The Wolf Of All Streets - Bitcoin Will Skyrocket: Key Catalysts for Price Surge | Macro Monday

Starting point is 00:00:00 We've talked Bitcoin spot ETF inflows to death and everybody on the planet seems to know that the halving is coming, but there are other catalysts that could send Bitcoin flying. One of those namely is the approval of ETFs in Hong Kong and then being in-kind rather than cash create. Now, if you take a deeper look at this market, there is a lot more Bitcoin spot volume in Asia than there is in the United States. And if we get in-kind Bitcoin spot ETFs approved in Hong Kong, that could be a huge catalyst for price. And Bloomberg reported that that could be coming very soon. We're going to discuss that, of course, what's happening with gold stocks on Macro Monday with James Lavish, Mike McGlone, and Dave Weisberger. All right, guys, let's go.

Starting point is 00:01:04 What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel, hit the like button and tap the bell so you get an alert or notification when we come on. I'm going to get right to it. It's Macro Monday, best day of the week, and everybody is here on time. Dave magically appeared apparently from space. Are you on a space? He is in space. It looks like you're in the back of the space shuttle. Doors are about to open. Very cool. Where are you? Just at the Denver airport on our way back from skiing in Winter Park. Okay. That could be worse. I thought you were going to say you were at a conference and we would see a lanyard, but I guess today it was vacation. So listen, Mike, I know you're going to leave a little early today. Let's jump into the morning call. And then we have to talk about gold for sure, because right here in Bloomberg,

Starting point is 00:01:53 stock futures rally with gold on rate cut hopes, market trap, but we're still in the upside down where gold and stocks rally together. Well, I appreciate being able to start. And gold is the reason I have to hop on early. It's one of those signals, as I like to say in my business, is I'm a strategist. I just write about stuff I think are relevant. And I'm kind of more extemporaneous for Bloomberg TV and radio. They'll just ring me up and say, hey, Mike, can you comment on this? Come on, comment on that. So today, Canada TV wants to comment on gold twice. And sometimes that's a sign. Uh-oh, this might be getting a little extreme.

Starting point is 00:02:27 I'll give you one good example. It was December 2017. Two weekends in a row, Bloomberg Radio asked me to comment about the launch of the Bitcoin futures. And that turned out to be a pretty good peak. But that's why I have to hop off. So overall, I'm still nothing but bullish gold. Yeah, markets will get overbought. And I do like when people look at 14-day RSI's and say it's overbought.

Starting point is 00:02:48 That's great for traders, but I look at gold as it's four years now, bumping against 2000, and now it's just turning 2000 support and resistance into support, and for good reasons. You can't say gold anymore without China and unlimited friendship in the same sentence. The world changed in 2022, and that's good for gold. But I'll just tip hold to our meeting a little bit and then I'll pass it back to the team. Stuart Pauls, our economist, hopped on, pointed out, we still, they have been a little bit early in a recession,

Starting point is 00:03:19 potentially wrong, but pointing out they expected the payroll number to come about 185, 3.9% unemployment, and showing signs of what they're looking at, potential downside surprises and isms, and wage growth continue to moderate. My colleague Ira Jersey on interest rates made a key point that the Fed might go slower, but he sees a rally before year end, meaning rates dropping potentially significantly next year, and the economy slipping in the second half. And my colleague, Gina Martin-Adams, in equities has been spot on, still bullish, just bow in a gentle direction.

Starting point is 00:03:51 I've been wrong. Her quote is no detection of excesses in position sentiment leading indicators. And then we went over to me. I talked about gold and how gold is the only major commodity that's making record highs. And the rest of them probably continue to have problems stuck in ranges. Yeah, I want to show something really quickly. This is the gold chart just for anyone who's wondering. You talked about being overbought. This is the weekly just touching overbought. For anyone who pays attention to RSI, when you look on larger timeframes, that's the power zone, actually. If you get overbought on a large timeframe like that, you tend to go way into overbought and you tend to stay there for a very long time. That happened when Bitcoin was 12,000 on the way to 69.

Starting point is 00:04:30 It went overbought on the weekly and people said, it's overbought. What's going to happen? This is just a blue sky breakout. All time highs for gold with it just going into the power zone. This looks like it's going straight to 3,000 in my opinion, Mike. So I tend to agree with you. I think this is powerful. I guess the question becomes, what's the world look like if gold goes straight to 3,000, in my opinion, Mike. So I tend to agree with you. I think this is powerful. I guess the question then becomes, what's the world look like if gold goes straight to 3,000?

Starting point is 00:04:51 Right. I mean, that's got to be a concern. Go ahead, James. It's not good that it's up about the same as the S&P 500 this year, and you can't see S&P 500 without AI in the same sentence. I mean, the rock that you take out of the ground and put back in the ground, as Warren Buffett said, should not be beating the S&P 500. In the long term, stock market should always win. I mean, it's huge in the ingenuity, creating dividends and returns, but maybe that's just a sign of how frothy

Starting point is 00:05:14 the equity prices are. Yeah, I mean, it's also probably gold sniffing out the reality that the Fed here is a little bit too dovish with inflation sticking over 3%. And we're still seeing about a 60% probability of a rate cut by the markets, by the Fed fund futures in June. So the Fed is still kind of tipping off that they're going to cut rates two or three times this year. And I mean, the dot plot shows three times. And we've got, but then again, we've got a host of Fed speak this week, this next couple of weeks. I mean, there's just so many Fed speakers this week.

Starting point is 00:06:02 I had a look at them. It's like over a dozen. It's nuts. But yeah, it's a lot of. So we'll get a little bit of indication. And like Mike said, the isms, you know, the manufacturing numbers are early this week. Then you get some some of the services numbers later this week. You get job numbers later this week.

Starting point is 00:06:23 So we'll get a little bit more information. But I think that gold is just kind of sniffing out that the Fed is going to accept higher structural inflation in here and they're going to cut rates before we hit 2%. That's kind of what I think is going on here. And the reality is that why is that happening? It's not because gold ETFs are being bought like Bitcoin ETFs. It's because central banks are buying gold, you know, and it is now involved in the energy trade. And it's undeniably involved in the energy trade. And you have to recognize that when you look at gold.

Starting point is 00:07:03 It's not just this shiny rock that people are putting money into uh to to save against inflation it's central banks are using it for the exact same reason um and uh and kind of protect themselves with treasuries so that's that's just a little bit of reality check there dave any thoughts so We should tilt over to Dave. Oh, he just hopped off. He just lost it for a second. I can't say you can't say gold anymore without Bitcoin in that same space. I love how Dave, it was March 5th when Dave went on his rant about the history of gold and silver and demonetizing silver. I mean, that was awesome.

Starting point is 00:07:42 Let's see if we can tilt the T-Dave off a little bit on Bitcoin demonetizing gold and the potential for central banks to potentially hold Bitcoin someday. Saif-ud-Din Amm is predicted in his book, The Bitcoin Standard. Dave, can we fire you up on this one? Have you had your energy drink this morning? Not yet. It's the denominator period dollar is the denominator for the global financial markets period the fed is monetizing two trillion dollars a year in debt from the u.s federal government they continue to do so in the foreseeable future we got maybe slightly less debt you know created if if a republican wins but i'm not really buying that. I think it's a unit party where everybody wants to spend and that's all you're going to get. And so in that environment, what do you expect to happen? Well, gee whiz, what's going to happen? Everything denominated in dollars

Starting point is 00:08:34 is going to go up. In fact, they want that. I've been saying this for two years on this show. What happened in the pandemic was they fucked up. They gave money directly to people. They created consumer inflation. They stopped the gravy train of asset inflation that was consumer deflationary by facilitating more and more technology that was not necessarily economically justified and more and more outsourcing. And so what do we have? We have a world where they are printing money. The denominator is getting less valuable. Therefore, everything denominated in it is getting more valuable. So what a surprise. Gold is going up the same as the S&P. Not surprising. The fact is gold going up is enormously bullish for Bitcoin. I mean, it couldn't make me more bullish. Remember what I said last week and the week before

Starting point is 00:09:26 and the week before that. Actually, I can't remember what I said before that. I said, the longer we stay in this trading range for Bitcoin, allowing it to coil like a spring, the harder it will rally into the summer. Lots of facts for you. Fact number one, we are just sniffing the beginning of investors who are able to use Bitcoin the way they can use gold. Individuals can mostly, although places like Vanguard and others are not allowing them to yet. Institutions are all circling the wagon, as it were. You've had Matt Hogan from Bitwise on, he's gone through and detailed this. At length, You've had other guests as well, Scott. We know that the institutional market, that people who want to invest in Bitcoin are doing their research now. And the price has gone to $70,000 without that.

Starting point is 00:10:16 So what does that tell you? We know at the same time central banks, other than Panama. Not Panama. Yeah. No, not Panama, other, yeah. No, not Panama. On that point of institutions and the banks, the large banks brokerages allowing their customers to access Bitcoin and Bitcoin future or the Bitcoin ETFs,

Starting point is 00:10:39 we're in that 60 to 90 day window now of a kind of a quiet period where they wanna see how it acts and make sure that they check all their boxes and do all their due diligence and have their, you know, cover your ass pamphlets out on compliance. And then once we get through that 90 days, then there's, you know, you're just going to see continuously more and more brokers and institutions kind of step onto those on-ramps. But go ahead, Sergeant.

Starting point is 00:11:09 Right. But I want to go on and talk about the central banks, because what Mike said is the key. So other than El Salvador, who's been able to do this to the IMF, right, and basically tell them, go take a hike, and Buckele is probably a hero throughout most of the of the people who are the debtors to the imf the fact of the matter is other than them very few maybe there's some stealth central bank buying aren't very very small but you know frankly given how bitcoin is how transparent it is it'd be much better known if that were happening if you're a central bank and you see the denominator getting crushed what are you going to buy if you have spare reserves?

Starting point is 00:11:45 You're going to buy gold. And that's exactly what they're doing. They don't have a choice yet. At some point in the not so distant future, probably after the next leg up caused by institutions and pension funds and sovereign wealth funds, then I think you'll start seeing central banks going into Bitcoin. And that's when demonetization happens. I've said it many times. I don't believe it's necessarily this cycle per se. But the fact is, is if you're a central bank and you see your dollars getting worth less, you're going to have to buy something. And yeah, you can put it in and get 5%. Yes, you could do that. But if you're a political enemy of ours, or at the very least, not happy about us, or you actually have your eyes open and you notice that, hey, wait a minute, US government can freeze my assets if I put them in treasuries

Starting point is 00:12:29 based on what they've done with Russia. You're going to put it in something else. And enough of that is going into gold to be driving this rally. And I think it absolutely adds legs. I think the single most bullish thing we could see, if you told me gold will be 3,000 by the end of this year, I will tell you Bitcoin will be at least double where it is now, because it has a beta to gold and will go up more. Yes, it won't go up in the same straight line. Yes, the correlations are not perfect. Yes, Bitcoin need has the money that that pretty much consistently sets price is is in the crypto sphere until more and more overwhelms that. I mean, Noelle Atchison,

Starting point is 00:13:06 Noelle in Madrid on Twitter had a great post over the weekend at some point where she went through and debunked a lot of the myths and I reposted it. So if you follow me, you'll see it. The fact is Bitcoin is trading at a fine demand. Yeah, the topic today is her newsletter. Literally, I got it. We got it from her newsletter right here which is uh we'll get into that in a minute but that was the catalyst that was talking about is from her newsletter so yeah right well look noel's a friend but she you know she really encapsulated it beautifully but the point that i'm making here is everyone who always says and they love to to throw shade at mike the bitcoiners do and say oh how do you deal with it? Mike is 100% right. We just basically are looking at this. It's a question of timescale. Gold going up is because

Starting point is 00:13:50 people don't want to hold on the margin. Fewer people want to hold dollars. They don't have a whole lot of choice. And the gold market is not even close to big enough for them to all hold gold instead of dollars. So it's just marginal buying. And that's important to understand. There are gold bugs out there. And look, I've been reading this stuff for years. I've owned gold for most of my life. I still do. The fact is, the gold market is small and the futures market has been used, many people would argue, in fact, billions of dollars of fines make the case better than my speculation, that the futures markets have been used to hold the gold price down for years. But the Fed basically has signaled, going back to as far as green spend, that they don't really

Starting point is 00:14:35 care about gold unless it's up significantly more. If you look at inflation on an inflation adjusted basis, I don't think below 3,000, they give a rat's ass. And so they're not going to do anything or signal anything. If the gold starts going towards four and $5,000 an ounce or whatever, yeah, they're going to try to manipulate it downward, no doubt. But we're not there yet. Mike, I have a question. If gold's at 3,000 this year, we got the Dow sniffing 40,000 today, right? We obviously know the markets have been up. Where is Bitcoin and where is the S&P? That's a good question because I really appreciate that question

Starting point is 00:15:14 and what Dave said. And that is, I'm fearful if you get a normal market reaction, let's look at what markets do from a 30,000 foot view from history. And the S&P 500 goes down for typical correction and recession that gold signaling and the rest of the world's bond markets are signaling. I said this a few years ago, still early, potentially wrong. I'm afraid gold and S&P 500 meet at 3,000. You put them on the same scale,

Starting point is 00:15:42 they've been like that for a hundred years. The S&P 500 gets too expensive, gold's too cheap, and then they revert and go back, but it's different this time. That's why I like to point out was maybe it's not different. That's why obviously McGlone's been wrong about equities. But when Dave says that, my question is, okay, Dave, so what if that happens with the S&P 500 in a bear market. So we all know, I want to reiterate too, unless something terribly goes wrong with Bitcoin, just given current trajectories and trends, there's nothing that stops it from being part of central bank balance sheets. What Saif Ndina said six years ago, I mean, it's just where it's going. Something's got to fail.

Starting point is 00:16:19 And then I look at gold as well. If you're a traditional gold investor, which we both of us have always kind of played with a little gold, and a lot of people are so much gold bugs. If you don't have some Bitcoin in space, like Peter Schiff, you're really risking missing out. Why take that risk? So I want to end with this also. When I look over, I had a call this morning from an investor, good friend who's in the Midwest, very wealthy, successful landowner. And his quote was, yeah, I'm kind of bummed gold's going up, but I've got so much land. It's the same thing.

Starting point is 00:16:49 If you look at the value of land in the Midwest, farmland over gold, it's been the same for almost 100 years. It just fluctuates the number of ounces. But his quote is, he's so worried about his son who's got a way overweight position in almost every type of crypto asset there is so I thought that was funny but I want to also mention this the US 10 you know right now is 4.25 percent every single market in Europe is in a three or two handle and every single one in that matters in China is in a

Starting point is 00:17:15 two handle or I'm sorry in Asia I mean to me that's what gold's safe and at some point that two that four handle in the US 10 you know it is going to drop to three. And that, to me, is what gets gold to 3,000. So S&P is at 52-54. 3,000 on the S&P would be back to May 2020, two months after the COVID bottom. That would be devastating. Well, there's one point that, Mike, I was wondering— Mean reversion can be devastating. 1987 was a simple mean reversion event.

Starting point is 00:17:44 Mike, can I ask a question? Do you have the ability to look at the constituents of the S&P in, say, whatever, 30 years back, 40 years back, whatever, and how that's performed vis-a-vis, without index changes? Because the one problem with making long-term charts vis-a-vis gold in the S&P or any index for that matter is there's huge survivorship bias. The S&P is not the same index that it was back when you started making that calculation. And so it's designed to go up, but it's more importantly designed to, quote the great Mike McGlone, to be continually to reflect human ingenuity. And so it is picking winners constantly. It's picking people. It's picking people,

Starting point is 00:18:25 it's picking companies that are creating value. And so therefore, it kind of skews that. So I wonder if you look at, if you kind of stripped it out and you said, okay, what would the number of the S&P be for a normal correction, given that it's dominated by companies that more or less didn't exist. Or if they did exist, they certainly didn't know anything about the internet or AI or any of the stuff that people are doing with Google and Apple or Tesla or whatever back when you were talking about those numbers. To me, that's an interesting question. I don't know the answer. That's why I'm asking you the question. Mike, I think it was a question specifically for you.

Starting point is 00:19:07 Either me or James. Maybe it's time. James, any thoughts on that one? No, I think it's a great point. We see it all the time with trying to use a benchmark for hedge funds. And you have this HFRI index and the HFRX index. And one of the problems is there's massive survivorship bias. And so mathematically, it does skew the numbers positively for that index. It's just reality. And people don't talk about it. So it's a really good point that Dave brings up.

Starting point is 00:19:43 I do not have, I mean, I've got Bloomberg. I'm sure I could figure out a way to do it. But you know, you're the, you're the deep expert on that. So we'll have to see if you, I guess Dave's going to send you home with some homework. Look, the point really is, is my denominator point. If you look at 2008, 2008 was fascinating because we had three months where gold went down with the markets as the financials were leading the market down. Idiots were trying to ban short selling. By the way, we're seeing the same thing in other countries, not to name them, but it's

Starting point is 00:20:17 one of the dumbest possible things you can do to try to arrest the stock market falls banning short selling because all that does is it means that the next time that the market goes down it goes down way farther and faster because the buyer of last resort generally are short sellers covering their positions people like scott looking at squiggles on charts and say hey look i've made this money it's getting to getting to support let me buy well if you don't have that buyer the market goes down further and i don't know how many times they need to learn that lesson but policymakers are just generically dumb when they think that they can repeal laws of supply and demand. And so we've seen it. But the point being that in 2008, gold went down for three months before it took off on its epic rally. And so you saw that. Now the question is, will that

Starting point is 00:20:59 happen again? Or are people looking at it differently and saying, well, wait a minute, I don't want to be that stupid. And so maybe I've learned from it. So maybe now it'll be a month or a week or whatever. Yeah, but I don't know if it's people being stupid, but if it's just simply out of necessity to cover margin calls. We've talked about this almost ad nauseum of the correlation to one. It's just a reality. I don't know how else to explain it. When you walk into a trading floor on a day of disaster,

Starting point is 00:21:29 you're like, everything is being sold. Like, the managers just literally walk in and say, take 10% of the book off, and then we'll figure out where we are. I mean, that's literally, that is, I have heard that so many times. Just take 10% of the book off, and then we're going to figure out where we are. I've had to do it. So, yeah yeah yeah but but here here's here's a hypothetical there what if what if misis was right and what if this and isn't going to be the same as it's been uh you know the same as it's been throughout the fiat the long and storied fiat history since 1971.

Starting point is 00:22:08 And what if this is the crack up boom and the denominator really is what's going to go down? If safe dean is right, if any of these people are right, and effectively what that would mean is, I don't like the word hyperinflation. I don't think there's, first of all, no one uses cash anymore. So there's not going to be wheelbarrows full of dollars getting pushed down the street to buy a loaf of bread. You're not going to see that. It'll be digital and it'll be handled in a different way. But what if the whole point here is we need to, and by the way, the US government does need to, and so do every G20 country, not named Germany, need to inflate away their debts. What if what's actually happening is the great reset is the great revaluation. And then everything goes up. But the fact of the matter is, if you're not earning dividends, if you're not keeping up with, if your demand is being screwed, because in a crack-up boom, it is extremely uneven which companies will continue to keep pace with inflation. So what if that is what's happening?

Starting point is 00:23:10 Okay. So this is a really good point. I'd like to know what Mike thinks about this because I was reading an article this morning, and it was an opinion piece, but it was talking about the rise of AI, the AI's, you know, voracious demand for energy and in pockets of areas in the United States that may or may not have enough energy. Data centers needing to be here in the U.S. because of security reasons, you know, seeking out nuclear power, seeking out any source of power that's not wind or green because they're not reliable. And the reality is that that will be what pushes up energy prices, right? This will eventually push up energy prices. I mean, this is a very high level, kind of a hundred thousand foot view. It's interesting the thought of structurally forcing energy higher because we have not done a good job of building out our energy infrastructure in the United States for that type of scenario, especially because we've been pouring

Starting point is 00:24:18 money into census projects. But, you know, what are your thoughts on that, Mike, for that to be one of and maybe a main catalyst of higher energy prices, which we all know higher energy means higher prices for all goods and services. It's the main factor in inflation. So what have you thought about that much? A lot. I've read a lot about it. I can mention four books. I'll start with one. Let's start with Thomas Malthus and the Malthusians have been wrong for 200 years. Jeff Booth, The Price of Tomorrow has been dead right. Adam Smith, The Invisible Hand. Let's look at the number one source of heat, electricity, and fertilizers in this country. Natural gas has dropped to the same price as it first traded in 1990.

Starting point is 00:25:08 So that's severe deflation. Yet we use more of it every day. We create more of it every day. And so the thing that I point out, Jeff Booth pointed out in his book, The Price Tomorrow, he was spot on and is spot on, is these things are happening. This whole thing that we saw called pollution, people are now calling global warming decarbonization, is happening so fast. I put solar panels on my house in Connecticut 10 years ago. I bought my electric cars 10 years old. These things are just kicking in where we can create more with less every day, and the AI is just going to create more incentive.

Starting point is 00:25:39 I go out to the Midwest, and these wind turbines are everywhere. Now, people say they're ugly, but every structure now can have solar. Now if you're building a new data center and if you're not putting decent solar on top of that roof and having storage, that's just silly. I mean, it's the technology's cheap now. You can do it. So to me, it's just a matter of time. And so I am bullish natural gas because it's below the breakeven cost. I'm not bullish crude oil. I'm bearish crude oil and copper because they're still in that macroeconomic sense where I'll tilt over to what's happening and I'll make a prediction. The world is turning Japanese. China is there right now.

Starting point is 00:26:13 The latest data you see can be somewhat fudged because there's not China anymore. It's one person. Complete respect for Chinese history, Chinese future. There's one person who matters in China right now, President Xi. And some of that data is all, you know, there's no free markets, there's no free press. But if you look at bond yields, there's a problem in China. And I mean, where are they exporting to? Certainly not Germany, they're in recession. Certainly not Europe, because they started to help support this war. Certainly not the US. And their private sector, their property sector is as bad as it was in

Starting point is 00:26:41 Japan in 1990, just getting started. So that's turning over. So to me, the whole sector is as bad as it was in Japan in 1990, just getting started. So that's turning over. So to me, the whole world is turning Japanese. And one little thing will trigger a severe deflation initially. Maybe we'll get to that inflation later. Is the US stock market having a normal correction? I just want to see a 10% correction and see how things react, see how Bitcoin reacts, see how gold reacts, see how treasury reacts. Just get through that. Oh, we don't have those anymore. I forgot. Since that low in October, we're up almost 30%. We've only been down one week, 1.5%. So anybody in their right mind who's running money and looking at their value at risk model knows, okay, well, I'm doing okay until we get the bump.

Starting point is 00:27:16 We need to get the bump. So to me, that's the macro. The world's turning Japanese. And remember, there's two key things that used to matter. We have the leading indicators have been negative the longest period in history, have an inverted curve on negative one of the longest periods in history. And the Fed just can't wait to ease. The market's already priced for it, but they can't because their inflation targets are above, their inflation metrics are above target.

Starting point is 00:27:38 And we have the speculative frenzy going on. That's creating more inflation. So to me, this is a, yeah, I think it's good for gold, Bitcoin and long bonds. Dave? Well, I mean, once again, you know, the fundamental thesis I agree with, the difference is, is massive, massive fiscal inflation, massive money printing, because the governments are just spending more than they can and they're voracious about it. I mean, the funny thing is we look in the US and we say, oh my God, our government is, how dumb are they? We're going towards 130. We're hitting escape velocity. For those who don't understand what I mean by that, in a black hole, you have to be going a certain speed to be able to escape. And when you can't, that's it. You're getting sucked

Starting point is 00:28:23 in and eventually you're down the drain. Well, somewhere between 120 and 150, depending on who you believe is where you can no longer grow your way out of debt to GDP is what he's talking about. That's right. Debt to GDP, Japan, to use Mike's expression is over 200 somewhat percent. Now in Japan, they have a very old population, which had a huge amount of savings, and they basically hijacked their savings for generations. And in fact, what we're seeing now is for the global economy as well. Because if Japan can't run at effectively zero or 1% interest rates, if they start normalizing to the rest of the world, it's going to be ugly. And I'm not sure it'll be, it could be pitchforks and torches ugly, right, in Japan, because you have an entire generation of people who basically, you just

Starting point is 00:29:21 wipe me out. Now what do I do? And so that, of course, will cause even bigger structural budget deficits if the government has to take care of those people. So we have to be very careful about where we go. My thesis is different than Mike's. I don't see a normal deflation except where human ingenuity really has worked. Natural gas, we've had the greatest single factor is our ability to frack, not just U.S., but the world to frack and the ability to tap into enormous natural gas supplies. And so that's why it's where it is. Oil, on the other hand, is stubborn. People look at it and they look at oil and they go, well, wait a minute. If natural gas is where it is, shouldn't oil be at 40 or $50 a barrel? And it isn't. And yet we have an entire political class

Starting point is 00:30:09 in the United States and through Western Europe doing everything they can to de-emphasize the use of oil and natural gas. And yet they can't. Now, why can't they? It's the ultimate irony, I have to say it because my, you know, James pointed it out that that AI, which is going to be the biggest driver of energy, can't use wind and solar because of its intermittent nature. But the one financial asset which absolutely can incentivize renewables is Bitcoin. And yet we have, you know, Elizabeth Warren and others in this country still trying to stop Bitcoin from working. And her friends on the squad and in the Green New Deal are going to wake up one of these days because it's now at this point pretty much

Starting point is 00:30:48 accepted fact that if you want a Green New Deal, your only chance is to encourage Bitcoin mining at scale in the United States. And they're stuck between a rock and hard place because they don't want, they're using the energy argument, right? Which they know is just pure nonsense. They're using the energy argument, which they know is just pure nonsense. They're using it because it sounds good, it's great, soundbites,s and off ramps of banks, like the choke point 2.0 is real. I mean, we're watching it in real time now with, you know. Custodia. Custodia Bank. Exactly.

Starting point is 00:31:42 With Caitlin's Bank, who just got lost that lawsuit. So this is a reality. Custodia. Custodia Bank, exactly, with Caitlin's Bank, who just lost that lawsuit. So this is a reality. And so that's really where it's coming from. And we all know that Greenpeace's article, and this is just nonsense. And they know it's nonsense, but they must assert control over the money. That is like, can't lose control of that. Really quick, Dave. I know Mike has to actually jump in a minute.

Starting point is 00:32:07 So I want to see if he has any final words before he does, unless they canceled your appearance. No, they didn't cancel it. I get to go talk about gold. So I'll be right back. It was probably a clear sign. They want to talk to me again this afternoon. It's probably a sign of embarrassment. As we've been speaking, Bitcoin's been coming up.

Starting point is 00:32:20 Stock market's come back off. I mean, see how this day works. But this is going to be a significant week. First one of the year. First one of the quarter. See how things pan out. But I mean, on the macro, you know my state. It's everything.

Starting point is 00:32:33 Nothing matters until we get that 10%. Everything is dependent on getting that 10% correction in the stock market. And then I'll move on to having a realistic view of crude oil and gold and Bitcoin. Right now, I've got to sit back and wait and keep the powder dry. And I think that's what most leveraged money is doing. Seems like Buffett still has a lot of powder. I'll be right back. All right. Thanks, Mike. All right, guys. So listen, let's talk about this, though. We were on Custodia, the articles here. So I kind of did a superficial reading of

Starting point is 00:33:05 the rejection, obviously. I think they filed the suit in June of 2022 and their master account was rejected. And this was one of the topics I wanted to get into anyways. Basically, the judge said the Fed can make whatever decision they want. It's their discretion, even if you're and didn't even address any of the actual points. I don't know if you guys read it, but it basically said Kansas City Fed can do what they want. They don't need to give an account to everyone who qualifies. Sorry. Very vague and kind of crazy. You're on mute. Yeah. Go ahead, Dave. I said, there's a fun fact that a lot of people don't know the federal reserve banks are private they are not federal agencies people don't necessarily realize that

Starting point is 00:33:51 so the administrators procedures act which should govern them and would if they were federal agencies doesn't really apply and it and that's why they can get away with this crap at least that's in my non-lawyer opinion i'd love to hear what some of the lawyers say. I'd love to hear what Caitlin has to say about that because I'm sure she's fuming and rightly so. Because the idea that the most powerful institution in the United States economy or one of is basically not subject to the same normal rules of procedure that all the rest of the federal, that's not rest of, that all federal agencies are subject to is incredibly problematic. But I want to go back to the point that James made about control of the federal debt, not rest of, that all federal agencies are subject to is incredibly problematic.

Starting point is 00:34:25 But I want to go back to the point that James made about control of the money. That's absolutely true, but there's a double-edged sword here. It's control over the money and it's a scorecard against where their spending gets measured. So if you're a believer that we need to, if you're Stephanie Kelton and an adherent of modern monetary theory, you believe you have the right to spend as much money as possible. It doesn't matter. Now, what makes it matter? Well, Greenspan would have said and did used to say before he converted to it, and Bernanke used to say before he converted to it, that, well, gold is what measures. And so gold starts going crazy, and I don't mean crazy from 2000 to 2200.

Starting point is 00:35:02 I don't think they give a crap about that. But gold going from 2000 to 4000, okay, don't think they give a crap about that. But gold going from 2000 to 4000, okay, that would indicate something really serious going on. And they don't want that score card on what's going on with budget deficits. I mean, we have the largest structural budget deficit in peacetime history, and it has chosen no sign of ending. And James and I talk about it every time. James has some of the funnier tweets about it. You know, it's a consistent thing. It is not trivial. And that is quite literally what a sound money like Bitcoin or like gold would be measuring. But remember, gold was sound money when gold represented 100% of monetary aggregates. That was in 1971. Nixon closed the gold window.

Starting point is 00:35:41 Ever since then, it's been falling relative to global monetary aggregates and so yeah this rally is a little squiggle but it still hasn't recovered 10 and and that that matters right so the idea that people could opt into an alternative financial system around the world like you know el salvador did or like argentina probably wants to uh is a very big deal and so look we're in i'm not sure we're we're through the first inning yet you know in in a nine inning probably an extra innings game and so you know when it comes to bitcoin in terms of being real it's kind of graduated into you know maybe it's a teenager you know it is it's already 15 plus years old but the fact is it's not not there yet they're trying to basically

Starting point is 00:36:26 stop it before it gets to be an adult and at this point it looks like they will not it pretty much can't happen and so that's why i'm so bullish long term but yeah there's a lot there's a lot of levers that are going to get pulled and you know having a bitcoin bank more important than the bitcoin aspect of the studio though is it's a fully reserved bank. It basically says we could be a bank without fractional reserve banking. And I think that actually is what scares them. I kind of wonder, I actually asked Caitlin this once. I said, well, what if you allowed

Starting point is 00:36:54 very small amounts of fractional reserves so as not to trip their worries? Would that make it easier? And her answer was, but that's wrong. And I'm not going to do anything that's wrong because our entire reason for doing this is to be fully reserved. That was some of my next question.

Starting point is 00:37:12 Yeah, that was some of my next question. Is it actually the, is the bit, you know, you love to do this, Dave? You know, is the Bitcoin the red herring, but actually they just don't want a fully reserved bank. And even if you pulled the Bitcoin out of it, then they still would not approve a fully reserved bank. I mean, James, what do you think? Yeah, no, I don't think they will. And the reason is, God forbid, you have a fully reserved bank that suddenly takes in assets from all of these non-reserved for the fraction reserve banks, it would,

Starting point is 00:37:45 it would tip off, you know, more investors and more entrepreneurs to start other fully reserved banks. And you'll, you'll, you would, you would disrupt the system. It's disruptive, but Bitcoin is disruptive. Having a fully reserved bank is disruptive and you, you can't have disruption in this system why why do they need fraction reserve i mean it it all goes back to the money system and what dave was talking about monetary you know modern monetary theory which is just spend ad nauseum

Starting point is 00:38:18 you know we're we're running multi-trillion dollar deficits in peacetime in a time that we're not in recession. This is just it's absolute lunacy. I mean, I could not have predicted just how unrestricted and how much loosening the policy would be tilting towards with the fiscal spending at the end of last year. Going throughout 2023 was like, why are the rates not, why are the high Fed funds rate, the monetary policy, why is that not affecting the economy like it should? And it's because of all the spending. So why do they need fractional reserves? You need to have enough capital out there to be buying up these treasuries. And fractional reserves pretty much allows it. It provides for that.

Starting point is 00:39:15 It solves that problem. So look, I want to make it clear, though. I'm not one of these, you know, I'm a Bitcoin maximalist in the sense that I believe in it and I believe that it wins ultimately and that it is the absolute best store of value. form of money if we build enough of layer two to solve for transactions and lightning does build out enough, which I think we're getting there. I mean, I base my future career on it by starting a hedge fund that I'm focused on, on Bitcoin, the Bitcoin Opportunity Fund. But I'm not one of these maxis who wants the whole system to just implode. I think that would be disastrous. It would be catastrophic. It would cause so much pain and disruption in our world that that's not what we want. You don't want a few super wealthy

Starting point is 00:40:18 people because they own Bitcoin running around in a lawless state. That's not what we want. So I can understand the defensive nature of DC. I get it. I see where they're coming from. And they're scared that Bitcoin gives people the ability to opt out of the system. And it's not like they can control it. They kind of know that they can control, you know, taxes on it and whether or not you have a non-custodian wallet, they can control those things in a way, you know, or they can try to, but that's where they're coming from. And, but to be completely ignorant about the reality of Bitcoin and the reality of the energy consumption and what drives the energy incentives for Bitcoin and how it can actually solve this green energy issue. Because when you have wind and solar, the wind is all is not always blowing and the sun is not always shining. And you need you need tremendous amount of batteries to to to hold this energy for future use.

Starting point is 00:41:34 Or you can just build out enough infrastructure around it and have Bitcoin be running and using it. So it's not just wasted space and not just wasted energy. And then just have to turn off the switch. One thing that people don't understand that are new to Bitcoin is that it is tremendously easy to turn the switch off and just divert that, redirect that energy back to the grid. It is so easy to do that. What's not easy is to turn the switches on, to build out all of this infrastructure, to suddenly deal with new power needs. You can't have a nuclear reactor running at 30 percent.

Starting point is 00:42:18 It doesn't work. It has to be running full tilt. And so how do you do that if you don't have enough demand and how why are you going to spend that much money to build you know billions and billions of dollars to build energy infrastructure around nuclear when you you really can't you don't have the the demand for it yet you may have the demand for it from ai at some point but you don't now you you will have the demand for it if you can use Bitcoin to harness that demand. You know, so that's kind of a long winded way of saying that I see the incentives.

Starting point is 00:42:53 I get it. But they're not taking the whole picture into into play. All they're thinking about is the next four years. And that is ultimately the problem that we have with our system. So that's a great point. Look, let's be blunt. Bitcoin is a speck on a mountain, a mountain of rockies. And looking at these huge mountains, Bitcoin is like a 10-foot hill, right? And they're fighting over the 10-foot hill, not because of where it is, but because, well, they know that eventually it can grow to be 1,000 feet, 10,000 feet and be like a real mountain. The fact is it's small and people understand that and people are always frightened by what it can become. But the truth is that the,

Starting point is 00:43:35 the only real way for things to, to play out in a rational sense is for a gradual, uh, incremental, uh, set of changes that will eventually get us to where we need to go. And that is true in every respect, right? When you get into these sorts of debt problems, in the 30s, everyone, all the Bitcoiners go, oh my God, they stole our gold. Well, yeah, you know what they did? They said, okay, people who own gold, you're going to fund our budget deficit.

Starting point is 00:44:05 And so they stole it said okay people who own gold you're going to fund our budget deficit and so they stole it at 20 and then as soon as they took it they revalued it to 35 and change and so effectively stealing two-thirds of the money from the people who held gold and they said okay you're the poor saps are going to fund yes there is no bitcoin is way too small now if bitcoin were trading at at two or $3 million of Bitcoin, is there a possibility? Maybe $20 million. I can't think of what the number would be, but to actually fund a structural deficit that's $34 trillion,

Starting point is 00:44:38 to be able to steal it and revalue it, you're talking about Bitcoin at worth a market cap in the hundreds of trillions. So, no, there's not a real chance of them stealing it because there's no need to steal it. They can't do anything with it. Now, what they can, however, do is they can try to keep kicking the can down the road for the next two years if you're in Congress, four years if you're in the White House, six years if you're in the Senate. And so it's always this exercise in can kicking. And there's a growing recognition among people that are in the political class that, well, maybe we need to do some stuff now. And so what's the real answer? And the real answer, in my opinion, is that all roads lead to inflation. And the Fed is going to allow inflation. They just want good inflation, not bad inflation. And I keep talking about this, but just to be clear, a world where assets go up significantly and consumer prices go up a lot less, yeah, that's kind of what they want.

Starting point is 00:45:31 Now, is it what I want personally? Is it what people should want? No, because what does that mean? It means completely increasing wealth gaps. It means the rich get richer, and the average person finds it harder and harder to get across, to make ends meet. That's why when you get all these stupid political nonsense from the Biden administration, look how great the data is. Well, yeah, the data is looking at the average. Yeah, sure. If you're rich, the Biden administration has been great. Your assets have done phenomenally

Starting point is 00:46:03 well. You've more than kept pace with consumer inflation. It's great. But if you're not, then the data from the Federal Reserve of St. Louis says that native-born United States job losses have still not recovered from the pandemic. We know that real wages have not kept up with real inflation. We know that. But this is why, by the way, it's kind of amazing to me that there are any progressives that don't agree with Richie Torres in terms of support for crypto and Bitcoin. It just amazes me because literally the single best method on the horizon that the private industry has come up with that is less increasing a wealth gap is crypto and is Bitcoin. And so you'll see it.

Starting point is 00:46:47 And by the way, it's not been lost on them because we've talked about this before. The adoption of Bitcoin and before the ETF was much higher among poor people and minorities than among rich white dudes. It just was. And it is. And my guess is that continues, although we'll see hold up i'm sorry scott yeah please go i got you so this is the you know this is from an article this weekend on bloomberg is uh look at what has happened with the boomers so you've got you know the under 40s you got the millennials and them and the and gen z are just kind of like they their their ability to generate wealth has has been decimated so you can see from 1990s down into the 2020s it their their

Starting point is 00:47:33 share of overall wealth has just been decimated because it's been very difficult to keep up with inflation then you've got the boomers look at the boomers down at the bottom. Look at what has happened to their share of the wealth versus Gen X right above them. And some older millennials, right? I mean, and this is to your point, Dave, is the asset inflation has been just absolutely mind-boggling. And so during the early 2000s, it was fine. So you had the wealth gap separate, but it wasn't so bad because it didn't bleed into services inflation and your consumer inflation. But now it has, and it's become a real issue.

Starting point is 00:48:23 Yeah. I mean, think of it this way i mean i'm glad i'm glad to see a chart which puts me not in the boomer category because you know at 62 i'm not at 70 yet so that's good so thank you thank you for that you made me feel younger although i did you know i'm feeling good because i'm still walking after you know two ski vacations this year so obviously things are still going okay. But the simple reality is that both parties share asset inflation. They say, oh, look, the stock market's doing great. Look how great we are. Look at how much your home is worth. Yay. Yeah. They love that. You can get a new one

Starting point is 00:48:58 if you sell it though. Yeah. Well, but the point is, that elizabeth warren wants to tax that wealth you know so you know whatever unconstitutional or not the truth is they celebrate that and they both hate when consumer prices go up so it doesn't take a mind reader to figure out that they're going to try to engineer exactly what we've been talking about now whether they can do it or not that's a totally different story but in the short term you know they have the policy wheels to do it or not, that's a totally different story. But in the short term, you know, they have the policy wheels to do it. You know, they can fuel liquidity and they can drive asset prices up and they can keep the brakes on consumers at the bottom end. And then if you think about it, I mean, frankly, if the average person understood that both parties were literally enacting policies designed to keep them down and to make their rich friends more wealthy, then you would see pitchforks and torches. But that's why so many people, it jives.

Starting point is 00:49:52 Look at an opinion poll. Find me an opinion poll that says that there's a majority of Americans who believe in any political system, any political party. Everyone has lost faith in Congress. They've lost faith in the White House and administrations. It doesn't matter which party you're in. You know, what was Trump's highest approval rate? Did he even get to 50% ever? Has Biden even gotten to 50% ever? I mean, this is not healthy.

Starting point is 00:50:16 And so that's why you see it. I mean, it doesn't surprise me. But the essence of my argument is towards the, I think, the crack-up boom kind of methodology, rather than a deflationary recession that Mike believes, is literally the politicians of both parties want to kick the can down the road, and they don't care. How about we can have both? And I believe that we can absolutely have both, which is we have a massive drawdown, whether it's 20% or 30% or whatever it is, that causes a tsunami of debt and monetization, debt monetization and money printing, which just triggers that crack-up boom. So some people think that we're like, you know, Larry Lepar thinks we're kind of in the middle of the beginning stages of the crack up boom, you know, and maybe we are. But,

Starting point is 00:51:11 you know, you could have something where we do finally get that drawdown because of an unforeseen event, you know, another black swan, and you have all assets correlate to one with gold and Bitcoin going down with them. And then you've got that massive money printing that we saw just like that V recovery in March and April of 2020. It's the same exact thing. But this time when that happens, they're not printing $5 trillion. They're printing north of 10 and it'll just be that much more inflationary. They may have learned that they're not going to just take money and put it in the pockets of people this time. But the assets will inflate because they will print so much money that they they they'll have to keep the Treasury market liquid.

Starting point is 00:51:58 And in order to do that, they'll print money. And it's it's just a reality of our of our new boom and bust system triggered by the Fed. I have to address the title, right? The key catalyst just before we get done because we had a great conversation, but I do want to talk about this potential Bitcoin catalyst, because I think it's actually important. And I mentioned at the beginning, this Eric Balciunas, looks like Hong Kong is going to allow in-kind creations and redemptions for spot Bitcoin ETFs in Q2, which could help spark AUM and volume in the fast-growing region. And I just want to quickly tilt to Noelle Atchison's newsletter from this weekend that Dave actually alluded to earlier.

Starting point is 00:52:34 She talks at length about why in-kind would be so much preferred to cash only. We talked about that endlessly before the Bitcoin spot ETFs in the United States were approved. But she shows just how much volume, at least in Bitcoin itself, on spot is coming from Asia. And this kind of unlock with a superior product, even though they're not huge on ETFs in Asia, how massive that could be. I mean, you do take a look. She's honest about it. New York Stock Exchange at $25 trillion. Hong Kong Exchange, $4 trillion. So this is a fraction of just the New York Stock

Starting point is 00:53:05 Exchange without NASDAQ, et cetera. But the idea being here that these are the kind of catalysts nobody's talking about because we're so hyper-focused on the United States and on the halving and these things, but there are other things out there that are going to unlock massive capital in the same way as we've just seen. So I mean, I guess the question, and Dave, I see the question is, you know, how big is this? And how much does this matter? Look, I don't like tinfoil hat conspiracy theories, but I love to promulgate them once in a while. Hong Kong allowing in kind creation to me is about as clear a signal that that Chinese capacity and mining is directed by the CCP.

Starting point is 00:53:43 And anybody who doesn't think I mean, yeah, okay, they banned Bitcoin mining from private companies. But yet, if you look at any measure of Bitcoin mining geographically, China still has a double digit percentage. I believe that this is a signal that just like the CCP is likely to be buying gold for themselves with whatever dollar surpluses they have, that they're also going to be mining Bitcoin. And the idea that our government shouldn't be looking at this is nuts. I mean, people should understand that this is a very clear point that they're not dumb. You know, you can say whatever they want, whatever you want. Mike's right about the chilling effect on an economy of having one person control

Starting point is 00:54:25 it government-controlled economies don't work but they're not stupid uh and if you think they're not trying to diversify away from the dollar by buying gold and mining bitcoin of course they're going to do both and that's really i think that's what this move signifies because hong kong literally you know the leader of hong kong can't you know has to ask Xi when they go to the bathroom. I mean, come on, let's face it. They can't do a damn thing without his approval. And there's no way that they'd be allowing in-kind creation, which by the way, makes it easier for Chinese government miners to create.

Starting point is 00:54:57 Come on. To me, it's a very obvious signal. And that is an enormously big deal. That's why I tend to agree that it's a big catalyst. Is it a big catalyst like Bitcoiners want to say, okay, cool, we're going to go? No, but it's a ground spell. Yeah. Just more access to more capital and more markets that we see unlocked slowly to keep a floor of rising demand. It's the same thing we've seen with the spot ETF. Seems so obvious, right? James, any thoughts on that?

Starting point is 00:55:22 No, I mean, I totally agree. And it's interesting to put your tinfoil hat on. But I've been saying this for a while. If you look at the mining and there's a significant percentage of Bitcoin mining that's still coming out of China. It's just reality. So they banned it. But really what they did was, from what I understand and from what I've heard from people who have first-hand experience of trading or of interacting financially with some of these miners out there, is that you've got some miners that are protected in certain provinces, and they're just giving kickbacks back to the government in order to allow them to continue to operate. And so

Starting point is 00:56:12 that's just the reality. You don't even have to have a tin foil hat to believe that. That's just what's going on. Mike, you showed back up in a jacket you get to wrap us up on china i i really like the back um piggyback on that one because we have to ask ourselves do we think it's not trying anymore president z is dumb enough to take the risk in a world he's shifting back to a gold environment away from the dollar, take the risk, a world going digital of not having some Bitcoin in their space. It's just logical, like you just said, unless he's that dumb. And one thing I've just enjoyed reading the book from my colleague, Sally Motion, Paper Soldiers, about the history of how Chinese are so into their history and everything. And so is

Starting point is 00:57:01 President Xi. And that's the thing that Jeff Booth warned us. History and technology is moving so fast. You got to have some Bitcoin or you'll risk falling behind. So I think safety and amnesty is right. And they play the long game. You know, China and Russia, they play the long, long, they play generational games. You know, we play games that are four years long

Starting point is 00:57:21 in the United States. Are our leaders in D.C. stupid enough not to own Bitcoin? Yeah, they're selling it. They are absolutely stupid enough. And it comes back to incentives. The incentives are four-year cycles. But Russia and China play long, long, long, long, long generational games. They're playing games that will win for their great,

Starting point is 00:57:45 great, great grandchildren. And we're playing games that will win for next week or November. Yeah. Well, I guess we'll see who wins in November and what it means for this market. It's a good thing we have a better system. Free markets to the extent, and we don't really have free markets. We have free-er markets. It's a good thing we have free-er markets because political system and the incentive structures are completely foobarred. Yeah. Yeah. We all agree there.

Starting point is 00:58:10 And somehow we got to time. So, Mike, I'm glad you were able to pop back in. How was the gold discussion, Mike? Yeah, I was going to say, how's the gold discussion on Canada? It's good. It's good. It's about rates and things. And I just point out the same stuff I pointed out here.

Starting point is 00:58:22 But it's probably a good sign of a peak when they asked me to comment that much. And so it happened Bitcoin in 2017. Wow. Well, I think this time we all think gold's going up. So I guess we'll see. Guys, thank you so much, everybody. We'll see you back, obviously, next Monday for Macro Monday. And I will see all of you guys this afternoon at 3.30 p.m.

Starting point is 00:58:41 to look at some charts. All right, guys. Thank you so much. We will see you guys p.m. to look at some charts. All right, guys. Thank you so much. We will see you guys soon. Bye. Bye. Bye. Bye.

Starting point is 00:58:47 Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.

Starting point is 00:58:49 Bye. Bye. Bye. Bye. Bye. Bye. Bye.

The Wolf Of All Streets - Bitcoin Will Skyrocket: Key Catalysts for Price Surge | Macro Monday

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.