The Wolf Of All Streets - Calm Before The Storm - Is Bitcoin The Lifeboat? Macro Monday

Episode Date: November 27, 2023

It's Macro Monday with Dave Weisberger, James Lavish and Mike McGlone. James Lavish - https://twitter.com/jameslavish Mike McGlone - https://twitter.com/mikemcglone11 Davie Weisberger - https://twitter.com/daveweisberger1 ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘2MONTHSOFF’ WHEN VISITING MY LINK.  👉 https://tradingalpha.io/?via=scottmelker  ►►TAP A super-powered money app - an all-in-one investment, money, and trading platform. Coming to the U.S. soon, with tons of bonuses. 👉https://referral.withtap.com/scottmelker  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►► OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $10,000!  👉 https://www.okx.com/join/SCOTTMELKER ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=453131... ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

What came as a huge surprise to many was the strong consumer numbers this Black Friday, up over 7% since last year, making a lot of people say, what recession? What problems? What calm before the storm? But as you know, many of us still believe that there are worse things coming down the road. China actually potentially showing the way with some serious deflationary pressure on profits over the last quarter. We're going to talk about all of this. If it is, in fact, a calm before the storm, or maybe we've just been wrong and where Bitcoin plays a role in all of this. Of course, I've got Mike McGlone, Dave Weisberger, and James Lavish. It is Macro Monday. Let's go. what is up everybody i'm scott melker also known as the wolf of all streets before we get started

please subscribe to the channel hit that like button i hope that all of you had a wonderful holiday weekend for those of you had a wonderful holiday weekend. For those of you who celebrate, it feels like the United States just forces our holiday weekends on everybody else anyways, because if nobody here is working, it seems like you probably can't get anything done anywhere else in the world as well. I'm glad to be back on a full schedule here. It's been a few weeks where I've only had one or two shows. We're starting with just me and Mike right now. We've got a pretty sweet view backstage. You guys can't see of the inside of Dave Weisberger's car as he makes his way up to his office.

James, since we're a bunch of boomers having his standard Monday morning technical issues, but we'll be on soon as well. But I would go ahead and bring on Mike because we usually start with Mike anyways. Good morning, sir. How are you? Good morning, Scott. It's good to be on. I can rant a little bit before my colleagues come back on. So I'm happy to go over some of the stuff we went over in our economic meeting this morning and my outlooks if you'd like to listen to it, wherever you want to go. Yeah, let's dive right into the morning call. I want to talk about Black Friday and the consumer afterwards, but I'd love to dig first into your morning call and what's happening, what the view is at

Bloomberg right now, because as I kind of pointed out, a lot of metrics still strong. Yes. And that's the key. I'm glad you started there because Bloomberg economics pointed out that it looks like the downtown downturn is likely already started. Markets are obviously dismissive of that. There's notably stock market. But the key thing they pointed out about the extreme discounts from Amazon, Walmart and all the above and the buy now pay later incentives. That's really never happened to that extent is showing strapped consumers. So that is something to be cognizant of.

Now, I'm not just trying to pick out bad stuff out of good stuff. It's great to see that, but it's just the facts of what Economic Team points out. Our chief equity strategist, Gina Martin-Adams, pointed out that there's a second dip in the economy, potential risks there. But still pointing out the stock market is showing the momentum still strong and not showing any picket downdraft of that. And the key thing I want to bring out is something I've learned being in the grain markets for decades. And that is the old saying that when the bulls get turkey for Thanksgiving, bears may get it for Christmas. Now I look at that and that's true. That's what I look at in the equity market. And I think cryptos are the best leading indicator there is for that. So what I'm looking at that is that's a potential risk for now and then for next year.

So we have to admit this year, everything, all risk assets have been up. Cryptos are the riskiest and they're up the most. Now, I should say Bitcoin. Now, the alts aren't up as much, but also. And why are cryptos up a lot? Is that that ETF hope, which we know is going to happen. But the key thing that we pointed at the beginning of the year was one of the best potential assets to buy for that was GBTC. Well, that's already done. The point, I mean, it's up almost 300%. The key question you have to ask yourself for next year and the next few months is, okay, so what if we just have a normal recessionary backdrop for the stock market, which people have already said we're not going to happen, which is the opportunity. It's the

beginning of the year. People are priced too much for that. What does that mean for all markets? And so I like to tilt over what are the indications for that. For first, leading indicators, now people have hurt poo-pooed that number, but it is minus 7.6%. That's almost always accurate. At beginning of, at this time last year, it was about minus 4%. So it wasn't extreme. And then what's happened so far this year is the Fed hiked another 100 basis points. And I like to. Gold is up above $2,000 an ounce. I think next year gold's going to be knocking on the door of $3,000 an ounce. And I have to remind people, will remember, that to quote Roger Bapson when he gave a speech in 1929 in Massachusetts, I'll repeat what I said this time last year and the year before. I feel the same way about gold.

I've been bullish gold for two years. I think it's just a matter of time it breaks above 2,000, goes to 3,000. But the key thing that's holding it back is the stock market's strong and rates are high. Both of those little things might be tilting downward. Now, that hasn't started yet, yet gold keeps going up. But in other currencies, it's doing what it's supposed to. It's made all-time new highs. And all the other commodities, you look at industrial metals, most notably energy, they're all tilting downward. I mean, continuing to bounce a little bit who's done well in the equity markets up 45 percent in NASDAQ this year and cryptos, you know, GBTC up 300 percent and Bitcoin up 100 percent and change this year have to be worried that next year we just get a little reversion in that the normal pendulum swing. And that to me is why I keep pointing out that's the tilt towards enduring. I think the more enduring recession, it's just a question of how long can the stock market lift all boats? So I guess there's two ways to skin numbers like these Black Friday numbers, right? The optimistic view or the pessimistic view. So up 7.5% from the previous year, reaching a record 9.8 billion. And there

was actually, I think, a 2% increase in stores as well, which I think surprised a lot of people. But most of this, as you mentioned online, then you were quick to point out buy now, pay later, which saw 79 million in sales and a 47% increase from the prior year. So basically what you're saying is that people aren't canceling Christmas, so they're going to get the deal while they can and kick the can down the road on paying for it. So maybe these numbers aren't as positive as they would seem because, you know, on the surface, once again, just looks like we have a strong consumer. Well, OK, that's a good thing. We've had a strong consumer for most of this year, but

the bottom line I like to write about is why we've had a strong consumer this year is partly because of the wealth effect. to the peak in 2022. Now that's dropped back a little bit, but most homes have actually increased and are flat to higher from those peaks. Equities are flat to higher from those peaks. We haven't had that reverse wealth effect, but what's that done for the Fed? Well, they kept hiking rates. So it's come next year that the typical pendulum swinging rules of economics and history, I think are going to kick in. And it's good to see that we're still hanging in there from a consumer standpoint, but you're not seeing that in commodities. You're seeing the exact opposite. You're seeing declining demand for unleaded gas, declining gas demand for diesel, declining demand, all recessionary demand for container boards and

stuff I really watch closely, declining demand for natural gas. So from my standpoint, these sales are great, but again, they've been borrowed from the future. And the bottom line is you got to just keep the stock market heat going up for risk assets to go up. We just haven't had that normal recession contraction in wealth, which is great. Hopefully we can sustain that and history is different and it's different this time. Dave, do you have any thoughts on what's happening with consumer and Black Friday? It says here after Cyber Monday, sales will likely taper off to the rest of the holiday season as retailers trim discounts. No surprises there, I would say.

I think consumers are playing follow the leader. Our leadership in the central bank and treasury, everyone else are expert kickers of the can. And consumers, to the extent that you give them the ability to borrow, are going to kick that can also. The problem is, is consumers don't have the printing press. And, you know, something that is interesting, I was reading this weekend. I'm a subscriber of Noelle, her Crypto is Macro Now newsletter, and she pointed out something that I think is very important, which looks, it's not confirmed yet, but the tick up in both loan defaults and high yield defaults is certainly increasing. And that always presages a jump, not a small jump, but a jump in unemployment because as companies can't fund, they have to lay people off. Now, if you look at that chart, which I was trying to bring up,

Michael, Mike probably has a better version of this on the Bloomberg Terminal. But if you look at it, it looks like loans have kind of strangely accelerated beyond, you know, defaults on loans have gone up more than default on high yield, which is generally not what happens in this part of the cycle. I'm not sure why that might be. But at the end of the day, as long as high yield bonds, if companies with high yield bonds start to default significantly, that's when you will see an acceleration of unemployment. The fact is the Fed is watching this stuff. You know, it is not terribly surprising that the market is no longer thinking there'll be any more tightening. And I think most people in the market are betting on the ace can kickers, you know, tapping out, you know, and coming back in.

And I think that's what's going on. The problem that Noel points out, and it's very accurate, is that the stock market risk assets still require earnings. At least some people like to see some earnings. And if, in fact, the economy goes into the dumper, and you have a situation where the Fed is printing to try to get yourself out of it, the reality is earnings are going to take a hit before anything manages to trickle back through, which is why I think you'll see more rotation into the, it sounds totally counterintuitive, but into more speculative assets where there aren't as many earnings. It's that old expression, you know, if you have earnings, then you have something to measure it by. So I think that it's a fascinating setup. The truth is, I can't help but think if we weren't going into an election cycle, that this is set up for some sincere ugliness with risk assets, with some risk assets anyway.

But, you know, it's really a question of what the hell is going on and who can kick the can and whether they can. And that's what they're going to try to do. And I think Mike and I agree on that. The only thing that where we disagree is there's no version of reality where I can think that gold could rally 33% and Bitcoin will do anything other than go absolutely stir crazy to the upside. Because the same if even a fraction, forget the fact that it looks like there's been more inflows into Bitcoin than gold full stop. The fact is, is if a tenth of the money that was going to go into gold that required pushing it to 3000 came into Bitcoin, the market is just too damn small for anything other than at least a doubling of the price. And that's really important to understand. So that's why where Mike and I agree and disagree.

But there are a lot of crypto out there. There's a lot of projects out there that if we see a high yield implosion, we'll have difficulty funding. And so you could see Bitcoin dominance dramatically increase. It depends on where it is. It also depends on the global nature of the economy. Where are the cracks founding? Where are they forming? And where are people going to put their money?

So I think those are sort of the thoughts. Yeah, I think that makes perfect sense. Mike, yeah, you were muted. I think you were trying to come in. But I want to talk actually about China. I was reading today that I have the story here. Let me just pull it up really quick. Asian stocks falls, China profit growth slows. This is basically industrial companies in China

seeing a major slowing. I was reading Grit. You were reading Noel this morning, Dave. I was reading Grit and basically saying that this is very, very strong deflationary pressure in China. We're already seeing it. Is this giving us a peek into what we may see here? Because six months ago, people would have been telling you the same things that they're telling you about the United States right now, right? Everything's strong. All the metrics are good. And now it sort of seems to be leading. And to that end, we also had, obviously, Mr. Xi come to the United States. It seemed like some are saying that he bent the knee. Right.

But but very, very like calm terminology about being friends with the United States and us lifting restrictions. And it can only be enemies or friends. And we need to be friends. Right. I mean, we all we all heard what he said. It seems like China is very eager now to save their economy with help from the United States. I'm glad we went there, Scott, because to me, that's the overwhelming macro that it's not really hit hard yet. And I was very impressed as Mr. Xi did come to the US and as you you said, bent the knee and tried to save face with President Biden. But he's stuck in a position now that's almost historically unprecedented. It's not unprecedented. If you read Viktor Shevits, The Great Rupture, a whole section of China about it.

China is just doing what they have in the past. They just they leap out to the front. They join the world and they push back. And he's completely done that. Now he's trying to see. I think this is indicative of what's happening internally. Now, our Bloomberg economics team writes about China, the property crisis, and it's a complete consensus. Everything I read is it's just getting worse. There's going to be Band-Aids, but it's not going to get better.

The key thing also is I plug in an internal. If I type in NI China, it's all the data in China. We have to be careful even writing about China because colleagues can get detained. I mean, that's how bad it is. Now, I think what's happening is I looked at him coming here as akin to, remember right at the beginning of COVID, we all heard how wonderful it was they built a hospital in 11 days. And people thought that was so bullshit. I'm like, do you realize how bad that is? It means they had to build a hospital in 11 days. It's how bad it was. And we found out how bad it was later. So everything that's happening in China, to me, is completely fits into my narrative. It's a combination of Ayn Rand's Atlas shrug,

peak China, and peak Soviet Union. You're seeing it happening. Beginning of the year, it was all about China rebound. Didn't happen. And now we have this virus kicking in again there. And we have every major country in the world that was importing from China. It's so politically incorrect now to import. They're finding other ways, most notably the lesson you learn in the history of the last 100 years.

If you're a poor nation, you want to become wealthy, be friends with the United States. If you want to get poor again, be an enemy of the United States. It's just the way it's always worked. Has that changed? Who do they cozy up with? There's not a lot of demand pull out of the Soviet Union. Well, Russia. So to me, this is the macro big picture. And I'll end with one key thing that's the best metric I think you can watch. It just was rates. The two-year note rate in China is 2.4%. They're cutting rates. rates are stimulating because they have to. In the U.S., it's 4.9%. That's a melting currency happening. They have to support that currency.

Yes, it's not freely traded, but that almost 300 basis points of difference between the top country in the world that's the top importer and the top country in the world that's the top exporter. Now, it's just pissed off all its customers. It's indicative of where things are going. And I think you see that in plunging energy, plunging industrial metals, and slumping commodities, which China has been the number one demand source for about the last 20 years. Hey, Mike, I want to give you a chance to kind of response what Dave said, but I didn't really think about it. You do have obviously the idea that gold and a lot of people share. Once it makes a new all-time high here, we're over 2,000 now. Novogratz said the same thing, 2,000 to 3,000 relatively quickly.

And I tend to agree with that view. Do you think that Bitcoin would follow in that situation? Or do you think that it'll be a risk asset and fall off with stocks? Because the assumption here is stocks are going to go down for gold to go up. So that is, and I still think bigger picture macro, Bitcoin has a higher correlation with the stock market to gold. And also remember gold, Bitcoin has about three times the volatility as it does of gold and the stock market. And when markets go down, typically high volatility assets go down more. Now, one thing that's a problem for Bitcoin is it's already

gone up a lot from the bottom on the narrative that everybody agrees that they're going to get ETFs. But the thing that we agreed with on this program a year ago was if you're bullish ETFs and Bitcoin ETFs, buy GBTC. Now, what happened with GBTC? It's the best performer. It did what it's supposed to do in that narrative of taking away that discount and going to ETFs. So I'm very much, I disagree with Dave on that. And I think here's the thing, I need to see the proof. Show me the beef. And here's the thing why I like to say, because if we get a normal 50% drawdown

peak to trial in the stock market, which is a lot, but that's what happened the last two times we had recessions. Then I think Bitcoin's going to suffer and gold will do better. But here's the thing is, we have not seen proof of that divergent strength yet.

Now, we've seen proof of divergent weakness in all the alts, most of the alts that got way too expensive on speculation. But let's look at this year in history. Let's look at the last two years. Everything, all risk assets went down in 2022. Cryptos went down the most because they're the highest risk asset. Just look at a value at risk model. Everything has gone up this year, crypto.

Bitcoin's gone up the most because it's a higher volatility asset. And it's got that, of course, I get it. It's the fastest horse in the race. But we have not seen that chance for it to show macro divergence strength in a recession, stock market going down, Bitcoin going up. I want to see the beef. I need to see the same. And I look at it as a risk manager sitting in that desk and saying to my boss who's running the money say oh yes sir

i agree with you but if you look at the history when stock market goes down bitcoin goes down and i just need to see that show something other than that i mean first of all there's the correlation between bitcoin and the stock market over the last, you know, six months has been negligible. But all of that is immaterial if one goes back to first principles that were Mike and I disagree. And I pointed out every single freaking time is Bitcoin trades like an option. And the trading characteristics of options are different than the trading characteristics of assets. When you look at every single on-chain metric, Bitcoin had the hash rate hit a new all-time high less than a week ago. When you look at the number of holders who, and we can say hodlers if it makes the Bitcoin community happy, but people who are holding for long term, a new all time high within the last week. If you look at every single on chain metric, the fact is, is you would think

odds of adoption, global adoption, which is what triggers the in the money, the this out of the money option of it becoming digital gold, are at least 4x where they were when we hit the previous all-time high pre-Luna, pre-2022 catastrophe. So we're at half the price of the all-time high and four times the probability. And I always look at the Bitcoin price as a probability. Well, at $37,000, it's somewhere around, depending on how you calculate it, 6% and seven percent is what the market is saying bitcoin would be digital gold at gold's current price if we all agree that gold is undervalued well then that the odds are probably closer to four percent now what does this mean well it means that bitcoin is at its core and its core use case these days with, you know, obviously ordinals and other, you know, JPEGs and other inscriptions notwithstanding.

The fact is Bitcoin's core use case is as an alternative currency for preserving wealth. And the kicker, the reason why there are so many smart people and we've seen this bid underneath the market is because people look at this asymmetric potential where, yeah, it could fail or it could 20x minimum in order to get to where gold is. And so the fact is none of that, literally none of that has anything to do with future earnings on publicly listed companies, which is obviously what the stock stock market is so from a fundamental perspective in addition to the actual quantitative side there's no reason for Bitcoin to be correlated to the stock market except for one thing or Mike and I totally agree when there are sharp falls and if

the stock market drops 50% gold will fall also the fact is when there's sharp falls people sell what they can not what what they want to. And I've said this a zillion times just to be really clear. If you see a Black Monday event in the stock market, yeah, sure, Bitcoin, gold, everything else will fall. In 2008, gold took a full three months to de-link from the stock market. So the next time it'll probably be quicker because that's people learn from the stupidity. But the fact of the matter is I keep pointing out and my favorite analogy is what company from the 30s? Homestake mining. I look at Bitcoin as a digital equivalent of homestake mining.

I've said it many, many times. Now, there is one problem from a Bitcoin perspective, and that is most of the adherents, most of the true believers are young, relatively speaking, who have less disposable income and are the ones that get hit first in a recession. So there is a chance that if we go into a deep recession, that all assets, Bitcoin included, gold also fall before it starts moving higher. But the truth of the matter is I tend to have belief. It's sort of like, you know, when the – I'm a Jet fan, so I have nothing to root for in football season anymore.

But when you do have one of those quarterbacks and the Jets are playing them and the Jets score, but it's a six-point or less lead going toward the end of the game, you kind of know that quarterback is going to drive the ball down and score, and you're going to walk out shaking your head saying, same old Jets. Well, in reverse, I have a pretty, I actually, I don't like the word faith, but I tend to believe that our politician, political class, has at least one or two more can kicks in them before everything goes to hell in a handbasket. And so, you know, I don't know, but I'm a full believer in QE, whatever the hell we're up to, three, four, five, I don't know, coming. And I think that that

is when the recession starts to kick up its head. I don't think there's any chance this year going into a presidential election that the Fed or the Treasury are going to allow unemployment to go from 3% to 7% because they'll know that that will be creating regime change via the election. And so it may happen anyway or it may not happen, whatever. But I just think that they're going to take those sorts of extraordinary measures. Just I thought that we should tilt the chains. Let me just give some facts on gold. I like to say in the gold as a basic, I mean, long-term commodity strategy, I think it's imprudent to be a gold bullish investor anymore to hold gold without some Bitcoin in that space. I think completely agree with that narrative.

Let's give you some facts on gold this year. Gold ETF holdings on a year-over-year basis are down about 8% and gold's up 15%. It's beating the S&P 500. That's never happened. We had ETFs selling gold. Why is gold up? Because the deepest pockets on the planet are buying gold. Central banks, they can print currency, they can print paper money and buy gold with it, and they are in this war environment, global potential. Some people are calling it World War III. So to me, that's the bull's case for gold. I don't disagree with Dave about Bitcoin. The key thing, remember, it's the best performing asset in history. When you got to sell, you sell where you have some money, some profits. So that's a short-term thing. But

again, we haven't got through that. And also here's a key thing that markets already priced for next year, which I find striking is what Dave mentioned is there's not much we can do. Anybody can do for unemployment going from a bottom of 3.4% to reaching 5% next year and this year. That's the call from Bloomberg economics that you're going to reach 5%. It's against consensus. It's very recessionary, but the market's already priced for that in rates. So if I just look at Fed fund futures in one year from November, they're priced for 90 basis points, about 90 basis points of cut. So market's already priced for the Fed to cut, yet most economists, most interest rate standards say they're not going to cut unless they have to. The key question we have to ask ourselves, what makes the Fed cut?

People are saying, oh, inflation going low. But for the rest of our lives, we're going to say, well, the last time you cut too much, you created this inflation. So my bias is there's only one thing that really triggered them to cut, and that's risk assets going down. And what's the leading risk asset on the planet? James, we're sort of debating here whether if gold goes from $2,000 to $3,000 and the stock market crashes, what does Bitcoin do? Does it behave like the stock market or, what does Bitcoin do? Does it behave like the stock market or does it behave like gold? I know that you think that it will behave like the stock market, at least initially, because you've said that here before. But do you think that it can then behave like gold? What would make it, I guess, since we're calling it

a lifeboat here, what would make it that actual lifeboat to somewhat detach from the risk-gone environment? I think, honestly, the most important thing is just for it to have a higher asset value. And it's just too volatile to be a store of value for institutional investors and widely for retail investors. It's still speculative on the spectrum of investments because it's just volatile um let's say we get we get multiple etfs approved early in the year and uh and that allows for that massive influx of capital from institutions to come in then that will uh that that will stabilize it i think a little bit at at least. I still think it's going to be volatile up front until it gets to a certain size.

And whether that's $3 trillion or $2 trillion or $5 trillion, I don't know. But it's going to take a little while until it gets to the point where it's stable enough that investors will start moving, allocating to it out of their bond allocations. And until that happens, I think it still just remains volatile and more of a risk asset. But it's got to get to the point where large institutional investors are confident to take allocation away from bonds and into Bitcoin. Yeah. Okay. Let's talk about something because we haven't really brought it up. We've talked about the ETF to death, obviously. I think that's still the key narrative floating the Bitcoin boat. 90% chance, according to Seyfert and Balciunas. Mike, you talk about consensus and where interest rates are going to be. I don't know that I've ever seen a consensus greater than the fact that the ETF is going to get approved. What if it doesn't and that's the

easiest counter trade ever? What happens if you get rejected? Markets forgot about that risk, but I mean, we know that answer. I mean, the question is very leading. And that's, to me, the bottom line is that what I repeated earlier is when the bulls get turkey for Thanksgiving, watch out for what the bears get for Christmas. I think that tilts for 2024. So it's, again, the key thing for this year is all risk assets are up this year, much more than most of us expected, particularly me, except I thought gold would be much higher by now, And it was, it's not, but there's a good reason for it not to be. It's just the key thing for next year is can we sustain this NASDAQ going up 45% in the annual basis versus just the normal thing that it does. And that's tilt a little lower, particularly when you have leading indicators say it should. Now, of course, it's all different this time. I love when people say it. But here's a key thing I'm getting from all the strategists is people, they're saying what people want to hear, particularly this time of year. And I even did it Thanksgiving morning.

I didn't want to post something bearish because that's not so nice. So I waited till afterwards to point out what housing, how expensive housing got versus GDP and what it typically does versus per capita income. Well, maybe it's different. It's just per capita income, US average home price jumped up to around 10. Before it was around eight, eight times. Now it's just usually goes back down. What does that mean? It's a reverse wealth effect. And what's the Fed going to do to stop that? Well, they just hiked rates and last hike was only in July. Give this a year. And that to me is this why I'm still sticking with that great reset. And at some point, I'm just worried that this bounce this year in

all risk assets, it's going to do what it normally does. It's going to do what energy typically does. It bounces. And then the next year it realizes, oh, we went too far. There's also a vast difference between, oh, just the normal recession and what it should do here and a great reset. Right. So, I mean, I'm glad you brought that in, which is and we'll tilt over to Dave or James. I think it's illogical to expect a normal recession after a confluence of hundred year events on a global basis. And we three years ago were all worried we could die. A lot of us knew people who died right here, my son, um, these things happen. And then you have to tilt back to, okay, well, we didn't. And what did we do during that period? We created the biggest liquidity pump in history. So I've gone back and read everything I can about

liquidity pumps. They always dump. And when they dump, it's usually reciprocal to the pump. That's just getting started. And that's why I like to say is good luck with your mind. So I had a model or Bloomberg reach out to me from Europe this morning. He says, hey, we need to jump you in some of our modeling. It's like, yes, perfect. Because when you do your value at risk model, Dave and James have both done that, usually have maybe 50 years of data. Well, can you bring in 100 years of data? What happens with the 100 years events? I'm trying to focus and bring that in. And that's where I was really early on crude oil a year ago and got a lot of haters.

But the fact that it's dropped almost 50% for the peak just fits into that macro big picture narrative. And there's one shoe left. Now, that's one thing I like about cryptos is they're new and different. Bitcoin is new and different. But if you look at the macro big picture models of what happens when you pump liquidity like we did and then you take it away, it's never been a good thing. We're still delayed into the, I think, the normal pendulum swing after liquidity pump like we did up to the peak in 22.

Dave, ETF, what happens? I mean, there is no version where the market is priced in the ETF long-term because of what it actually means. I think that part of the reason the market is sitting here is because people are like, oh, we got to wait till January again. And then in January, if they say no, then there's going to be a court case and it's going to go even farther and yeah i mean look at the end of the day this administration is being run by someone who's a vowed hater of crypto right we know you've had the kit your your podcast with with caitlin long is a must watch for anybody you could post the link here i'll tell you scott did a great job and c is always amazing. The fact is we know that this is true.

There is zero probability that, in my mind, that any new administration would do anything close to this. We have a presidential election year. So if Bitcoin, if Gensler decides, you know what, screw it. I got to keep pounding on Bitcoin because I'm being told to do so, it could happen. It seems more likely that what they're going to do is kind of let Bitcoin into the gate and try to keep pounding on the rest of crypto because that is literally the actions they've taken with the Kraken suit. But, you know, we'll leave that aside for a heartbeat. It could happen. If that happens, then we'll leave that aside for a heartbeat. It could happen. If that happens, then you'll see a dip for sure. You'll see some selling.

And you'll see when you look at the on-chain metrics, you're going to see, wait a minute, none of the people who were really long-term holders sold. They're still long-term holders. And then people start talking about the next time. And look, I think that that's what happens. And, you know, sure. Is it a tradable sell off? Yeah, it could be 20%. I mean, that sounds like bad for most assets. But for Bitcoin, that's Tuesday, right? You know, or so it's like, you know, what are you worrying about? I think that people don't understand what's actually happening here. And what's actually happening here is that the rallies that we've had, and look, we've been in a trading range now, a tight one for three weeks. Three weeks is nothing. We've seen multiple 10 to 12 week

trading ranges. In fact, if you look at a one year chart of Bitcoin. I was just looking at it. It looks like plateau for six to ten weeks, a ramp plateau for six to ten weeks, a ramp plateau for six to ten weeks, a tiny little ramp and a tiny little whatever for basically all of it. And then we've just had a ramp. And so for us to plateau here wouldn't surprise anybody. The issue is it's basically done nothing. I mean, there's no Thanksgiving rally for Bitcoin. The rally was, you know, at the beginning of November and it's been pretty much exactly where it was. I mean, you know, within a thousand bucks or so, which is no big deal. You know, so look, I look at this as right now there's a door. The door is fairly reasonable and we understand it. The things that I'm staring at on a daily basis is the amount of speculative activity.

Things like last week, because it was the roll and because there are people who are using Bitcoin futures to have their Bitcoin exposure, the calendar spread from November before it expired to December popped to $600 to $800. It is back down today to $400, which is still high. Don't get me wrong, because the math says it should be around $120 with today's interest rates. But it's half what it was last week. If you look at the funding rates across all the perpetual swap markets, they're all negative or flat. There's no speculation in the markets right now. None. And in fact, we saw this when we had a couple of moves over the last few weeks, that we've seen more short liquidations on moves than long. But the truth of the matter is there's no long side speculation. Well, what causes a major dump in Bitcoin price? Major dump in Bitcoin price happens when there's a lot

of long speculators that people can trigger and create a liquidation cascade. You don't have a lot of loans, you can't create a cascade. With leverage, right? Just so people are clear, he's speaking about with leverage because we have seen quite a bit of demand on the spot side buying, right? And I think that's lending to your point. You're seeing more investors than speculators. Yeah. I mean, look, at the end of the day, I mean, we're seeing lots of motion in crypto writ large. I mean, you know, there have been a lot of coins that have had significant moves, you know, Bitcoin and Ether, you know, it's still relatively stable. It got up to 0.56 something. Now it's a 0.54 something. Almost it's been kind of around 0.55, you know, 0.55 is the ratio for a while now.

But the truth is that there's been a lot of motion under the covers. And we see it because we see a lot more volume going through our platform. We see a lot of spread trading. We see a lot of stuff, but there's no long bias. There's no short bias either. It's just, there's no, the speculative on leverage stuff, which has literally been the most reliable indicator of a market top. We are not, it just totally doesn't look like that. The last time we saw any, it lasted for less than three hours, not three weeks, three hours before that came out. The traders, the large whale speculators in this market don't take long to flush that open interest when they get the chance. That's right. And so look, the truth is that the most, the only stable

open interest that has speculative pressure is in the United States. It's in the futures market. And now I can tell you, it's right here. I mean, now, by the way, CME has smoked finance. Now it's 15 billion, I think ahead in open interest, right? We've talked about that maybe they would pass them. Now they're leaving them in the rear view. There's 15%-ish more open interest on CME than Binance Futures. Right. And so look, the fact that the CME still has a premium is a little worrisome. It says that

there are people in the US who are betting. That's the people who are betting on a spot ETF. And that's the money that causes what I would think that looks to be about a 10 to 15 to 20% dump if the ETF doesn't happen. But it won't be the ETF not happening. It'll be the ETF. They're going to be taking back to court again. Because if you think BlackRock and Fidelity, who's working with the staff, there's just no way. We're way too far down this rabbit hole. Does it have to happen in January? No. Could they delay it again?

Of course. They could talk about, well, we need, this is the whole technical thing of in-kind versus cash redemption. And I'm happy to explain that if people really care. But the truth is, is that it's no longer an in. It's semantics. Yeah, yeah. Well, no that it's no longer an it. It's semantics. Yeah, yeah. Well, no, it's not semantics.

It's a very serious problem because in-kind redemptions mean you could take Bitcoin and create ETF shares with it. If you can't, then you have to pay a market maker dollars based upon the spot price. That is a big difference, which means if you have Bitcoin and you want to turn it into ETF, you would have to literally sell it for cash and then flop it to an ETF. So what you'll end up with is a market that I used to play in a lot when I ran a billion dollar index art book called the EFP or exchange for physical market. And that market's not well developed because the US companies can't touch physical Bitcoin. And so you're going to end up with a leak in the plumbing if the SEC forces it that way, it will be more expensive. Because one of the little thought about, but very important

reasons why a spot ETF should be a very big deal is it will lower trading costs. Why? Because market makers are pretty efficient and they're pretty competitive. And so you'll end up with very tight spreads, zero commissions in your Schwab, Dean Witter, Morgan Stanley, whatever account. And that will attract a lot more retail interest because people like stuff that's cheap, right? Cheap to trade. Bitcoin right now is very expensive to trade if you're retail. And so that will make a big difference. If they force it to cash only, then yes, it'll still be cheaper, but it won't be as much cheaper because of that. So those things do matter, but I don't think we're talking about this big binary bad decision. I

think, yes, when the news comes comes out you'll get a pump and at least 50 of that pump will retrace i think so i i got a question that for you for you dave and your thoughts on this so you know when you when you launch an etf you have to have some sort of an nav of the underlying right and so you know there's all talk all kinds of talk about BlackRock out there trying to accumulate enough Bitcoin for when they do, in fact, get approved. But GBTC has the underlying NAV, and it's trading at a discount to it right now. So if and when that does get approved to then be translated into an ETF, it would seem to me they have an advantage in a way and that they already have that underlying. I mean, look, they might.

I mean, it depends. I mean, look, it's going to trade at a discount for a while for a very simple reason. It's because there's a management fee associated with it and risk that they can't play nice with the SEC and all the other corporate crap that's going on. But that discount is very low right now. It's 8% right now, right? Right. 8% is too fair for it. What is it, Mike? Yeah, you're right. It just dropped to 8%. It was such a classic case that I'm worried about. At

the end of last year, it was almost 50%. It was trading, it was a low around 8% in the price. And here we're 30% and it's 8%. It's going to go to zero dave's right there's going to be a bit of a spread there but it's just a question of when um and the question so then it's going to be okay what's this is going to be about the pure price of bitcoin and i just um and you know overall i think it's going to go higher but i think the uh just to piggyback on a few things that Scott pointed as CME open interest now in terms of bitcoins is one hundred and seventeen thousand bitcoins. And that's the key thing that as X futures guys really make sure people are aware of when you see the open interest in futures. And sometimes be careful looking at it in dollars. You have look at in the underlying in terms of contracts of bitcoin and that was one thing i remember jp morgan put out an article back in 2019 how 18 how bitcoin cme futures were failing because they use dollar value my guys

no you have to use the amount that trades the actual bitcoins that trade and it was wrong but they learned um because they didn't trade in the future space. But that's just an indication. And one thing I also want to remind people is no Bitcoin traders, the number one traded vehicle on the planet, I think. Dave, you can pick in to chime in how much it's more expensive now. No Bitcoin crypto traders have experienced a recession yet. Well, I mean, that's true. I mean, look, for institutional traders, Bitcoin is actually cheaper to trade than most people think. I mean, I just did the TCA on our client trading

Bitcoin spot, you know, if you're using coin routes, you're you're paying less than five basis points all in to buy into buy or sell institutional orders that's on many, many billions. And that's cheaper than pretty much everything but the most large cap liquid equities. And there's reasons for that. But the truth is, it's not hard. It's a great trading vehicle. The futures open interest on the CME is going to restrain and why any move on the ETF will be muted because the fact is is you have to subtract from that what the futures ETFs have but the truth is a lot of long open interest on the CME are people who will flip into the

ETF when they have a chance to do so because the role is very expensive it's a very expensive way to be long Bitcoin And, you know, the old expression, you do not what you want, you do what you have to do, right? If you are, you know, right now, if you're hedging OTC derivatives, non-deliverable forwards, if you have done a contract for difference, if there's a swap, any of those things, and you're US based or you're a bank, you probably feel that that's the only place that you can do it and that changes when there's a a real etf just like on my trading desk in a in before i'm old so we'll admit this before the s&p before the spider if you needed to hedge portfolio trade, you use futures. Once you had the spiders, it was cheaper because spiders, with all due respect to our SEC chair, who still thinks futures are a better market structure,

futures have dramatically wider spreads and much more expensive than the equity markets because they're more competitive until they screw it up with all the things that they've passed recently or trying to pass recently. But the fact is, the spiders are what every single trading desk migrated towards because it was cheaper for intraday or intraweek hedging. The same thing is going to happen in Bitcoin. And so there will be a, you just mentioned, a hundred and some odd thousand in open interest. I mean, some of it has other reasons for it, but it won't go to zero. But it is going to be supply and demand because there are short sides of this too that will come into the market. And it will be a restraining force on any rally, but it's also very limited in size. But you're right.

There's a lot of plumbing that's going on here and will go on. Preston Pyshko Yeah, I have the data here on Coinglass, by the way, Dave, as we were talking about open interest and long shorts. People have been very much, this is on the 24 hour, this is the most net short traders have been with leverage in over a month. So 52.64% shorts, it was 52.59% was the lowest before on 13th of November. So just going back to what you were saying, people like the large traders, you can sort of see it anecdotally, but the large traders are shorting. Funding is slightly negative. There's no chance right now of a long squeeze.

Right. Let me piggyback on that a little bit. I think we. Fine. I just want to make one quick point. I think we can. Go ahead. Go ahead.

I'll get back to it. Mike. Well, just a key thing is it bar. I mean, I think it's complete consensus. It's hard to dispute that it's the most significantly traded 24-7 vehicle ever on the planet. And so that to me is where I think it's more going to be leading indicator of risk than lead of risk off like gold, gold or even treasury bonds because people love to trade it. I mean, you got to trade the swings.

When you're a trader, all you want is volatility. It's just give me volatility. I don't care about direction. As long as I get the right side one, so I give me volatility. And that to me is part of the problem of it going up if risk assets go down. I mean, sustaining that up is because it's the trading factor. I think this tells a very short-term story, just to be clear. This is what's happening in a day or a matter of hours. This is for short-term traders who are looking to speculate. I think the overwhelming point was just confirming what

Dave's saying is that this is not one of those situations where you reach the top and people are massively net long and there's an easy flush to be had here. There's just no chance of a liquidation cascade to that side right now in this market. Yeah. I mean, I think also if you look at the whys, it makes sense, right? So if you're the professional trading community basically had their eyes peeled on ETF approval dates. And as soon as it became clear that we were going to have to wait till January and we've had a run, the playbook says short it for the consolidation phase. And so that's what you've seen. These are not people who are long-term committed shorts. These are people who expect that short to reverse around in the Christmas to New Year's time when people are doing, you know,

because I don't think anyone's going into January 10th or early January because they know the SEC could surprise a couple days early. I don't think any of these people are going to be short coming into that event. So whatever the leading short you have now will reverse for a New Year's rally at, and it's not a big rally because it's not that much in all likelihood, it's completely predictable. That doesn't mean that the market's completely predictable, if anything, but it actually right now technically looks a hell of a like it did in 17 uh and that's that's something that that there you had to get

these great animal spirits and i don't know i'm not saying that's going to happen but i am saying that that it looks that way and traders have have seen what happens and picking up pennies in front of a steamroller is not a great idea. And so they don't do that. But I do want to say something about what Mike said about the greatest trading vehicle ever invented. I mean, the truth of the matter is Globex S&P Futures, yeah, the CME takes a day and a half off on the weekend, but it is open from Sunday night. And we all talk about the CME gap. I will say this. I strongly suspect that in some period of time, in the next two decades,

pretty much every asset will trade the way that crypto is trading. It will be tokenization. And it will be global. It's a better vehicle. And so that is going to happen. I mean, the reality is when there is a disaster over the weekend, yes, Bitcoin will react first. But if it's just, if it's a normal weekend and the disaster is a slow motion train wreck,

which is really what we're talking about here. We're not talking about a, you know, a boat going over the Niagara Falls and going. We're talking about a slow motion train wreck as unemployment starts to tick up and what's going on and people saying, you know, whatever. likely to be on Cyber Monday is it means people aren't going to be selling assets in December to buy the G.I. Joe with Kung Fu grip. They already have bought them. And you laugh, but I mean, you know, for those who don't know, that's a reference. It's true. But I do wonder if, you know, if the same the person who's actually holding stock and has the luxury of deciding whether to sell is not the one who's chasing down a Black Friday sale on a G.I. Joe either, right? There are a lot of people. Mike is right about this. There are a lot of people living on the wealth effect.

They sell as minimal as what they can sell in order to pay for what they need. There are a lot of people like that, right, Mike? I mean, I don't know if you have stats on it, but I suspect that you do. Did you guys touch on the buy now, pay later? Yeah, we did right at the beginning when you were technically issuing. Yeah, we talked about the fact that you could skin the Black Friday numbers basically in either way, right? Yes, we're up 7.5%, but a 50% increase in 47, whatever it was, in now pay later it doesn't i mean it seems not not not to be full on conspiracy theory but it just seems like every single point of data we get this year

it has been obfuscated with some sort of other side like the employment numbers are the employment numbers look great yeah but when you dig in deeper and you see that multiple job holders are up, you know, and hours worked, it's just it seems like there's a lot of confusion around the data this year in particular. And it's going to what it does do is it it it emboldens both sides. It emboldens both the bears and the bulls. And so you get this more or less sideways action. And it is more like you're saying, Dave, instead of off the Niagara Falls, you're getting the slow motion train wreck because there's a lot of confusion around it. And so, yeah. And another data point, I read months ago that I can't remember if it was the San Francisco or New York Fed that predicted that the stimulus checks would be all but evaporated by the end of this year and so that's that goes back to this point

of black friday 9.8 billion dollars of sales how much of that was these checks how much of it was on credit how much of it because you know if you look at i i looked at some charts on bloomberg this morning before the tech uh issues i had And just looking at the interest payments are surging. So if I can share, I'll try to see if I can share this. Yeah. Just really quick question. Are we still talking about people living off of or feeling wealthy in 2023 because of a $1,200 stimulus check that they got three years ago? Are we talking about PPP where people took $75,000, they didn't need it? All of the above.

All of the above. And then there's a money supply pump. It pumped 41% from 2019 end to the peak in 2022, 2021, and now it's only 34%. If you look at all risk assets, they're up the same. It's never happened in history. Exactly. And so in just a few months ago, we were talking about how interest payments were going to surge because of rate raises. And because of just the sheer amount of debt that

individuals are taking on the consumer debt is at all time highs. And so here you go. And now this isn't just the interest payments. This is as a percentage of income. And so we're fast approaching the highs of the great financial crisis. The only thing we're missing on this chart here is that red line on the right-hand side. There you go. It's magenta. Which is the recession. But the increase there is just astounding. You look at these past ones and this is literally faster and twice as far to travel there on the jump. It's absolutely incredible.

Are people just blind to this or are they just doing what they have to? How does your average person who sees this not react? There's a few reasons in my mind. Number one, all individuals have been used to, anybody who is younger than Gen X, basically, has been used to ZERP, zero interest rate policy, for over a decade now. That's number one.

So taking out debt and credit was nothing. I mean, you could deal with it, right? So that's number one. Number two out debt and credit was nothing. I mean, you could deal with it, right? So that's number one. Number two, wages are not keeping up with inflation. Number three, you now have, the Fed didn't raise rates just 5%. The Fed raised rates over 1000% of where they were, right? So it was like, they've raised it from 0.25 to over 500 basis points. So 25 basis points to 500 basis points is a massive move in rates on a percentage basis from where they were. So now you're seeing credit card rates at 28, 29.9%, because I guess that's what they think they can get away with before it's predatory. Pitchforks and torches? Yeah. And so this is where we're at. And of course, don't underestimate those pitchforks and torches and the fear among the current administration about what this means.

I mean, even if unemployment doesn't pick up and they can suppress what it looks like by double counting people who are working a part-time job because they can't afford what they're doing on their full-time job, those interest payments are one of the reasons. People keep asking this question. All the pundits who read this stuff say, why are, I mean, I see this all the time. I mean, Mike, you must laugh about this. People saying, I don't understand this recession. Why are voters saying that they're not happy with the economy?

Look at all these great numbers. And the answer is because people can do math. And they say, okay, paying my minimum, my credit card bill costs me X. Paying my insurance cost me Y. Paying my rent or my HOA fees, which are going up much more than I ever expected, are costing me Z. And they look at all this and they say, okay, add that up and it's less than, it's more than, excuse me, what my take-home pay is. I got a problem. And that's why voters are pissed. So, you know, what are we seeing? We're seeing the first, the obvious.

I mean, Elizabeth Warren on every single one of these things calls for price controls, right? You know, and how does that happen? Price controls on Big Macs, right? Or on Subway. That's it, on Subway, right? Oh, my God. They think that there'll be monopolistic behavior because we lost the $5 footlongs. Well, we lost the $5 footlong. So we lost $5 footlong.

We lost some $6 to make it. Yeah, look at the chart I just put up, right? And this is the voter who's realizing that they're being gaslighted right here. They're being gaslit. They're under pressure. Their delinquencies are rising because now they've got all of those student loan payments that they've got to make, and they've got all of those student loan payments they've got to make. And they've got to make the credit card payments that they were ignoring.

And so where did that $9.8 billion of spending come from? Well, it's probably boomers who are buying things for themselves and for their kids and grandkids. And then buy now, pay later. And before you join, James, I made a point, and I'd love to hear your take on this, which is courtesy of Noel, who is part of someone else, that loans have led, loan delinquencies are leading ahead of in this spike, high yield bond fund delinquencies. Which is fascinating and is exactly why what you were just showing. But when the high yield bonds start catching up by the financial system. Yeah, because they're going to have to be reset. They're getting reset over the next three to five years. And when that happens, and they'll start resetting this year at the end, in the middle of 2024. And towards the end, you'll start seeing a bunch of them.

And why have high yield spreads? Why are they so tight? Because investors are still emboldened to go after risk assets. That's a risk asset. Yep. Love it, guys, but it's 10.03. Sorry I was late. My computer decided to update.

And when I turned it on, it decided to update. I'm like, what? And it's like a casual 47 minutes later. Always, every time. Guys, amazing chat as always. Thank you so much, guys. All of their Twitter accounts are in the description. Please just follow them already, for God's sakes.

Follow me, too. I mean, I don't know. You might not be. Um, and, we will definitely now got a full week on the docket this week, which is great for the first time, still operating without a producer. Crazy.

I know you guys keep asking for updates. He's still, uh, in detention in Louisiana, somewhere waiting for a deportation. We're now fully at a month. Uh, he's been sitting there.

So pretty, pretty insane. If you're wondering, uh, what it's like to, uh, get stopped at the border in the United States, you don't really have many rights or due process. Really, really a crazy, crazy thing.

So guys, we'll be back of course, uh, next Monday and I will be back tomorrow at 9 30 AM, uh, 9 AM Eastern standard time. All right, everybody. Thank you guys. Let's go.