The Wolf Of All Streets - Bitcoin SHOULD Be Falling - So Why Isn’t It?

Episode Date: August 17, 2026

Bitcoin continues to hold above $63K despite heavy ETF outflows and elevated Treasury yields, showing surprising resilience as markets remain cautious. With volatility near historic lows and Goldman expecting no Fed hike in September, the setup could be building for a bigger move as macro and geopolitical risks remain in focus. Learn more about your ad choices. Visit megaphone.fm/adchoices

Bitcoin should be failing. So why isn't it? We're in that point in the market where seemingly we have nothing but bad news, but Bitcoin remains resilient. That's just one part of the conversation today. Obviously, we're going to dive into everything macro, where markets stand, what our predictions are for the rest of the year with Dave, Mike McGlone and special guest from Franklin Templeton, Chris Gallipo. Let's do it. Happy Macro Monday, everybody. Good morning, everybody. Welcome to Macro Monday. We're going to dive right into it. Mike McGlone will be joining in a bit. He was supposed to be here to give us his thoughts on the morning meeting, but he had called off to be on actual TV. So he prioritized that over us. I'm not saying that I'm feeling personally an affront or anything, but that that is what happened. Mike sometimes duty calls, but it's good because we can't talk about Bitcoin yet, Dave, because we need to hear Mike tell us it's going to $10,000 and that there's millions of cryptos and unlimited supply. Please, please, dear God, try to steer the conversation away from that nonsense. We won't do that yet. We won't do that yet. Chris, listen, so we've got you here, obviously,

head market strategist at Franklin Templeton. Welcome to Macro Monday for the first time. Maybe you can set the table for us as to where you're generally feeling about markets. I read your most recent research. It was great. I don't think there's bearish as McClone. Well, listen, let's remember that the world doesn't end that often, right? despite the constant negative rumbit of that. Look, I think the backdrop here is fine. You know, to be honest with everybody and with your audience, we've been bullish since the lows in COVID,

maintain that through 22 and really have been flinched through all these different pullbacks. And there's been some challenges, right? But I think the economic backdrop is fine. I think way more important than that is the earnings picture, which is more than fine. Tape's not expensive. I can't say it's cheap either. tape is broad, earnings power is broad. And so, you know, those are the conditions that set the stage usually for a pretty good, you know, environment for risk assets. And that's what we've seen.

So, Chris, let me ask you a question because Mike's always pointing something out, and I'm always counterpointing it. The thing he points out is market cap to GDP is off the charts all-time highs. thing I always point out is earnings compared to GDP is also at all-time highs. And there are structural reasons for that, in my opinion. But I'm curious, you know, when your clients ask you, what do you, what do you think are earning or market cap to GDP? Is it bubbling? Is it this? Or is it simply a reflection of liquidity in the marketplace? Because we've had decades of fiscal dominance and accelerating, you know, money production, basically, however you want to call it. printing, you know, however you want it to define, whether you define it by M2 or you define it

by broader markets, you define it by debt, however you define it. I'm just curious because that is really the fundamental tension between Mike and I on the macro side, has been for the better part of, I don't know, how long we're doing this, Scott, three years? Three, four years now, yeah. Yeah, so I'm curious where, you know, what you see there. Is that the so-called Buffett indicator that you're referring to? Well, I mean, I don't know what he, he hasn't, he just, uses his Bloomberg charts and he talks about market cap the GDP. I think that scares the hell out of it. I think that's what Buffett uses.

That's that's Buffett's indicator of when to take risk and when to not take risk. Check that because I'm not sure it's the exact same definition, but I think it's close. So if we take that as a starting point and you look at market cap to GDP, it might be be slightly different than that. But Buffett was worried about that. And look, we can't argue with the guy's long-term track record. and by the way, his investment horizon is different than any ones in the world, probably, except for an endowment.

That was strong in 2022, right? That's where he raised all his cash. S&B's up 100% since then. So market cap to GDP, okay, like you're talking about the best companies in the world here driving that, and that is earnings driven. Let's also not forget that the stock market is not the economy, and the economy is not the stock market. Although Mike would argue that the market, that the economy is the stock.

market these days because of the wealth effect is what's driving America. I personally tend to agree with you. The difference between Main Street and Wall Street is actually causing a lot of the political earthquakes that we're seeing because people who have money are making more money because the government is creating more money and the cantalon effect tends to go to the stock market and the people who own it, right? Incidentally, M2 went straight up post-COVID. That's what caused big, big part of the inflation problem along with supply chains, M2s come straight down since. And if the economy is the stock market and the economy drives it, someone explained to me why a couple of years ago Germany was in a recession for two years and the tax was up 100%.

Oh, no, we're talking specifically in the U.S. But look, you're right. They're different. Mike's point isn't that. It's that the wealth effect is what's keeping the U.S. consumer and the ability and consumer demand going. That's his point, which is, he's not wrong on that. Yeah, he's not wrong on that.

Yeah. Anyway. Yeah, so I want to jump into the key events this week, since we don't have the morning meeting and see if any of these have consequential July housing starts, July pending home sales data, Fed meeting minutes today. August Philly Fed Manufacturing Index, August S&P Global Services, August SMP global manufacturing. This seems like a quiet week for data compared to a CPI, PPI, like we had last week. Is that fair to say? And maybe we should unpack what did happen last week,

because once again, sort of mixed reviews or takes on the inflation data. I would agree. I think last week is a lot more important than what's in front of us. I think the next two big things to focus on here will be jobs data and what comes out of Jackson Hole. I think those two things will be important. But last week, I think, was better or more important. And I think you've got, you know, basically in line, roughly in line CPI, PPI. But I think that I don't get too caught up in the economic data, to be honest with you. So as a 35-year stock picker and portfolio manager, I'm much more worried about the micro stuff than I am any, you know, point in time piece of information, which is, by the way, late, backward looking and revised a bunch of times usually. But I think last week was, you know, generally tape friendly, right?

Generally tape friendly. And then we'll see what comes out of Jackson Hall. And that you're literally, your August 14th report was called micro over macro. Yeah. Right. So I'm looking at it in front of me. Maybe you can explain exactly what that means to people and how you then view markets to that lens. Yeah.

So I think if you look over time, right, you go back 75 years, you pick the index, any of the big U.S. indices, or at least aspire back because you can get the data. But if you take the S&P back 75 years and you look at S&P earnings growth on a reported basis, and you look at the S&P 500 price movement through that 75-year time frame, what you'll see is the correlation is spot 9-8. I've tested every index. That is the variable that matters. Now, we can shorten the timeframes.

It's fine. Correlations are spot 8-5 or higher through all periods, right? So that is the prime driver. I think the risk and the things that can cause markets to come under pressure or light of fire under equities is if the Fed is to start, let's say, a prolonged hiking cycle. right? So we'll see what happens here with Warsh. But markets just don't collapse. Markets just don't fall off a cliff. There's got to be some sort of catalyst of that normally, at least in my experience, back to 91. That's typically the Fed raising rates, holding rates too high, you know,

breaking something and causing a recession. Or you get a black swan like COVID that, you know, no one can really predict, including me. So that's what ends the party, right? Conversely, if they start cutting rates, especially when the economy is expanding like 24, that's gas on the fire. I think we need to be, I'm thinking about that, right? And the other thing I'm thinking about really is this is pretty much a rate of change game in terms of equity space, right? So we've got to be mindful of where we are here on a reported basis, where earnings in Q1 plus 25, earnings in Q2, if you take out the one-time events plus 30 year-on-year. Those are huge numbers. So the rate of change is going to slow a little bit. We're not talking about peak earning. You're talking about peak

ROC, that's something to be mindful of here. So maybe we get a little more VOL on a go-for basis. But look, you can't argue with the earnings reports in the first six months of this year. I know AI gets all the headlines, it's broad and strong everywhere. And you know what, guys, it has been for the last 19 months, right? The stock market in the U.S. is broad because earnings power is broad. Let me ask you this. What's the number one performing index in the last 19 months? Large value. Number two, small cap. You know what the caboose is? Mag 7. Yeah.

They followed the Mag 7, to be fair, right? But yes. Because until 18 months ago, the prevailing narrative that here and everywhere else was the entire market is the mag 7, right? And when they started to sell off, people said that was the sign of a collapse. And we aptly, I think, at the time pointed out, it was just rotating. It wasn't leaving, right? It's not like if the Russell starts to rise when all those things start to fall, that's not a market

collapse. It's a market rotation, right? and seeking more risk because they've made so much money. It's a combination of a couple things. From 2020 to the start of 25, the earnings growth profile was absolutely and utterly dominated by Meg 7. I have the date. I can show it to you, right? So that was stocks following earnings overtime.

As we entered 24, sorry, as we entered 25, what we noticed is that the earnings power in the U.S. was beginning to broaden out. Meg 7 still looked okay, but everything else was coming online. It was coming online in E. it was coming online in Japan and in Europe. And so we told our clients, hey, we need a broader stance here on client accounts. So if you're super tilted to Russell 1,000 growth, that's work for the past five years, four and a half years.

You need to shift gears here because the earnings picture, that's the most important variable, was changing quickly. And, you know, that still looks very good through calendar 27. I mean, it's important to understand the why. And investors, I mean, I end up with conversations with people all the time. time about this. The biggest single problem in investing is so many individuals fight the last war and they're looking backwards. And so if you try to understand what's been happening. So the MAG7 was creating technologies that the largest companies start to adopt and make themselves more productive.

So you think about AI. And there's some very basic things in AI that drive earnings in large cap value companies, help desks. You want to run a help desk. You used to have to, you know, the first, you know, the first big rotation to help companies do better was they outsource their help desks to India, right? You know, now that costs money because, so they lost money in the beginning because they had to go through restructuring charges. So they did that. And then AI comes along and all of a sudden, you realize that you can insource your help desk with way fewer people by creating bots that will allow you to, you know, screen calls do all sorts of things. Same thing in manufacturing, just in time, managing supply chains, all of those things.

Very nitty, gritty. The kinds of things that when you're talking to the product manager of a large multinational corporation, they are very excited about, but everybody else finds, oh, my God, that's boring. But that boring stuff that the Mag 7 produces has allowed the average, what you call a value company, value companies, just by the way, just to understand is basically defined as companies who aren't growing their earnings as fast, but more, it's really more market cap-driven. It's really more the way they look in terms of earnings per share and that sort of thing. And those companies

gain from technology in terms of productivity. And so the fact that large-cap value is outproducing is not surprising when you consider how technology is going on. I mean, we are literally in the in the middle of an industrial revolution because of AI, maybe even the beginning of it. But the beginning of it is still very meaningful to companies. And so when you talk about Chris that this trend is continuing, it's not surprising that the trend is continuing. And I think that people always overestimate that,

or underestimated depending on who you are, right? You know, they say, oh, well, the benefit to the technology is going to be from the people who produce it. Well, no, not really, especially when it gets commoditized. When technology gets commoditized, the benefit goes to the users of the technology. And that is a lesson that people in crypto are starting to learn and have yet to learn. It's a lesson that technology investors you think they would learn because we saw it. We've seen it every time.

I mean, the internet bubble happened in the early 2000s, right? And a lot of the companies went to boom. But the impact of those companies was huge on the domestic economy writ large and continues to be. And it's really one of the most important lessons from a macro point of view, I think. I mean, I don't know. Sorry for the, for the monologue. Yeah, shouldn't we continue to have massive earnings expansion just based on the fact that spending goes down because AI is deflationary, you know, obviously and technology is

generally deflationary. If a company makes the same amount but reduces expenses by 20%, isn't that the same effect? Well, yeah, that's the point. Yeah, that is my point, much more pithy. Yeah, just summarizing, exactly. Right, Chris. And we've started to see that.

So in Q2, there was, you know, two dozen S&P component companies that talked about, they specifically now quantified their EBIT margin impact, EBIT margin accretion from using AI. And I think the average accretion was 180 basis points, which is, that's significant, right? So what you've heard on earnings calls. probably for the past 12 months, past four quarters. And what we're going to hear on a go-forward basis is exactly where you guys are both laying out, that we're going to hear more and more companies, not just talk about using AI to eliminate a call center,

but really to improve efficiency, productivity, and ultimately profitability. We're probably in the first inning of a nine- inning game there. And it runs the gamut, right? So companies in all industries, up and down the cap step, It's been very consistent probably for the better part of the past year, but now you're starting to see the discernible ROI, i.e., in this case, margin accretion, right? That is probably going to continue. And, you know, I think you guys make a really good point about moving from the innovators of the technology to the implementation phase, right?

So if the three of us are running, you know, Welker and company or Welker widgets, right, we're trying to figure out how can we increase all those things, efficiency, productivity and profitability by using AI. And I don't think it's a, you know, you're talking about this massive run on human capital necessarily, but you're talking about operating more effectively, more efficiently. Here's a great example. So I think it was Q1, Walmart on their earnings call talked about the use of AI buy Walmart customers in the store, right? So you can fact check me on this, go back and read the transcript. So what Walmart told this was if Scott is on the floor in a Walmart store and he is not using Walmart's AI agent in their app. And I'm on the floor at the same time.

And I am using the AI tool of Walmart's app that I will spend 35% more in the store relative to what Scott will spend because that AI agent is directing me, you know, you just bought these sneakers and aisle sex and you might like these shorts or whatever the cases. We're going to hear a lot more of them. And so I think it's early innings there. But it's great point. Yeah, slight pivot here.

So I just saw this break. I guess we can't call breaking news. But U.S. 30-year treasury yields reach 5.29% highest since 2007. So I guess we can put that in conjunction with your comments earlier, Chris, about Warsh. If you would cut, that could kind of be the existential crisis. September Fed interest rate increases very unlikely. Goldman Sachs says, I would say September Fed interest rate increase is 0% if you listen to Dave and I.

You know, we've been saying that the whole time. I don't think there's a chance of worse cuts. But let's talk about the fact that there is a little problem here. Well, he's getting the bond market's testing him, Scott, right? And so I didn't think that the last press conference really went that well. So I'm listening to this as an investor. and I'm hearing them say two things. Well, I'm hearing say a couple things, I guess.

The task forces being set up to try and figure out how they assimilate information, harvest information and the time we're going to submit a sample size and they want to improve it. That's great. I mean, I think that's fabulous, right? But then he also said a couple of interesting things. Number one, that markets contain information, bond market, stock market, currency market contains information. He's 100% right on that. That's the bleeding edge of information.

And so the issue that he created for himself there, in my view, is you have to, if you're going to say that, two-year note yields are about 50 basis points above the effect of federal funds rate. If you look at that indicator over time, what you'll see is two-year note yields lead the Fed. It's not the other way around. The Fed doesn't lead the bond market. The bond market leads the Fed. So that's one issue. And he was asked about that. And he said, yeah, we're going to give it a little more time.

And then on the flip side, you've got break-even rates, one, two, five, and ten that have come through the floor here in the last, you know, since March, I guess, which is telling him kind of you don't need to cut rates. So he's, I feel like he's got himself a little bit of a pickle here. That's why I think whatever comes out of Jackson Hole is interesting. But all along here, long bonds, right, as you just pulled up, Scott, are testing him. Not a surprise. And I think that the week after that meeting in my note, the title of my note was, wait, what? And that I think the bond market is from Missouri.

Prove it. And so I think it's going to be interesting here in the back half of the year to see what he does. Mike, you think, welcome. Hope you had a good TV appearance. We've referenced you about 37 times while you weren't here to ask you question. Obviously, we're talking about 30-year kind of hitting its highest since 2007. I guess, you know, you and I have discussed TLT quite a few times. I just popped up the chart in its slaughterhouse five, making its lowest since making a low below that 82 kind of level for the first time.

Also, you can zoom back all the way since 2007, not looking great out here at the moment. Yeah, I appreciate catching the last part of what Chris said is prove it. And the main place, the main market I've been wrong on is inching higher bond yields. Now we're at the highest level on a year-in basis right now at 528 since 2001. We saw that auction last week, the highest yield since 2001. So I had to publish this morning, you know, the whole theme of nothing stops this train. Well, something can stop to train. it's almost always prices and levels.

And that's why I point out when people are still bullish gold, I'm like, that problem is gold is at the highest level versus a basket or U.S. Treasury Bond Index since 1987. So it's almost 40 years there of wideness and how extreme the difference is. And so with the bond, obviously we all get why it's going there, just a question how much further it's going to go. And I like to point out, this is showing up in non-incorputing assets, It's highly speculative, highly volatile assets like Bitcoin breaking down.

Gold, same thing. It sits in the same category. It's annual volatility is two times S&B 500. Historically, it's much less. So that's a volatile asset. All the precious metals have broken down. Iron ore is even going down. And the one left is copper.

And I like to point out, copper stuck in this political situation, potentially with the U.S. in tariffs. But global stocks are used in copper are ample. Head trends are long. And they're long in assets have been way underperforming the stock market with a much higher volatility. So that's kind of what I'm watching. But overall, in commodities, what does, I'll end with this. What does Mr. Trump need for elections?

We know he needs lower prices. He has the ability to do that in corn, in soybeans, and crude oil. We're just a net exporter. We're well above the cost of production. My key thing Mike, I ask is I just love to look at this function in Bloomberg, showing the Fed's going to hike rates in the October meeting. Like, what's that, five days before the election? I'm like, God, no, there's no way that Mr. Borsh is going to,

hike rates. Just mentioned it would be like we've talked about this for it. There's no way. So if the market doesn't form, he's great. That's what he basically needs. The market needs to do for him. And bond market's not enough yet. I open the floor. Well, that's one of the things that Warsh said in that press conference. He said, these weren't his exact words, but paraphrasing, we don't really need to raise rates because the bond market's already done the work for us, right? Whether it's two year yields, 10 years have been kind of, you know, 470-ish. but as you guys point out, 30 yields up. That's not enough, right?

That's not going to cut it. No pun intended. He needs to probably give us a little better cons there and maybe take some action. I would agree with you guys. He probably does nothing here this year, but he's getting tested. Dave. I mean, the relationship between, you have to look at Fed policies. There's two different broadly speaking sets of policies.

There's interest rates and there's asset, you know, managing the balance sheet. The interest rate lever that the Fed has, the only way it has any impact on inflation is by curtailing aggregate demand. And by the way, definitionally by controlling investment spending. If you look at the drivers for inflation recently, the most important one being oil, the Fed has no impact of that. And in fact, oil prices rising actually creates a break on economic activity on its own. Now, it does so because people can't afford to spend or buy the stuff that is being used. I mean, oil is used for all transportation, et cetera. So it's not just oil.

It's everything, right, that people see. And so the argument that the Fed needs to raise rates in order to curtail aggregate demand to check inflation is kind of a strange argument. because a large part of inflation is oil, and it has arguably a negative effect. Another part of inflation is owner's equivalent rent, which is ridiculous that they use it that way, but the housing market, and once again, rates are inverse to that. The higher the rates are, the higher that prices. And so it's very much a non-cautive relationship. And actually, and I've done this before, and Chris, you know, if you go back over the last 25 years and you look at the relationship between rates and inflation, what you find is we've been in negative real rates most of the time, like two-thirds of the time.

And, you know, basically there's no there there. And the Keynesian economic, you know, consensus out there in all of the various people and the economists who try to look at the Fed, just ignore that. And they just slavishly say, well, look, the bond market is up so the Fed needs to move. Well, maybe they move. Maybe they don't. It depends. And I'll just say that Warsh doesn't look at it that way. He's much more monetarist.

He looks at the way I look at it, which is there's no reason. It's not monetary policy that's driving inflation, certainly not in this particular example. Certainly not consumer inflation. Consumer inflation is being offset by technology. It's asset inflation that. monetary policy has been moving higher for the last, I mean, 40 years, basically. That's the point, right? Right.

It's the, it's the quote, good inflation versus bad inflation, depending on who you talk to. Now, first time homeowners don't consider it good inflation, right, because it makes homes less affordable. But I just don't think that he wants to. The really interesting thing here, and the minutes today might actually be fascinating. I'm actually, I'm looking forward to it, is we've never had, in the history, of the Federal Reserve, a situation where the head of the Federal Reserve disagrees significantly with the board. And there's a real division where the Fed loses, or the Fed governor that the chair

loses control of policy. That's never happened before. That is the real risk here. And I'm really curious what you think about that. I mean, God forbid people disagree. No, no, it's not about disagree. I know. I'm just saying it's funny that the expectation is everybody get in line and there should be a consensus, right? Well, it has been. But that's been the, in fact, there have been multiple examples in Fed history where the Fed chair basically did bulldoze the policy. Yeah, out of the room and said, I'm not doing this anymore unless everybody agrees.

It's happened. Right. So I think it's fascinating because it seems pretty clear to me, I mean, it seems pretty clear where Warsh is coming from. He's coming from a monitorist perspective who realizes that there's been a lot of bullshit at the Fed for a long time. And he wants to, quote, fix it. But he also understands that rate policy, short-term rates,

is probably the wrong lever to push here, you know, in this economy. And politically, it's absolute suicide. I want to double click even further on this because, you know, I'm just seeing the feed come through. Well, Wells Fargo thinks we're going to get a hike now, right? So Goldman Cut, Wells Fargo hike. Obviously, no consensus here. But the bigger problem, obviously, is this, right?

the U.S. government officially posts largest July budget deficit in history at $432 billion due to an acceleration and federal spending. And of course, the cost of servicing that debt is now the highest in decade. Listen, anyone who is a Bitcoin or even a Bitcoin adjacent understands this, so we don't need to dig into it from our audience. But we have a national debt problem. The deficits are growing. How is, you know, I think these are the arguments for a cut, right is that they need to get the debt service down by cutting rates and then obviously the interest payments will be lower as we refinance blah blah blah that's the train that nothing was stopping over there mike well i think that's part of we've reached that end game we know inflation's the number

one issue in polls if trump doesn't get something controlled on that soon is obviously incumbents are going to get hurt in midterms and i think that's going to be a factor and if it doesn't get it under control or fix something which is the rich people making money we'll have a president a see, these are current trajectories. What stops that? I'd like to point out, the key theme about, I had to put that out is because I had to compare versus money site. People come, you know, point out how high money supplies, I get it.

But gold reach its highest versus USM2 since 1980. Now, we backed off from that. It should hang in a range, but it's usually signed. It's going to be stuck in a range for a decade. The U.S. stock market has just surpassed its measure versus this money supply since 2000, peak in 2000. But the bottom line, we talk about debt. It is 40 trillion, minuscule versus the 83 trillion of U.S. stock market cap.

So here we have the number one real-time measure of our country's liability, ex-accountant here, and our number one real-time measure of wealth and effect. That's two times. That's the highest in like 20 years. That's when bond yields peaked in 2007. So I think that's all that matters. When we look at all this data we're seeing now, yeah, some of the data has been late week lately. That's what Anna Wong points out.

Fed's got that in its favor. But on any value at risk model, our model, that matters. The next thing that matters for everything is what's the next, the 10% up or down in SMB 500. If it's up, okay, the Fed might have to tighten, inflation's sticky, wealth, rich people get more money, and the incumbents keep getting crushed in the polls. If it drops 10%, problem solved. All this inflation we have a problem, the Fed talking about hiking is seriously silly. Drops 10%.

It's problem solved, but again, these things just don't happen anymore. Chris, there's that stock market is the, economy thing. It is. It is. So I even look at it's look at copper. It's the highest correlation to the S&B 500 ever in an up market, even gold. And copper is a complete stock puppet. So that's for my spaces. I like to say from commodities, everybody sucks about potentially being bullish commodities. I'm like, well, the only sector made a new high this year. And it's the most highly correlated to the stock market is the metals. Everything else is just stuck in multi-decade ranges and they're going to get succumb to what happens with human ingenuity. Elasticity. We bring

on more energy and reducing our use of fossil fuels. But the metals are the key space. And I'm just so worried that that space is stock market drops 10%. The whole metal sector, including gold drops 20% or 30%. That's just, and then there might be a trading opportunity. But right now, we're at, we're getting towards volatility season. I mean, it's August 17th. It's about when volatility usually bottoms.

Chris, choose your own adventure. Mike's right on the last point. Vol is seasonal. And so we're starting to enter, right, well, we're in August, but you start to enter September, October. So it wouldn't surprise us if we saw a little bout of volatility here, which frankly we need, right? Our year-end price target for the spoo's high end 7,800, we're knocking on that door here now. So I think it probably gets harder from here, right, in terms of inequity space. I think Mike's right. I think we'd probably get a little uptick and ball. just wrote a white paper about that, probably publish it this week. I think for investors,

let's just assume for a second that you're an intermediate to long-term investor. By the way, there have been four pullbacks between four and 10 percent this year that no one seems to remember or even think about. That's run of the mill. That's average. We get another one here. Perfect. We're going to tell our clients to buy it because I think the fundamental drivers are still in place, i.e. earnings on a go-four basis. Like I said earlier before we might join. I think the one thing we need to be mindful of here in addition to Warsh and what they end up doing is the concept of peak rate of change in EPS growth. And we're probably at that here right now on a rate of change basis, not on an absolute EPS basis. But I think the combination of seasonal vol here now

we're entering that window plus peak ROC and EPS, sorry for the acronyms, probably sets the stage for some VAL here in the next couple months. I don't know if this is the time to pivot into it, but we did have a story that this is one of the cheapest times to buy volatility in years, Bitcoin-specific. However, the data shows recent buyers still did not make money. Bitcoin simply delivered less movement than people paid for. I mean, volatility is astoundingly low, specifically in crypto right now. But, I mean, you know, when you look at the data, sort of as you just alluded to, Chris,

I mean, it doesn't stay this way forever, right? It's kind of like a tightening band and you usually get a massive expansion when compression is this tight. Well, so if you look at the, if you look at just take the S&P earnings estimate for this year, it's plus about 23% year on year. If you look at 27, rate of change is still up. It's about 12 or 13%. If you actually want to step out and look at 28, which for an active manager, you're not doing that.

You're focused really on 27 now. But if you look at 28, which I did on Friday, you know, it still looks okay. But the rate of change is starting to come down a little bit. And generally historically, when we enter that phase, you know, you get some fall pickup. But remember this, long-term median fix is 18, right? And so if you use the rule of 32, you can figure out what daily balls like to be. And so it's depressed here. 18 is normal.

I mean, Mike, I'm assuming you believe that when that volatility comes, it's going to be a significant move down. No, well, I've been wrong in that one forever. So I can't. But I just look at the macros. I see the next three months is potentially ho-hum. We're going to get at least a minor correct. I mean, come on, you always do. Then dip buyers come in, it's over, and it's just so set in.

The way I look at, though, is if we do continue with this same end of the year of S&P 50015 or 20%, puff, nothing matters. It's ho-hum. But the next big trade could be if it drops, and it's only dropped 10% from here. It ends up to the year on the down note, as we head towards, you know, maybe through midterm elections, as we probably have problems with finding out that crude oil supply and demand is coming. collapsing in China with that 10, you know, you're going down to 168 and all their data going bad. And as Dave mentioned, oh, that's the thing about happens when things like this spike, it breaks stuff. But to me, that's the next big trade is some form of reversion where you can bait on a

typical option strategy. You point of how volatility is low. I'd look at as an ex-option trade. And I'm looking for that 5 to 1 or 10 to 1 payoff if we get a 10% drop in SME 500 because that's all that matters for everything for copper and crude oil and bond yields in the Fed. If it goes up 10%, I don't know what to do. I mean, look, I think that the, we're coming into, when we come into the fall, the next couple of months, I mean, look, I've thought that we'd be in a low volatility environment through the end of the summer. It's not changing. I mean, look, I look at Bitcoin a lot. And it's the same price every week we do this show.

I mean, you know, more or less. I mean, it's, it is not that surprising. I look at gold and I see gold reacting to. monetary aggregates. I don't like just looking at M2, although I will correct you, Chris, M2 is hit an all-time peak in the last month that was measured, which was June. It's definitely continuing to rise. And I see gold as a reflection of that. And I think that that's a large part of why gold is higher, because frankly, there's more money in gold is a denominator that people use more and more of its percentage of market cap as a monetary instrument. And you

could go through the numbers about that. The real problem is, is the trap. You know, we're in a, we are in relatively booming economics. We have a significant wealth effect. We have, you know, an economy that's kind of chugging along pretty well. And we're running two trillion dollar deficits. And that's under supposedly a Republican administration that theoretically would be more austere. Now, if you get president AOC, yeah, I'm sure she'll cut the defense budget until she can't. but transfer payments and everything else will go higher. Now, the real question is, would there be a wealth tax? I mean, what they're doing in California, that's actually a very big deal.

People do not understand it. I mean, you have Congressman Rokane going out and literally making a fool of himself every time he opens his mouth for anybody who understands it. Now, of course, most of the voting public do not understand what he's talking about. Say whatever you want. But, I mean, you know, it's funny to watch. what we're seeing is is, is a crisis. You're seeing people like Mark Cuban who are, are small D Democrats or, you know, basically old-fashioned Democrats. I mean, frankly, in many respects,

I mean, I'm an old-fashioned Democrat. I just don't vote with that party because it no longer is old-fashioned, right? People who believe in social safety nets, people who believe in human rights, people who believe in those sorts of things, but understand how the economy works. If you start taking five to 10 percent of people's wealth, if you do it on a one state level, you're screwed because they're all going to leave the state. But if you try doing it in the United States, the catastrophic impact on the economy is almost impossible to calculate. None of the things that we tried in France didn't go too well. It's been tried multiple times. It's never gone too well. And it's funny because the countries that the same people talk about all tried it and all failed. I mean,

Sweden tried it and had to undo it, right? But this is what's going on politically. You have this this massive dichotomy between young people who are being taught economics by morons or not taught economics at all, believing that this stuff works. And meanwhile, we're sitting here, we're showing how the economy is running well. And I think all three of us understand that corporate profits are exploding upwards because of technology. But that doesn't change anything. And Mike's point is not trivial. I mean, it's not wrong, which is if it gets more expensive, if it is more expensive for people relative to their wages to support their families, they're going to vote for change.

And they're going to vote for change regardless of what that change is. And that's the situation that we're in. So when I hear all this stuff, I'm like, well, okay, that's true. It's really a question of what happens. The market is not pricing that in. But then again, it's nothing's going to change between now in 2028. My favorite activism is nothing is more bullish for Bitcoin than President AOC. Oh, there's no doubt that that's true.

There's no doubt. I mean, I've said this a million times. I mean, I was asked, Chris, what will cause Bitcoin to go to a million dollars? I said president AOC. And I got laughed at for it, but it's not crazy because it's too small of a market to matter. It's like they're not going to care, you know, if people start realizing that we're going to have to devalue because, of course, we have to devalue. I mean, there's no way out of this unless you, you assume, and forget Medicare for all, just Medicare at current levels, unless you assume that we're going to stop paying Social Security, stop paying Medicare, our budget deficit with unfunded liabilities is over 200% of GDP. That's just math.

If you go to Medicare for all, it's 250, right? It's never happened in the history of the world that a country can have that kind of deficit without inflating their way out. The closest we have is Japan right now. And Japan has an aging population and forced savers. If it wasn't for the postal system in Japan with all that savings from all the older people, they never would have been able to sustain it. And now we're seeing a lot of that on wine, this whole carry trade, which I'd love your opinion on.

I mean, we're back up towards 160 again. I mean, it's very interesting. And it creates a very interesting dynamic because I don't see it. Well, it works. perfectly, it stopped it moving up, and people were afraid. But basically, the bottom line is the U.S. doesn't want Japan to sell their U.S. debt, right? What happens to the long rates in the U.S. if Japan is forced to sell its U.S. debt? Tether buys it.

No, I'm just kidding. But seriously, I mean, those are all, I would love to get Europe because, you know, Mike and I talk about this all the time. I mean, Japan, to me, is the canary in the coal mine right now in terms of what goes on fiscally. What's that number, Dave? Is it 176 or 175% debt to GDP for Japan? I thought it was higher. It might be. It might be.

I might have that offhand. Yeah, I just, I saw that last week. But I thought I was pushing 200%. I'll update the latest as we heard. What I've heard from Japan is closer to 200% from China, 300%. That's the basic stuff. I'll check it now. But when I did was, I was checking as we were speaking,

is US money supply is running around $23, $24 trillion. In China, it's $53 trillion. And their tenant out deal is 1.68%. And their debt to GDP is 300%. That's why I like to point out, what's the sore thumb on all this? Our debt to GDP, our debt is just minuscule at $40 trillion versus $83 trillion in stock market cap. And that does not include private companies, which are all starting to go public now because they're supposed to be selling when they're yelling. This is a great end game. So, Mike, let's pull on that thread for a second. By the way, the number is IMF estimates Japan at 204, and the Japanese government estimates that at 187 is the debt to GDP,

just to know. But let's pull on the China threat. So how long is it going to take before the monitor, what's the acronym for the people who believe we can just print our way out? to look at China and say, why are we so dumb? China is essentially doing quantitative easing. Modern monetary theory. China effectively has bond rates half, so therefore they can make their deficit lower because it doesn't cost them as much. And at the same time, they can just continue to print. And how long is it going to take before people look at China and say, well, that's proof that we can print their way out?

because I personally think that's exactly what's going to happen if we end up with a Democratic ascendancy. That's exactly what they will do. They'll look at China and they'll say, okay, they can do the same thing that we're doing. We can do the same thing that they're doing because look at how they've built, goose their own manufacturing. And I'm not saying it's true. I'm saying how long is it going to take politically? Because to me, I think that's the really interesting question. Right. We talk about them, I don't think there's a chance of them cutting or hiking rates, but aggressively cutting rates to emulate China is a really interesting question. Yeah, I mean, Chris, he was asking you in Japan.

Now you can include China just quickly here. China's five-year bond yield crashed 7% today and hit a 21 flow. So it's, you know, apropos to the conversation. But Chris, you know, the question on Japan and China. Yeah, China is tough to get my arms around, right? And I am by no means an FX or rates expert. But, you know, what you just lay it out, about President AOC and kind of rolling down that route.

You know, at some point, at some point, U.S., Japan, China, at some point, you would think, though we haven't seen this yet, right, to Dave's point, we haven't seen this, but you would think the rubber will meet the road somewhere and we'll stop kicking the can, right, down the street. Seemingly, no party in the U.S., Republican or Democrat, even wants to address that. And it's, so I don't know what ends this, but it's, but at some point, this probably is going to be a problem.

I mean, one of you guys referenced the bond auction last week, a 30-year auction last week, yeah, but not great. What if that starts happening with fives and tens or any other spot on the curve? You're talking about, you know, the, to pay the debt, sorry, the expense on the debt, you've got Medicare, Medicaid, Social Security, defense. Those things are like, we're never going to change those. And now the expense on the debt, I think might be the number one expense. It's not.

Those things are going to become rounding errors in two or three years if the debt gets on. It's scary. Like it's, I don't have the answer for it. I don't know that anybody does. Certainly no one seems to have the Constitution, no pun intended, to address it either. But it needs to be. I agree there. Yeah.

Look, my point on this is there's only one way out, right? You know, and there's two, there's two possibilities, two ways to get there. there. One is somehow grow your way out. That is only possible with massive deregulation and basically really, really embracing what's going on with technology to grow our way out of everything. And I don't really see that. That can happen in a world where we're at war with everybody. I mean, the Trump presidency will almost certainly go down as being derailed, if in fact it goes down this way of being derailed by this war because you can't have defense budgets going up and up and to the right at the same time as you're trying to grow your way out of a budget deficit. Just the math

doesn't math. And I think that a lot of people in this administration who understand that, and they just made the decision, they made the decision, and here we are. And the only other way is to inflate your way out of the debt. And inflating your way out of the debt doesn't necessarily make it consumer inflation. It is absolutely true that it absolutely requires asset inflation, though. 100%, right? Bonds, they have to drive bonds down. Look at where we were a few years ago pre-pandemic with interest rates near zero and our debt service was tiny. It doesn't mean the debt was tiny. I mean, obviously, the debt's grown since then, but that's what they need. It's literally that plus growth to increase tax receipts to start decreasing the deficit. And so the only way

they can do that is by driving down interest costs. And the only way they can do that is to be able to borrow short, which is what Yellen did and why she did it, because she knew that if she started trying to borrow long, that it would drive bond rates up. And so she didn't do that. And that's the mess that we're in. And so, and by the way, I have no idea how China is doing it other than the fact that they control the economy and do what they want. I don't know that anybody has any insight, Mike, maybe you do, into who's buying Chinese debt at less than 2% with that debt figure. I mean, where's the money coming? And it's the Chinese central bank or fed?

So I've heard from my colleagues in China. It's internal entities within China. I can get more details than that. But to me, the key theme right now is we have our incumbent party getting hammered in the polls. There's election in less than 80 days. and one of the key reasons that Cameron is because this war is not working out and it's pumped up oil prices. So what are they going to do to get oil prices going to go low? Now, there's already key indications that's going to happen, and that's U.S. natural gas.

And that's kind of an inside scoop I want to provide on this channel is you've got to look at January futures, January natural gas. That's the apex of the bell curve. It just broke through key support. It broke through a level that the same January contract last year held and then went up, created all that inflation. So this was a great leading indicator post-2020-22. Natural glass led all the way down when people are calling for crude oil to stay above 100. It's low as 55 natural grass drop to two. Now, this is not the front contract.

That one doesn't matter in August. It's the one that matters. So that's breaking down. The key theme is hedge funds are short that contract. They fully do not expect it to go up. They don't expect the third colder number normal than winter in a row. And similar in crude oil. Hedge funds are not, they've never really bought into crude oil staying up.

So I think what the strategy is going to be from our administration is do whatever they can to get energy prices lower. Natural gas is already leading away, which means corn is probably going to drop. Soybeans are probably going to drop because they're all at key levels and have at least momentum in their favor as we get the midterms. The key thing that adds tons of fuel to that for post inflation, deflation, which always happens to this question of time in commodities, if the stock market drops a little bit, now if that keeps going up partly because, oh, we have some kind of detainting Iran, stocks go up, that's still going to hurt them. because that's the number one source for inflation right now. It is the economy, 2.5 times. Very simple solution to oil. And it's that we take the streets of her moves and make them the Straits of America, man.

Come on, man. I live on the Gulf of America. That's beautiful out here. You know, some things just can't get, it's just impossible. I know you'll get a lot of effort for a lot of people will say, yeah, yeah, TDS, God. I can feel the itch from my TDS from that comment. Yeah, I mean, it's, look, it's impossible. It's just impossible comment. Mike, did you say, did you say Natty's breaking down? Yes. So the January natural gas future, that's the one that matters. It just below four.

It's the lowest level since Russia invaded Ukraine. It's January 27. It expires right at the end of the year. It becomes front right before Trump's president. it's broken down through key support. Now, as a trader, I look like this response of you're supposed to buy it. Now, I'm not a trader anymore, but because if this market breaks down, which it is, that's the number one measure of heat electricity and fertilized in this country. We have a major excess supply. We're supplying the world with L&G, yet the futures are still breaking down. That's how much of a surplus we have of energy in this country. And crude oil is accelerating. Great point. Great point. I mean, look, the production cost of oil is, what, It's somewhere between 50 and 55 these days, give or take, right?

55 myself. And its oil is trading between 80 and 90. You know, it's not going to take long. And the longer that goes, the more you're going to hear both parties screaming, oh, excess profits on oil. We're all old enough to remember the last time that happened. Oh, yeah. Right? I was in high school at the time and then ended up studying economics in college as it continued.

and we saw the whole thing with windfall profit taxes and all of this stuff. This is a pretty sustained deal. You know, if it goes, if it goes, if this becomes a long-term structural thing because of the ability to do this, it seems unlikely for it to be that way. Yet, you know, there's every day there's somebody who says, yes, but if this happens, oil will spike to 150, i.e. triple its price of production and, you know, or higher. And obviously we all understand what the impact of that. is. The truth is oil can be produced dramatically cheaper than it is today, but it can't be

delivered. And so that is creating all these supply bottlenecks. It is also true, as Mike has pointed out, many, many times that these sorts of supply bottlenecks always get resolved one way or another. Right. Markets do have a pretty good way of doing that, whether it's, you know, and there's all sorts of things going on in the Middle East to take the Persian Gulf and to take the Straits of Formuz from a position of importance to a position of, okay, it matters to, okay, well, whatever, we could just route around it. Within 10 years, it will not matter. I'm very happy making that prediction, saying that the straight ceremonies could literally

be blocked completely in the priceful amount. Go ahead, Chris. Chris, sorry, I thought you were about to jump in, but then we had to do it. I was just going to say to Dave's point, the market as a way of taking out its own trash, right, which is. Yeah, no, it's true. And people always ignore it. Yeah, we got six whole minutes to talk about Bitcoin.

And Chris, do you have a view? That's my big question here, because everybody knows our failures. Okay. So as an organization, Franklin Tuplica, is bold Bitcoin. To the extent that we've applied it into portfolio construction, we know, elite, right, based on returns involved, you can add a little bit. into, let's just say 60, 40, you get out a slug of it in there. And it's a creative deficient frontier.

So I stipulate to that. Outside of that, I don't really have a strong opinion. I mean, when I think about it, right, as an equity guy and a PM and a professional trader too, I think of it. I just view it as another risk asset. That's my own personal opinion. I get it has its spot. You can make the argument for that conclusively.

But to me, that's a risk asset that can be traded. And you need to trade that like anything. else, right? Get your entry points right, stop loss GTC, and they should be fine, right? Irrespective of direction. You need to be objective on direction too. But no, I don't really have a stop now. Then the hard question, where would you put your stop with Bitcoin City here at 64,000? Mike, you're at nine grand. I mean, look, I think the important thing when we look at, it's really what is, what is, is the investment driving, you know, thesis behind Bitcoiners. The investment thesis is your eye is on

the monetary component of gold's market cap, not the jewelry component, not the industrial use component, the monetary component. And will Bitcoin get into that? And the answer to that question is completely unknown. I personally think the answer will resolve more likely to yes than no, but if that's true, but the market is telling you that it's 95% no. That's just the numbers. The raw numbers say the market is saying Bitcoin's probability of eating in and surpassing gold's monetary market cap in the digital economy in its lifetime is less than 5%.

You can just do that by math, you know, just looking at that relative market caps. And so when you're sitting there and you look at it, it really is a question of, well, what's happening? Well, look, there have been unbelievably bad. bad news from a Bitcoin perspective that people would look at. I mean, hacks of things that just from the outside. Now, every one of them could be explained and every one of them, really, they're not that big of a deal, but you get this massive inside the Bitcoin community, you know, fights over, over spam. I don't want to, I don't want to talk about BIP 110 or these other

crap. But it's just, if you actually spend any time on crypto Twitter or CryptoX, you come across and you're a normal economics kind of focus guy, you just get disgusted. It's hard not to be disgusted, right? I mean, I've basically been calling people morons more often than not. And frankly, there are quite a few bitcoinsers who agree with me. But many, many people act dumb. And it's, it is a very, it is very early. That said, more and more people that look like us, like your colleagues of Franklin Templeton and lots of others who are saying, yeah, this makes sense and we understand the asset and they're accumulating slowly. They're not pushing it.

They're not doing anything. So you've seen this great rotation from retail, which Bitcoin was led by in every single one of its iterations, whereas retail really is selling and it's more, you know, and I say retail, I mean speculative retail. The speculators are not just absent. I think of anything, they're short. And that's, to me, what a tradable bottom looks like. But we won't have a tradable bottom until, you know, something happens in the economy.

Now, something happens could be raising rates, which would be bad for all risk assets. The thing that could happen could be, as Mike puts it, a stock market crash, or we could see a sustained rally, or we could see other things that could change it. But these things tend to change quickly when they change. I don't expect it to change quickly for any length of time. I mean, we're talking September, October, maybe November. I don't know. But yeah, I guess to the point of the title and to what you just said, right, Bitcoin should be following.

So why isn't it? The premise there is that, you know, we have this situation now where there's bad news pretty regularly, as you said, and the price remains sticking, right? And different people have different interpretations of what that means. I don't know if you guys saw this just to that end. We had the SafePal breach after the Treasurer breach of data. Of course, all this after the cold card hack, but just an hour ago, Israel's largest crypto broker bits of gold hit by data breach affecting 200,000 more people.

So you now have 260,000 people in the last four days who bought some sort of hardware wallet or had something to do with crypto and have had their information exposed. And of course, on the back of that, I don't even know if it's relevant anymore, which I love. But strategy, you know, did some more financial wizardry with MSTR to buy back some cash and STRC. They didn't sell Bitcoin this week. But they've sold $6,000 and nobody expects them to buy anymore, which was supposed to be our prevailing narrative that we had this floor buyer in the market. So I do, listen, I'm a classic.

They won't buy until the price starts rising, Scott, because they buy and sell low. Yeah, they're going to use all that money to buy back at $85,000. You think that's not true? I mean, it is likely. It is absolutely proven, right? So, Chris, I want to ask your opinion on sort of bad news and then, being flat, and then, Mike, I'll give you the last words. Look, when, this is true for any risk asset, as an equity guy, I'll take it there.

When stocks ignore good news, start trading down on big reports and good guidance, that's a sign. When bad news, stop, you know, doesn't cause another wave of selling or incremental selling, that's also a signal. Remember, markets bottom on peak bad news, period, and the story. Okay. Mike. He'd the leader. I think we're in this, the Bitcoin was a, a great leading indicator for the bubble. It's burst. Gold was part of that.

It's bubbles burst. They're all purging stages now, not just gold in the whole precious metals. There's only four, though. Not in Bitcoin and then the millions of cryptos. I don't think that's going to be over until the stock market finds some kind of trial, and it hasn't even started rolling over. And the bond market's leading the way. It's going to break everything.

And in the next three months, I can fill or kill that position. And just the little fill is just, yeah, remember? 10% drop in the stock market, the whole thing just starts kicking in. By the way, gold's at 4,400 right now, just so we're clear, because you always, let's say we should look at prices. I think it was 4,250 last week when we were talking about it. I keep telling you that it's not, yeah, 5,500, the bubble burst down to 4,000, but it's reasserting itself in the equilibrium level.

I still maintain 4,500 is more or less middle of that equilibrium, and I think that gold is doing what it's supposed to do. and people are investing it the way they should invest. For the right reason, based on the news that we've seen in the last week. That's right. The argument that gold caught a bid again because of these debt numbers that we discussed earlier. Well, they caught a bid because there's Chinese buying. I mean, let's let's-Hethebine.

And tetherbine. 25 metric tons of gold decided it's- Oh, by the way, it is worth mentioning one piece of news you didn't say that is relevant for Bitcoin. It's relevant for crypto, although I think most crypto, most crypto assets are overvalued and Bitcoin is undervalued. So let's be clear, numerically, of the most crypto assets, I think will end up being footnotes in the economy. And that is the tether, truth, truther debate is finally over. Yes. And that is a very non-trivial story that has gotten ignored. I know, I can tell you, I know a lot of people who in the traditional financial industry who saw tether and said to me,

well, I heard that all crypto is, is all inflated because it's all because of tether, which is bullshit and it's not real and there's no assets there. And now they have a big four accounting firm saying their assets are exactly what they say they are. That is not a trivial story. Understand that's one of the reasons. You start pulling that out if, you know, we use the word fud a lot. But when you get these sorts of stories that disappear and nothing happens, you know, it's because it's showing what happens. And what Chris said is arguably the most important point. If people want to take away one thing from this show ever. It's that when you see markets with crescendos of good news failing to go up or crescendos of bad news failing to go down, those are turning points.

And I don't care what your market is, what your stock is, what your asset is. That is arguably the most important point. Take that and use that in your investing philosophy and you will do a lot better than if you don't. And I can underestimate that, Scott. It's so important. Yeah. That's why it's the title. 2050 falling. So why isn't it? All right. Well, the good news is that price will prove us right or wrong in the coming months and

we'll get to discuss it. Chris would love to have you back again. It really was great having your insight and you were a tremendous fourth here to the three amigos over here. So thank you. Appreciate you having me guys. Thank you. Mike and Dave,

thank you. We will see you all obviously next week for the next Macro Monday. Have a good one, guys. Bye.