to admit to it, whether they are political or not, there is tremendous pressure from the White House, from the administration, from certain congressmen and senators and congresswomen that are clamoring for the rates to go down because they want the economy to be roaring going into this election. That's just reality. You know, are we going to get a rate cut before it? I would say bet even money absolutely that we would get a rate cut before the election. We'll see whether or not the- A month before, wink, wink.

Right. Exactly. It could be two weeks before. The economy is doing great. There are two ways you can look at it and say, we didn't have to cut rates because the economy is doing so well. Or and that would be because we're spending so much money because our deficits are so great. And that is not going to stop that. The money coming out of Washington is not going to stop before this election.

There's just no way. And so what are bond yields sniffing out? That there's going to be an onslaught of longer term paper. You know, the structural issue here is that we're drawing down the reverse repo. That's been the little extra kitty that the Treasury has been able to tap into with all the T-bills. And so we've been issuing T-bills after T, like ad nauseum and with a higher rate to draw that money market money out of that reverse repo. Once that gets drawn down to a hundred million or a hundred billion or less, then you're starting to tap into bank reserves and bank reserves are about three and a half trillion. And, and so the structural issue here, and Dave knows this, and I think Mike and I've talked about it last time is that the, the fed Powell has, he pointed to it in the last presser. He said, once bank reserves get to a certain point, we, we, we have to stop QE or QT. And so they're already anticipating that and they don't want to

just stop it. They want to taper it. So they're tapering it already, anticipating that they're going to avoid those bank reserves being drawn down too much. Again, and this all points to the same exact thing that we were talking about at the of the show is that they can they have to avoid a disruption in the treasury market especially one like we saw in september of 2019 i mean that's they want to avoid a repo spike they and that will happen if there's not enough liquidity in the in the the bank reserves you know and so so we must keep that because they're going to continue to move out on the duration curve to issue more treasuries that are longer dated. And that's just a structural reality. I don't even know if there's any debate about it. Is there any other way? If you guys have another way for them to do it, please tell me, because I don't see one.

I know that. I would just be I have nothing surprises me at this point. As I say on the shows all the time, the levers they have to pull and the tricks that they have up their sleep for can kicking have just blown my mind over and over and over again. The thing to always remember about treasuries is there's a it's the Von Vigilantes we learned about in the 90s really worked for a little while and then we realized, well, if there's ever a problem, the government just buys all they want and that's no problem.

The key thing I want to point out is getting back that we all can kind of agree on what Dave's pointed out earlier and even you, James, is the denominator, the most significant denominator for everything is gold, has been gold, remains gold.

And that's changing. We will all agree that Bitcoin is demonetizing gold. And that's changing. We will all agree that Bitcoin is demonetizing gold. It's starting to. The point I like to make is you look at Bitcoin versus gold, its chart looks bad. I mean, it peaked. And just point out the facts. It peaked at the ratio was 37 Bitcoin to one ounce of gold. And now we're 28, I'm sorry, ounces of gold to Bitcoin. Now, Bitcoin's declining since then, yet beta's making an all-time new high. That's the divergent weakness. I guarantee you there's a certain amount of people running macro money looking at it like, uh-oh, this is something not going right. What should I do? Probably overweight a little more

gold. Not saying get out of Bitcoin, but that divergent. Now, the peak you see, I'm just looking at this chart right now at 28. It looks like a high similar to last one. The difference is beta is at an all-time high. I mean, we don't have that discount in beta. And that's why I point out is this historical relationship of gold beating everything. Gold's a great denominator for everything. I'm farmland. I've compared it to farmland since the 1960s in the U.S. It's stable. And the U.S. has been around four ounces of gold. It's equal to a decent acre of farmland.

So that's the key thing I pointed out earlier. I'd still point out is we have not had the test yet. The SME 500, the peak to trial was 2.6% so far. That's nothing. We need a 10% correction. And then I'll reassess. And I'll see how my value at risk models kick in. That's why I like to point out it's just very risky being an asset that's three times the volatility of beta in an environment when beta backs up. And that's why people are

still migrating towards gold. You know what's really risky then? If we're talking about Bitcoin as being risky, the one thing that was a little different this time in the crash was how aggressively the altcoin market sold off. We've seen actually in this bull market in general that there hasn't been as aggressive sell-offs in the altcoin market when Bitcoin has dropped. In fact, we've sometimes seen them go up. But I mean, Bitcoin's down 8% in seven days. But you start scrolling down here past like number nine, Doge 20, Avalanche 23. And some of these dropped 35, 40%

before bouncing 24 on ICP, 33 on Uniswap. Of course, they had a Wells notice from the SEC, but we did see this time where there was risk off within the crypto market, right? Much more dramatic than we've been seeing before. there was that that gave me a little bit of a that set off my alarms a little bit nothing wrong with sda speculative digital assets but just what that's what they are great for speculation and then there's bitcoin right i mean look you know we'll we'll debate this till we're blue in the face we all know what am i going to say bitcoin trades like an option yada yada. I don't want to go through the whole thing a million times. I think that that matters. But getting back to the treasury market, I think it's really, really fascinating to look at the yield curve. People

talk about betting markets and this. I just like looking at the yield curve. And right now, the yield curve from one month to six months is flat as a pancake. Literally 5,375 yield at one month and 5,373 at six months. That's pricing in ungots, as they say. Then between six months and one year, you see it goes from 5,373 down to 5,190. That is less than a full rate cut at a year. Then if you go out to two years, now we're at a full rate cut at basically at five. And then all the way to 10 years, you're at 4.6. So it's 40 basis points lower. I mean, the level of inversion and the flatness in the yield curve is, I mean, it's actually astounding in a way. I mean, if the thesis is the reason we had a negative yield curve wasn't because it was tilting toward recession,

but because they were manipulating the long end to be as low as possible in order to finance deficits, as you need to finance trillions of dollars, this is not good news. You know, because there's no place to push. So, yeah, I mean, the argument of why are they going to cut if they have to it's because in a flat yield curve if you cut the whole yield curve drops and will in fact do that i don't know james when you tell me but it feels to me like that that is what what the market is basically sniffing out yeah so i've been i've been wondering the exact same thing and we're watching it kind of happen in

real time with these auctions. And so, and, you know, as we go into the, so now we're in tax season, right? So it's going to be interesting to see just how much the treasury harvests from all of this asset inflation and whether we get a big tax harvest that allows them to back off that need for borrowing, it's going to be interesting in the next three months. But I'm watching those very carefully for signals. I did just take a look really quickly just out of sheer curiosity at Bitcoin dominance. And this was basically a three-year high. So if you want to know, that was a real meaningful sell-off on altcoins that we just saw this weekend. And I wonder if

that's the harbinger of that froth that I've been talking about here for a long time and that Mike's talking about, certainly within the Bitcoin market. I do want to pivot slightly to Bitcoin itself. Well, let's pause on that for just one second. So remember, we're getting a lot of new attention into this market from the ETFs. And I know that because I'm talking to people who never even considered Bitcoin before, and they're suddenly sniffing around it and trading it. Then what do you do when you're a trader? You see that there's an asset, you see, well, this is interesting. What's even more interesting? Is there something out there that's, that has a little bit

more juice to it? Could I, could I, you know, trade around something? And of course they're, they're, they're playing in those markets. I mean, that's just, that's an obvious kind of development. When you have more people come into the space, you're going to be looking for more things to do. But they'll revert back to that stable that, even though it's volatile, this is the one asset that continues volatility in an upwards trajectory. Dave, I think you were about to jump in or maybe it was me. No, continue what you were about to jump in or maybe it was... No, continue on what you were going to say. Well, I was just saying we still have, in context of all that, and this makes sense, by the way, James, because if we're getting more demand into Bitcoin through the ETFs

and the altcoin market is just the same washing machine, of course, there's going to be times when if that washing machine gets flushed, the Bitcoin demand hasn't really dropped with the ETFs, right? And now, we'd be remiss not to talk about this. Hong Kong gives initial Bitcoin Ethereum ETF nod, ish we're saying. So this is happening in Hong Kong. We've talked about it, I think, before. The amount of spot Bitcoin trading volume in Asia dwarfs what we see in the United States.

But ETFs are exponentially more popular in the United States than they are in Asia dwarfs what we see in the United States, but ETFs are exponentially more popular in the United States than they are in Asia. And the stock market in the United States is an order of magnitude larger than it is in Hong Kong. So it's like five times larger, six times larger. Is that right, Mike? Somewhere around that. I can take that. Yeah. Yeah. The issue with this, why this is a big deal is for the same reason that, you know, I remember when I first started buying gold coins, I thought that the smartest thing to buy were Chinese pandas because they're 0.199% pure. You could buy, buy them. I was buying them in the, I kind of hate to admit how long ago it was, but it was in the

four to 600 range. So that can give you an idea. I was buying it at spot, you know, and why? Because the Chinese government didn't allow their own people to buy them. They literally minted them for export. And, you know, and so they didn't want their people owning gold coins at that time. Well, we know quite famously that China, you know, shut down mining, et cetera they didn't want their people owning gold coins at that time. Well, we know quite famously that China shut down mining, et cetera, didn't want their people owning Bitcoin. Them approving the Hong Kong ETF is essentially telling their rich people, OK, you guys, you want to own Bitcoin now?

Now we're going to let you do it. And you're going to we're going to do it in a way that we're going to know you own it. And we're going to be able to tax you on if you sell it. that we're going to know you own it and we're going to be able to tax you on it if you sell it. But we're going to let you own it. That is not trivial. That is absolutely not a trivial thing. And so, you know, when markets go, you know, in the old days would go bananas to the downside. Oh, China is going to ban it again. And then, of course, eventually they did. And the hash rate went down. And then it has had since the china ban is the biggest up and up into the right chart i have ever seen is bitcoin hash rate and i know you have mike alfred on your

shows uh often mike uh will talk about this at you know ad nauseum but he's right in that the the strength of the bitcoin network is continuing to go this This is another reason why, because now there's no country in the world whose rich people are being banned from buying Bitcoin if that's what they want to save their money in. And so it is non-trivial. Is it the kind of news that you run out and say, buy, buy, buy, and it goes boom? Maybe not, but it's yet one more part of the narrative, which is why I'm more long-term bullish on Bitcoin now than I've been in a long time. It's just the news keeps coming, and this is all part of the same thing. Mike, I want to ask you a question because it's up for much debate. When you look at the Hong Kong market and what's happening in Hong Kong, how much do you translate that to China?

I think it's one of the best leading indicators. I think it was the book, The Price of Time. Chancellor, I think was the author, pointed out Chinese equities at their peak were about two times GDP, essentially what Japan was. And Chinese real estate was about four times GDP, essentially what Japan was during its peak. Quickly, four times GDP, essentially what Japan was during its peak. Quickly, I just did a quick market cap of the S&P 500 versus the Hong Kong Shanghai Index. It's about two times. I think that's just those two indices. I like to look at as the HSI S&P 500 ratio is the lowest since when Chairman Mao was president in the 70s. Now, a tradable bounce is going to happen, but that's what you'd expect in an economy that is just doing normal,

what it's always done in terms of emerging markets that grow too fast and then piss off the best customers. I'm saying that facetiously because what they did was shocking, what President Xi did. But I think President Xi is maybe smart enough to think, like, should we really take the risk of going full on gold without having some digital assets in that space, which is maybe where they're using Hong Kong as the test case? But Hong Kong is China in that regard. That's what I mean. Exactly. It is. That's part of the whole indication is it used to be somewhat independent, but that changed.

Was it 2015 or so? And it's the riots and everything. It's done. It's now essentially China, but they can use it as a test case for these kind of trial balloons. But that's one of my key things I've had for years, certainly having visited there 10 years ago and having worked for Japanese firms. It's worse, I think, than the Japanese implosion. Japanese GDP at $4.4 trillion is the same it was in 1990. I think expect the same thing from China. The thing

is what Japan did not support a war and did not have COVID pushback from the whole world saying, yeah, we don't need to import from China anymore. And you just look at Germany's GDP. They're one of their top, what, one third of BMWs are exported to China. That's an economy that's way overdue for some pain, unfortunately, just normal reversion. And you're seeing a property crisis and exports. And anytime you see a bounce, I think astute investors know that, yeah, sell. Yeah. Do you think though that this is, James, I mean, how big do you think the news is then of this coming to Hong Kong? Is this an indication that China's doors are open to Bitcoin again? I mean, the amount of hash rate in China, I think it's now over 20% or something last I checked.

I'm not sure. That was supposed to be banned as well. Yeah. The hash rate in China is, the government apparently is selecting which provinces or areas or regions are allowed to be mining and then they're going to take a cut of it. And, you know, that's, that's what we're hearing on the ground. And, you know, so is it significant? Yeah, it's very, it's quite significant. And like you said, look, the, the, the amount of money in Hong Kong is massive. So that was interesting. The, the, the size of the markets there, Mike, I think that's, that's changed over the last decade, but you know, the, there there's going to be demand. Is it going to be insatiable? I, you know, I think if you're in Hong Kong, you're not wanting to invest in China real estate, you know,

you're looking for assets to tuck your money into. And so this would be interesting. Now the question is, what kind of oversight are they going to have in these? Are they going to be in kind? Supposed to be. The rumor is that they would be in kind, but I didn't see that clarified today. And what I mean by that, can you liquidate your position for in kind, or do you have to take currency? I'll make a bet with any of you.

I don't think you'll take the other side. That in-kind for economic efficiency, you'll be allowed, sure. But I guarantee you that the wallets that receive the in-kind transfer are going to be monitored and they're going to be KYC'd, so they're going to know.

There's no way. For people in China who are buying this in the way that they would buy gold as a hedge, they're not buying an ETF in China. I mean well no they could if you're rich and you want to be able to have a financially diversified portfolio fine but there's no way that the chinese government is going to allow you to do it in a way so that you can move your assets completely outside the system you're going to stay in their system yeah you're going to either stay in their system or stay monitored by their system, full stop.

And, you know, it's just, it's crazy not to, which is, which is actually, it's probably the most important point when people keep talking about, you know, when Elizabeth Warren says her absolutely insane nonsense about how Bitcoin is terrible because of terrorist financing. I mean, come on. The authorities working with Elliptic and Chainalysis, et cetera, are able to trace pretty damn well. And the fact is, is there's no reason, if you're trying to move billions of dollars, to believe that you could do so with Bitcoin in a way that governments will not know who you are, and you're going to operate

outside the system. As Mike would say, when it comes to people who want to bet long-term on oil at 150, good luck with that. It's just not going to happen. I mean, until the world fundamentally swings back, because we are clearly on this side of the pendulum towards government control and lack of privacy, until the world wants to swing back and we elect political leaders that want to facilitate privacy, the tools are there to know what's going on. I mean, sure, with Bitcoin, the issue of paying your babysitter or your lawn guy off the books is probably easier. I don't have a lawn, nor do I have babysitters. So I picked examples that Noah can say, well, look what you're doing.

Can't do it on Venmo anymore, right? Or PayPal. Yeah. But the point is, is that, yeah, I mean, there's some more financial privacy and certainly you can move it around, you know, at the small levels. But if you're talking about large institutional size capital movements, come on. I mean, it's just, it's complete. It's just a complete paper tiger to say that you could do that. So no, I think this is the Chinese government saying, okay, you want to do this, you're going to do it on our terms, because there's no doubt that the ETF system will be more of a closed system. There's just one thing on that. One of the best signs I've always liked to use is government bond yields. And the 10-year note yield in China right now is 230 basis points less than the U.S. 10-year.

That's the most ever. That's a severe deflationary, recessionary indication. And if the government's buying in, that's how bad it is. That's just getting started. This is just early days. Think of how much leverage is in that economy, Mike. What happens in that economy if yields doubled, given the amount of leverage that's in the economy? That's why the government's doing what they're doing, because there's a lot of leverage and they're kind of screwed. I yield Japan 30 years a year. Yeah, I mean, we started this. I'm looking now at the 10-year chart. I hadn't really given it a look. I still hold TLT just long-term. We started this year at about 3.8%, 4.6%.

I mean, 10-year yields have absolutely bumped this year. And they're up from 4.5% to 4.63% today. Guys, the 10-year, go look at the yen. And I've got to go. My dog is asking to go out. But go look at the yen. Pull that up really quickly if you want to know how much chaos the 10-year is having on the globe. I mean, look at it.

It's up over 154 now. I mean, this is- And I was just in Japan. I could have gotten such cheaper McDonald's two weeks later. I blew it. Should have gone later. So, James had to go take care of the dog. And we all have to go because we are over time.

We're just going to look at the ghost of James. Let him conclude. Well, Dave, actually, I want to know, Dave, is your chat with John Deaton going to be recorded? I don't think we can record them. I think that the conference is under Chatham House rules. I'll find out. If it is, I will get it.

So yeah, I told Scott before, I'm doing a fireside with John, who's, you know, look, he's clearly an underdog to Elizabeth Warren, but if there was ever a candidate, if central casting was going to come up with a candidate to basically be someone who spent their entire lifetime fighting for the underdog,

actually fighting for the underdog, as opposed to talking about doing it and then helping the rich elite, John would be the guy. Pretty much every time Elizabeth Warren has said something about John, it's literally been not just a lie, but the polar opposite of the truth. And so, you know, if he gets enough oxygen to where people could start hearing the message, I think that race could get a lot more interesting than people think it could. But we'll see. If nothing else, as my joke is, it will turn the eye of Soron back to Massachusetts.

Yeah. Meaning that she'll need to spend a lot more money and other vulnerable senators and Congress people that the DNC might otherwise be funding may very well find their funding not being as much as they think they're going to get. And that could be bad news for Sherrod Brown and a bunch of others. So, you know, stay tuned. All of this is very interesting. You know, but John is, look, he's a pro-choice, centrist, you know, titularly Republican, but could easily be a Democrat in a different era or an independent, but he's running as a Republican that is free market in the sense of economic freedom,

having supported 75,000 XRP holders against the SEC, standing up for, as he puts it, the bully on the block. And who's the ultimate bully? We know who the ultimate bully is. He's now taking, he's literally, if we were playing a video game, he's going after the boss at his level, the final boss. So that's what he's doing. Bowser. It's going to be interesting. Elizabeth Bowser Horn.

All right, guys, it's 10.03. We went over time here. I will not be here tomorrow because I will be on a plane, but I'm doing the rest of my shows this week, jet lagged and at the wrong time for me. But we will be doing that and I'll be back here by Monday. So obviously we'll be back next week. Guys, this is a great chat. And we'll be past the halving when we have our next chat. So that'll be in the rear view and we can start, I guess, talking about something else. All right, gentlemen,

everybody. Thank you so much. Dave, enjoy your day at the Stock Exchange. James, let the dog out. And Mike, see you soon. Thanks, guys. Bye. Take care, Sean.