The Wolf Of All Streets - Crypto And Conflict: How Will Escalating Global Tensions Affect Bitcoin? | Macro Monday

Episode Date: August 26, 2024

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The macro situation has never been more interesting for Bitcoin than it is now. We have Fed Chairman Powell finally signaling that there will be rate cuts coming soon. But we also have escalating tensions in the Middle East and oil prices rising. It makes for a very, very interesting discussion about what's likely to happen for Bitcoin and crypto, whether they will be correlated, uncorrelated. You guys have been here uncorrelated. You guys have been here on a Monday. You know exactly what we're going to talk about. I've got James, Mike, and Dave. It's Macro Monday, best hour of the week. Let's go. global event happening, as you'll see by Dave and I, because I wore my clothes to matches, is that Lando Norris of McLaren won the Grand Prix yesterday by over 20 seconds. So we both

wore our McLaren gear to celebrate. But maybe that's not as important as obviously the things that are really happening in this world. Mike, maybe we should start with you. We obviously saw an escalation of the situation between Israel and Hezbollah with some conflict at the border there and Fed Chairman Powell. But maybe we start with oil, since that's right in your wheelhouse, and go from there. Yes. That, I think, was less significant. The latest missiles and attacks between Israel and whoever else are not significant oil producers. It's a headline about Libya. But the thing about Libya, here's the headline, Libyan rival government to stop oil put over bankroll. It's a short-term thing. Libya only produces 1 million barrels a

day. It's not significant. The U.S. and Canada export 6 million barrels a day. OPEC's spare capacity is about 6 million barrels a day. The more significant thing for Crudewell is when people look at these type of events is positioning. And it's just the most sold out I've ever seen. And our data goes back at least 2011 on Brent and I'm sorry, that's WTI. Most of the positions back to 2013 in Brent. And they just completely sold out. I've never seen managed money, i.e. hedge funds this much sold out. So there's a lot of room for it to bounce. Technically, crude oil looks

great. It looks like it could easily bounce here. I don't know how much higher it goes. But the big picture macro is this is short-term positioning, and it's more likely to me at some point the macro is overwhelming, and that is the excess of supply and demand in the U.S. and Canada and declining demand out of China and China heading towards a recession. It's going to pressure crude oil to follow natural gas to low price cure, follow corn to low price cure, which is around 50. But short term, it's bad for now. What do you think that impacts with the dollar then? Yeah, that's it. It used to matter. I mean, Jane, I appreciate the whole tilt for the dollar is lower now, i.e. as the Fed starts cutting, catching up to the rest of the world and Japan's tightening. But overall, to me, the macro big picture for the dollar, sure, it's way overdue for some back and fill, but it's the bottom line.

What's driven the dollar since that bottom in 2011 is u.s stock market outperforming the world and according to gina martin adams it's going to continue to do that so to me the dollar is still strong you see what you know the one thing i'd be saying the macro is to cryptos and then it's how you measure it versus gold i expect the dollar to go down versus the stock market at some point you're going to have a little correction but versus a basket of fiat currencies there's just nothing better in the macro big picture. In the short term, yeah, it's expensive. Fair. I mean, it's definitely an interplay between the Fed lowering rates and the price of crude. There's no doubt about it. So we'll see just how fast the Fed lowers.

Yeah. So I'll just follow up on our meeting. Anna, our chief economist, expects a key quote she took from Powell's testimony or speech was he's ready to do everything. Does that remind you of Draghi? Like about 10 years ago, we'll do everything. And unemployment, she expects if it's 4.3% unemployment by September 18th, she thinks they're going to go 50. If it's 4.2, she thinks we'll go 25. The key thing she's pointing out is everything's tilting towards a weaker consumer. Mortgage delinquency rates are rising. She expects 5% unemployment by next year.

And the key point she will point out and pointed out was recession usually comes when the Fed cuts rates and unemployment rates still climbs. And you and I, and we all speak on this program a lot, is unemployment has never bottomed from such a low level without going to 6% despite massive monetary and fiscal help. It's just the way cycles work. Yeah. And I want to hear what Dave has to say this but you know the the reality is and we've been talking about is the the fed last week uh for the listeners and i wrote about this um this past weekend is that the fed has now uh pivoted from not just in total but have they pivoted from focusing on inflation to now unemployment and so they've all but declared the battle for inflation over. And now their worry is that the employment number is coming down fast enough and unemployment is

rising fast enough that they may have deflation. They don't want that. So they can't have that. So they're working towards focusing on the unemployment numbers. And then that revision, that ridiculous revision to the jobs number last week of 818,000 jobs that the BLS had, you know, they revised it lower from 2.9 million down to, you know, less two point one million. And so it's basically a twenty eight percent revision to the jobs that they expected, which just gives the Fed massive air cover for what they're talking about, which is pivoting to rate cuts in September. A lot of people think that it was coincidence and then some people are putting on their tinfoil hats and saying oh wow the week of jackson hole all of a sudden 818 000 jobs disappear exactly it's it's it's actually incredible so this it's been it was a uh it's a wild week of of uh of fed commentary and

job numbers so but that's that's what it is we The Fed has two mandates, stable prices and full employment or maximum employment. There's no real target there. It's just maximum employment, whatever that means. So now they can turn to that maximum employment mandate and say, well, we've got to be focused on this. We don't want people to lose their jobs and we can start lowering rates before. Exactly what Mike said. We've seen it over and lose their jobs and we can start lowering rates before. Exactly what Mike said. We've seen it over and over and over and over again. You guys have seen me share that chart over and over again. Once the unemployment number starts ticking up from that bottom, it's very difficult to get it to to stable out before it accelerates higher.

And especially because we're in a services industry uh you know economy and so people lose jobs and it just feeds on itself i mean first off it's the conspiracy theory is nonsense as much as i love to blame the government for stuff the fact is that every august they do that uh this was bigger, but the timing was just that's when they do their major revisions. The fact is they have this birth death model that's baked into how they create these things. Before before you go at the birth death model for people to understand, it's not birth and death of people. It's the birth and death of companies. Yeah. And so they have these assumptions around what, you know, are companies being created or are they being dissolved and how many jobs are being created or dissolved out of that. And their assumptions were wildly optimistic is what comes out. Just as a parenthetical point, it shouldn't surprise anybody that this administration is having less small business creation than they would assume

because they're openly hostile. If we get a Harris-Walz administration and they actually go and they win for, God forbid, the Senate and the House, and they put in the proposal for the capital gains taxes and unrealized capital gains, small business creation will be an absolute bloodbath. You'll be seeing multi-million job revisions downward multiple times in her administration because it's a virtual lot. And for those who think that I'm being hyperbolic, I'm not. I actually think if my name were Scaramucci or anybody else who understands how the economy works and I'm endorsing that crap and not violently arguing against it, I would feel upset that I've just been torpedoed because I want to explain just

how bad this is. This is arguably the worst single policy I've ever seen. And the fact that the market is more or less ignoring it is funny because effectively it says, OK, we don't really think this could get done. So we don't. So basically the market is saying, well, God, you know, we were pretty confident the Republicans will keep the Senate and therefore they won't be able to pass it. But just understand the fact that you have a, that you have a leading candidate for president of the United States is proposing to essentially make certain that next, in the next 20 years, the next Googles, the next Facebooks, the next Ubers, the next every one of them, it doesn't matter, open AI, none of them would get formed in the United States. And why is that? I'm a founder, so I understand these economics. So when you found a company, you're paying your staff, your first key people in stock, you're accepting significantly less salary than you would in order to get stock. Now, why are you doing that?

You're doing that because you think there's a huge chance that you can create a unicorn. That's what everybody wants to do, a unicorn, for those who want to understand it, the math is a billion dollars. Well, the average unicorn, the founders have an average stake between 10% and 20% by the time they start getting into their growth curves. So now a $100 million value company that makes the transition and growth to a billion will never happen in this world with that policy why because as you go from a hundred million where you have a ten percent stake to a billion now all of a sudden you're going to be forced to sell 25 of your stock every single time you see that and you have to sell it into a liquid market which means you're going to lose control you're going to sell it you're not going to have it it's not going to you're not going to realize that and you have to sell it into a liquid market, which means you're going to lose control. You're going to sell it. You're not going to have it. It's not going to you're not going to realize that much.

You're going to be forced to to pay your tax bills. Now, it's important to understand why am I going here on the macro side? Because this would be a macro disaster for job creation in the United States, which has been reliant upon the infrastructure around big tech, big, well, big everything that's become big. It's because people have invested in it. This is literally the exact opposite of an economic growth-centric proposal. And it assumes something that's very important for macroeconomics, which is it assumes that money and economics is a zero sum game, which is completely bullshit. Right. It assumes that we have this pile of money in the economy that you can divide up and whack it up wherever you want.

Now, the truth is, is I'm more redistributionist than most people who would vote the way that I intended to vote. But that's because I'm a centrist. That doesn't mean that you want to destroy the economy. And this is a very, very big deal. And why the election matters. I mean, Bitcoin, yes, I think the election matters for Bitcoin, but much less. I think this matters. And people are tying themselves into knots because if you understand, if you're an economist and you're for this plan, then you basically betrayed the fact that you're more of a social justice warrior than you are an economist and you're for this plan, then you basically betrayed the fact that you're more of a social justice warrior than you are an economist and you actually don't believe in economics. And it matters because this is what's been coming out. This is this past week. And so a lot of what's happened and a lot of what's going on is about the fact that we're first seeing policies

and the policies are as extreme. I mean, I don't know left or right. I mean, I don't know what to call it. You know, economic, not even curious, basically ignoring the rules of economics. And so we're seeing a lot of that is going on in this. And that's why the polls are doing what they're doing. That's why other things are doing what they're doing. But it is a very, very big deal. And I'm sorry for hijacking the conversation. You know, it's also you should add to that, that, you know, it's been tried before, these types of taxes. You want to know where? In Norway.

In Norway. And they got rid of it because it was a disaster. Yeah. But to put some numbers around it for people to understand, they expected Norway raised the – they did the same thing. They were imposing an unrealized capital gains tax on the top 1% wealthy, whatever that number was. And they expected to have $150 million increase in annual tax revenues, which is a lot for Norway. And instead, $64 billion fled the country and they lost 40% of their tax revenue annually, which was about $600 million. So it doesn't work. You can't just flood the system with a sudden tax.

It's just not going to work. And in a rich country, this was part of, and in fact, the Harris Walls, so far everything we've seen is right out of the Hugo Chavez playbook for Venezuela. And people, when we mention Venezuela, people get this idea, they have this idea in their head. It's like, oh, well, that's a poor country. And so it's not the same. At the time Chavez took office,

Venezuela had the fifth richest country in the world. The massive oil exports, massive. And it's important to understand that those exports got dried up because he destroyed the industry. You know, you talked to me, I live live in Miami you talk to Venezuelans and you hear about it it's it's a disaster this is literally I hate to use the word disaster because a certain orange-haired person tends to to say but it really is and that's that's the thing that that's a problem the Venezuela tried to get that tax too as Colombia. Those are the three countries. Not good. And yet it's being proposed. But why does this matter? Well, it matters because we have a fundamentally unserious candidacy that people are making allowances for. But I tend to believe, as Maya

Angelou did, that when someone tells you who they are, believe them the first time. Don't wait to be persuaded. And markets are looking at this and trying to decide what to do. Now, it's fascinating because we've been stuck. When we talk about Bitcoin, we'll get to it. We're in this range. We're starting to get back towards the middle of the range, which makes me think that we're going to see the top of the range within know within you know sometime between now and the next two weeks i think i wouldn't be surprised uh i still think fundamentally that that we are shaping up for a explosive fall that's 74k in two weeks that's actually a pretty bold prediction yeah two to three weeks yeah it's got it i caught that one. I caught that.

My spidey sense is fired. But I'll tell you why. I think that this administration is going to basically force. Look, Warren is part of this administration, is part of Harris. Well, she's been cheerleading every single one of these things. She's been and they've been they've been completely aligned. I think at the DNC, by the way. She had the speech of the DNC, according to many people. So for our industry who thinks maybe she's been marginalized in the

party, that's not the party. Understand what's happening, what they're going to do, what they're trying to do, because they're not stupid. Don't ever assume your enemy is dumb, because they're not. They're misinformed sometimes, but they're not dumb. They're trying to drive a wedge and effectively say, you know what, we can support this Bitcoin thing because we can co-opt it.

And maybe, maybe, maybe we can support this Ethereum thing because we can co-opt it. And possibly on the margins, although based on the Kraken case, this also happened this past week. The SEC is still there. Maybe they'll work with the centralized exchanges like Binance, where the DOJ is basically, you know, is basically in bed and helping them to run the place. But DeFi and most of what's being worked on in crypto is still the enemy. And if you do that sort of world, if that world, and I'm talking, which I am not in favor of, no one should interpret what I'm saying. I'm in favor of this, but I am saying it is easy to see a world where Bitcoin starts to really take off because the government says, you know what? Okay, this isn't so horrible for us. We can control it. And the rest of crypto and innovation in crypto is still pushed overseas. That is a

possible world. Yeah, sure. There are a few things that I want to note that I didn't necessarily intend to talk about. But you talked about, obviously, the unrealized capital gains tax. Everybody with a brain understands that is insane. And you said we would never get the metas and the Googles in the future. I think it's worth noting that the DOJ is actually considering a breakup of Google in the first monopoly antitrust case like this really since Microsoft. So this is another case of not just watch what we say, but watch what we do in this case, right? And going after Google for a monopoly on search in 2024 seems about 10 years late, in my humble opinion. Google's losing search every single day because of that.

They've been completely marginalized. Now, listen, I mean, they could spin off YouTube and they could spin off ads and they could spin off cloud. At the end of the day, then all those companies would just become customers of cloud and Google would probably do better. Alphabet anyways. But like this is happening in real time on the ground as well to the existing biggest companies that we have. The other thing I want to mention, because I don't know if you saw this, but it was pretty brilliant. You see Ackman's comment on the unrealized capital gains tax? Absolutely. Yeah. Because this is such a great idea. Billionaire Bill Ackman has an idea

for getting the ultra wealthy to finally pay a fair share of taxes. He basically said, if you use your stock as a founder for a loan, you should be taxed above your cost basis on the loan that you take. Is that basically summarizing it correctly? Really smart. Yeah, I agree with that. And just to understand the idea. So basically what he's saying is, most of these guys, I don't know Bezos that sold any Amazon. He wants to buy his super yacht. He pledges Amazon stock to buy it. Why should we allow that? That makes no sense. You want to take a loan against, in fact, one could make an argument that that sort of behavior should be taxed at absolutely 100% should be taxed at the, at the marginal income tax rate. And yet, it would be basically like you sold this as if you sold the stock above your cost

basis, whatever you took the loan on. No, no. I think you should go further. I mean, you can couple that with don't provide long-term because people should understand that if you're in that tax bracket, long term capital gains works out to about 21 and a half percent. And short term capital gains or income is somewhere between 45 percent, give or take. Right. So, you know, effectively, the argument would be if you want to sell the stock, yeah, you can take your long term capital gains. Other people will buy it. But if you want to take a loan against the stock, yeah, you can take your long-term capital gains. Other people will buy it. But if you want to take a loan against the stock, why not tax the loan above that as it goes incoming? And if you did that, then obviously the stock is a little bit less valuable, sure. But the truth is, is that it's only upon taking out cash do you pay it? And that matters because the economic incentive is for capital formation. And so look, if you are a centrist and redistributionist and think that there is

some notion of fair share and that the ultra wealthy shouldn't be able to hide their income, then it makes sense. And look, I'm not going to I retweeted Bill's Ackman's proposal immediately thinking of saying it's a good idea because I think it is a good idea. But it's the difference between understanding economics and not understanding economics. And that that's what matters. But because that that could work. So it's not about the philosophy. You know, you could debate the philosophy. I mean, I often make the comment that people like richie torres who i i have a lot of respect for me he and i are going to disagree on where we draw the line and how and you know how much you redistribute etc but he is appreciative and understands economics and is for innovation and when you get the crypto it's more or less the same thing right you know it's like we don't know what the policy is. We know Elizabeth

Warren's policy. Elizabeth Warren hasn't mentioned how Bitcoin has destroyed the environment recently. We've got to definitely talk about Elizabeth Warren. Did you see her interview with Joe Kernan? Oh my God. She looked like a good woman. He like he destroyed her i'm gonna find that one second yeah that was you know once again you don't understand economics what you're looking for it it's very very orwellian in a sense because essentially what you're seeing is these politicians that are trying to to they're taking advantage of what i call the sound bytization of american politics so if all you do is get to say one sentence fragment and that's the only thing of what I call the soundbite-ization of American politics. So if all you do is get to say one sentence fragment,

and that's the only thing people are going to listen to, then repeat stupidity that fits your narrative over and over and over again and don't write out the nuance. So you say something like, well, Procter & Gamble made more money this year, ignoring the fact they took a charge the year before this is this is brilliant so i just i just sent scott a uh a tweet that that demonstrated okay so the the argument of kroger making so much money they just over and over and over again you've got people coming out on you know on the the democratic side or

coming out saying oh they've got 20 20 to 30 gross profit margins and the reality is that their actual net profit margin is razor thin it's less than two percent you know it's just it's mind boggling people don't understand that you actually have to pay for the the products that you're selling and so um yeah there right there exactly and so you know i mean it's uh it's pretty sad but here's the thing the the the argument with elizabeth warren is she she just she has this narrative or this, this comment that she wants to get across and she will not let you argue it at all. And that was the, it was actually a great interview.

I've got the video. It's one minute. Let's play it. I just downloaded it. I'm a super producer today. Just so you guys can see it because Joe squawk here and it was not having any of this. That is a time.

That's sophistry. That's your example. Your example on craft is even worse. You finished first. In any of the states around the country that already have price gouging laws in place... Can I tell you why those are fallacious and misleading at best? And your Kraft analogy is even... Why can't I tell you? Please let me tell you.

Kraft, you say, was 440% profit increase. The example you used, the prior quarter from the year before, they had a charge of $1.3 billion, an accounting change, which wiped out profits. Then they earned what they normally let me finish now. They fought, they earned. You didn't let me finish. Look at the data. Come on. We. They fought, they earned. You didn't let me finish. Look at the data. Come on. We have economic study now after economic study. This is the way it always goes. When there is more concentration. 40 million eggs were destroyed because of avian flu. When there is

more concentration in an industry, we have seen much greater increases in the profit markets. Do you attribute the inflation? That's what you think we need to do to solve it? They're not random. They are not random one-offs. It is part of the problem. When you've got companies that are gouging consumers on prices, consumers need to know they've got somebody on their side. Senator, Senator, Senator, we're trying to help. We're trying to actually do. Where are you in the 36, 37 states that currently have price gouging laws? Just quickly on that point, Senator Warren,

can you, this is Kelly here, can I just clarify how this would work? Well, the People's Republic of Massachusetts. It seems like I've had enough. I'm out of here.

Vote Dayton for Senate. I mean, look, the simple fact is Elizabeth Warren and Kamala Harris both believe that every problem could be fixed by the government setting a price. So I often have this great conversation with them. The question that you want them to ask is this, on every one of these topics, doesn't matter whether it's minimum wage, whether it's price gouging, whether it's whatever, it doesn't matter. It's what is the price that you would set and why do you think you would set it better than the market?

Because at the end of the day, the instant the government gets involved in setting prices, it creates distortions. It doesn't matter what that price is. A hundred percent of the time, the law of supply and demand is undefeated in human history. There has never, not once, ever been a peacetime series of price controls that has ever worked with the possible argument you could make in countries which could impose severe capital controls that they could keep it for a while. But today, with modern technology, I doubt that works. Any economist, anybody who's taken Econ 101 would understand this. Anybody. Anybody would understand this. So I just shared this little chart here, Scott, that I read in this, I was reading this book this weekend, Think Again

by Adam Grant. If you wonder where Elizabeth lives, that's her home. Now it's stupid. Yeah, but I would love to say it's stupidity. The willingness to open up a topic versus the knowledge of that topic. She lives right there.

I agree. But listen, I think, uh, I almost think saying she lives on Mount stupid is letting her off the hook. No, no. I mean,

I'm saying that she, she believes she knows. I believe she really does believe this stuff. I think she knows that, that, knows to a certain i i believe she really does believe this stuff like she really does i think she knows that that what she knows is more power to the government is what she thinks could create utopia that is true that's the same look it's the same it's the same idea that praise chavez it's the same idea for the people who are wearing the you know the t-shirts right you know from the supporting you know the early Castro days.

It's interesting, but the simple fact is there's two things she's arguing for, one I actually agree with and one I violently disagree with. I actually agree that concentration risk is a problem, except for her policies increase concentration. People, let's do this, you like to do these soundbites. If your policy is a hyper regulatory environment where the government controls everything in today's world, that means the 12,000 K Street lobbyists that are employed by the largest corporations will be the ones to write those rules. Those rules are generally then designed to eliminate smaller disruptive competitors, creating concentration. And therefore,

if you believe that monopolies and concentration are the problem, the answer isn't to have more hyper-regulation, which will of course create more monopolies, and then go in and have the FTC try to break it up. I mean, it reminds me of that great, of that great, you know, we all, I don't know if you guys all had kids, but, you know, there was an old lady who swallowed a fly. I don't know why. She swallowed a shoe.

And so then, you know, the old lady swallows, you know, whatever, a spider, and then she would do whatever. And then, of course, she died in the end, which is kind of weird for a children's thing. But the truth is, it's the government creates a problem and then says, OK, great. Now I've created this problem. Now I can use more power to have a solution. And now I have to create. Oh, wait a minute. I create another problem. Well, let me create another solution. So let's let's let's bring this all the way back to macro, which is, Scott, I'm going to do

your job for a second. Thank you. I'm going to interrupt you before you even say this, which is, okay, we're talking about all these uncertainties, like the policy differences of the two candidates could not be any further apart. So the question is that uncertainty. And I'd really like to hear actually Mike's take on this, because what do you see the market doing between now and the election? We're 10 weeks away from the election, right? Am I right on that? So what do you see? And what does Ana see? Or has she said anything between here and the election? This uncertainty with the Fed lowering rates, the probability of either a soft landing or we start heading into recession in the next few months. How do you handicap this yourself going into this market?

Because I believe there could be some serious volatility in the next 10 weeks. It's just getting started. So let's look at the next big trade, NBT versus the LBT, the last big trade. The last big trade was Bitcoin. I mean, when you get the president, former president of the United States, who's so desperate for power, shows up at Bitcoin conferences and said, yeah, we'll create a Bitcoin reserve. You know, he's getting desperate. And the thing is, they got to be careful about people who listen and really believe that stuff. That's not just silliness. To me, the next big is we will have a president, Kamala Harris, because when it comes time for people to go to the polls, the main thing that's going to matter is only two choices. This immoral, unpleasant, lack of rule of law person who

supports insurrections or the incumbent, someone new and different. The thing is, the reason she can say these things about what you mentioned earlier is because the stock market and everything is so high right now, she can say it. When things go down, everything changes. That's what's going to happen at some point. So everything's tilting that way. Bottoming unemployment going up. The yield curve just starting to disinvert.

The most significant inversion since 1979, 1982. And a two-year inverting with Fed funds. It's all tilting that way. The next president is going to suffer through this. And I think it's, like I said, it's going to be Kamala Harris, in my view. Because people are going to say, no, I can't vote for a crazy man. They'll quote my mother, lifelong Republican, just sensing the sentiment out there. And that, to me, all this is starting to show up in commodities.

Gold's up 30% when commodities peaked 30% higher in 2022. They both agree on one thing, both parties, unlimited deficit spending. OK, we got that going for gold. But Treasury's always starting to point out going towards the Japanese way. Look at that US long bond. I just can't keep my eye off of it. It's bumping up against 4% resistance or support. It's like just a matter of time it goes through and just follows what's happening in China.

And Bitcoin's leading indicator. It's lagging for quite a while. So I think it's the last big trade. The next big trade will be a normal deflationary recession that always happens in history. And you have to go back hundreds of years when you have pumps and liquidity like this that dump. And it's happening certainly in China. And that means that I still stick with the same premise that next big trade will probably be some risk-off deflationary type assets like US long bonds and gold. Now, what's going to change that? US stock market has to stay strong. It has to stay at the most elevated levels in history by most measures. And it's doing it now. It's got some great earnings. It's doing that great. But we've heard this before. That's when markets usually peak. And I'll end with this. To me, it's the

cycle that matters. The key thing that you see in stock market is it goes through these long-term cycles. It can stay up and get expensive. Everybody gets sucked into it, and then it has a problem. But commodities go through normal pendulum swings. The pendulum swing in commodities is clearly towards deflation right now. Crude oil is bouncing only because it went down way ago and because everybody sold out of their positions. Gold keeps going up because it's the main alternative. To me, that's the cycle where we're going. And I'm just sticking with Bitcoin as that leading indicator. I've been showing you what I've been showing for a while. Virtually every time it's made new highs in history, it almost always corrects at least 50%. Now it's correct at 25%.

And the thing is, it's showing that divergent weakness. But are you saying that Bitcoin, it showed the market move before everything else, and now it's selling off, then gold is behind it? Because gold seems to lead Bitcoin by months. Well, when you have a three-time, well, right now, it's only three times the volatility of gold. Historically, it was close to the five and six. It's rare for a low volatility asset to read a high volatility asset. Now, you know that. And also, it's the most speculative 24 trading risk asset on the planet. I'm just pointing out facts of what I've seen trading and where I think markets are going. So I'd love to see a show of divergence.

It's been marching to all-time highs here, sniffing out the likelihood of additional liquidity. Or it's just a flight to safety because we have so much geopolitical uncertainty out there. Well, that's part of it. I think that's one thing that those of us who live through, remember, duck and cover. The world changed in 1989 and 1981 with the fall of the Berlin Wall and the collapse of the Soviet Union. We went to a significant period of daytime. We're shifting completely the other way now. I mean, you just can't underestimate this unlimited friendship

with our main trading partner, China, who's going into pretty severe depression, cozying up with the axis of four bad guys, Russia, North Korea, and Iran. So that, to me, is a shift. Yet we're priced for a significant detente. The markets are just so expensive. We're just going to get a reversion in that unless something shifts in this Cold War 2.0. You don't think we have a crack-up boom before that? Well, we've had the crack-up boom.

That's my point. Two times GDP with the VIX volatility index, the lowest in six years. The things we talked about earlier, we've had the crack up boom. It's just how much more can we get above GDP? Two times GDP, the market cap is like $60 trillion of the U.S. stock market. That's wonderful. It's great. Anybody who's made a lot of money in that environment, I think that's part of the reason we're seeing this fight towards gold.

Not in the U.S. yet, but certainly on a global basis and treasuries. So but I would counter that, Mike, with the fact that we have seven to eight percent deficit of GDP and deficit spending. And that is driving this. And that's not going to stop. That's only going to get worse. Kamala's her policies, you know, it might double the deficit. That's what I said with the most enduring positions I think will be gold. The thing about, you look at treasuries, the amount of debt has really never mattered historically in the US, certainly when you compare it to its main competitors. Let's look at Japan and China and then, of course, Europe. But it's also the, it's just, and the yields are so much of a premium right now in the U.S. It's never mattered because we haven't been in this type, this part of the cycle. Sorry,

Mike, I just interrupted you. I apologize. No, it's okay. But I think I agree with you at some point. I mean, I wrote about this years ago. At some point, Bitcoin is going to trade more treasury bonds and gold, but it's showing every indication it's not going to. The volatility has got to come way down. It's still way too volatile. And it's when you get what's at the test. Show me a test. Every single time I've seen a decent test, we have a decent correction in beta, at least 10%. Bitcoin goes down three times that. Almost always. Yeah. But be careful what you wish for, because the test, in my opinion, would be something that is so impactful to the market that is that it's it's an event you know it is civil unrest it is banks failing and something

that bitcoin will show divergence then in my opinion exactly and that's the opinion i i agree with your opinion i want to see the facts and i want to see the indication one example it's not enough can i show it back scott so okay yeah yeah and then after that i want to see the indication one example it's not enough can i show it back scott so okay yeah yeah and and then after that i want to say something about the previous comments to the people in the con in the comments but go ahead dave yeah right okay so this is your long term chart of bitcoin versus the bitcoin hash rate you will notice that that there have been, and you can see it down here at 2014, then you saw it in 2018, before 2018, then you saw it in 2021 and 22, you see this huge irrational exuberance where it goes way beyond it. And you see right here, we are way below it. Where is my estimate coming from? I

think that we're going to get to that and then we're going to see our exuberance go well above it. The simple fact is, this is, you know, you said you call this divergent weakness. It's happened every time. It is still, we are still in the proto-asset phase of Bitcoin at a trillion dollars, give or take. It's less than a tenth of where it would be to even think about being a global store of value to rival gold. And gold, as much as I actually am a gold bull, I think that gold will continue to go higher, but I think it's effectively not likely to ever get close to achieving what it used to be, which is it represents all monetary activities. But this is

the fundamentals. And when you try to compare, and you can see it because it's happened every single time, you know, the entire time it's been there, it's a very powerful chart. It's the one that's always there. So that's my point in terms of why do I think what I think. I think that if you want to understand why, people are saying, well, why is acceptance, why does it matter that we have a coin flip election now and polymarket has been a coin flip for whatever i mean you can believe what you're going to believe i personally when it's a coin flip i like to be the one shoving my chips into the middle not calling and me you know arguing

with mike would be effectively the version of calling uh you know when i have ace king against queens if i shove my chips in, I'm okay with that. Apparently though, Dave, all that matters is Pennsylvania now. There you go. Well, guys in Pennsylvania. Let's just focus on that chart real quick. One thing that's been significant about that chart in the history of Bitcoin, it's coincide with the US stock market in a significant

uptrend performance. I mean, it's what, 30% of global GDP now versus a global stock market cap versus our GDP is less than 25%. That's what has to happen the way I see. Bitcoin will go up if beta goes up. And to me, that's what's changing. So you look at gold to Bitcoin ratio, it's peaked in 2021, it's lower. It had a good reason to peak again this year, it's lower. So I agree with to peak again this year it's lower so i agree with you dave the problem is let me finish what you pointed out right there is that's the lbt that's the last big trade what's the nbt the next big trade i told you what it's going to be trade is this this is the thing peaking above the half rate okay so let's point out one thing about the hash

rate the hash rate has nothing to do with demand like looking at gold and commodities or the supply and demand it has no correlation with demand and we've already had etfs launch so that so you actually just said something in the entire time of macro monday i don't think i've ever disagreed with the statement you've made more so you're saying that the entire mining community, these smart people that run Marathon Riot, et cetera, are morons and they don't put cash rate in response to demand. I've never called anybody a moron in this world. No, no, I did. I call people morons all the time because I'm- I don't use those kind of words.

You're much nicer than me. But it is interesting that they're out there buying Bitcoins. They're actively actually not just mining it, but they're out there actually buying Bitcoin and putting it on their balance sheet. I mean, these are people, these are not dumb people, but we can argue it all we want. But the other piece of the puzzle here is, you know, look, I understand your viewpoint. There are a lot of people who have your viewpoint in the coastal cities that are going to vote for Harris with 100 percent certainty. There are definitely people who look at Trump and say what you did. speech this last weekend, which was brilliant, is going to be very persuasive and it's going to resonate with people who haven't already formed their opinions, which are the ones that matter in the election. But it doesn't matter. As will the business tax from his own family.

The simple question is policy. And look, I hope, I think the reason Bitcoin will do well this fall is because it's going to become obvious to people that the Harris administration realizes they can't be they can't. They're not going to be necessarily anti Bitcoin. What they want to do is co-opt it rather than kill it. And so that will be good for the price. And so to me, it almost doesn't matter. Look, a Trump administration, Bitcoin is going to go over $200,000 because that will happen. But that's not going to happen.

But that won't happen immediately. It will just happen as policies and whatnot go on. But the absolute reality is, is if it becomes clear to the world that a Harris administration is going to moderate towards Bitcoin, Ethereum and some pieces. While they explode the deficits. While they're exploding deficits, Bitcoin as a, and by the way, now we get to Scott's big thing, which is now who is the big benefit? Who's going to get most of those assets?

Come on, Scott, your favorite, your favorite, Darth, whatever, you know, it's going to be BlackRock, right? You know, it's going to end up in that. So that's why I think what it is. I think the world is different. I don't like ever saying this time is different. I like pointing out what are the differences. The differences are we have structural deficits that are not going to change. We have a way for people to invest and we have people and we have we have literally the fall is when we expect that Morgan Stanley's army of RIAs can come back from vacation and start explaining this case to people.

So, yeah, that's why I'm bullish on Bitcoin. But, you know, I think the other story that we have to talk about, Scott, is, you know, Telegram. I think that's very relevant. So let me just follow up on that and let's go to Telegram. One thing that's changed. I mean, and that's one thing I talk about the next big trade. It's always my focus in the next big trade. I so enjoyed writing about this and publishing about it five years ago, more than that, and pointing out all these things that are dollar's the base layer. Maybe we shouldn't push back on this. All that stuff has happened. Now, I get a lot of stuff wrong, but that was the next big trade. It was awesome. When people disagree, they're all against it. And you see those fundamental shifts, those fundamental factors. Now we've got it tilted the other way. Everybody agrees,

and it's priced accordingly. It's up more than 10X since 2019 when we had the pushback on Tether, more than that. Got a 10 bagger. Maybe you get a pushback on Tether. More than that. Got a 10-bagger. Maybe you get a 2-bagger from here. That's why I point out is now it's not the next big trade anymore for me. It's past. I mean, it's great. I get it.

But you don't want to be overweighting things that people, everybody loves it. It's already done. Yeah, I think we could argue that one all day. I do want to talk about Telegram, but I also want to say something because, Mike, I don't know if I've ever, ever in the history of all of my shows seen the chat go as nuts and be triggered as much as when you said the word insurrectionist. And I want to point out about Trump. And I want to point out that whether you agree with Mike's, I don't even think you were saying that you think that, but the public perception, if you watch the mainstream media, it's important for people,

especially outside of the United States, to understand this. There are caricatures of these candidates, and those are the points that are being drilled home. So whether you believe he's an insurrectionist or not is completely up to you. I have no reason to even dive into that. But factually, that has been said now for years over and over and over again. So when Mike says what his mother, who's a Republican, is saying or what people in this country are saying, factually, that is a narrative being pushed. Whether you agree with it or not, when he actually talks about how that generation or that group of people is perceiving the election. I think that's actually quite.

I took Mike's comments as, as the way the world sees it, this is what they're choosing from. And that's what people are. Yeah. When you go. Yeah. That's what I thought of.

Just called Trump an insurrectionist, crazy person. I did think that's the way people are going to go down the polls. And when it comes time to vote. OK, well, here's some of an incumbent. We can trust the rule of law. She's an excellent. Not perfect. She might mess up the economy, but we don't have to deal with this other person. That's going to it's been stated. I got a retribution risk. If you disagreed with them, you're out of a job okay we are talking about the person who donated to the uh to bail the people and and the and her vice president bail people who committed we're not millions of

dollars in damage were done in in riots uh uh during the early parts of the pandemic after george floyd i mean come on you know when you talk about it, it doesn't matter. Does the. No, no. My point is, I mean, it's not really. Mike is just presenting what everybody is being fed and people are not. That is right. We are. Truth is unimportant. Mike's perception, I think, of how a lot of people are framing the election. That's right. No doubt. That is how the media are framing the election. That's right. There's no doubt. That is how the media is framing the election. And this all feeds right into exactly what we're about to talk about, which is cramping down on free speech. And it's incredible.

And by the way, I want to be clear. I have a selection bias because my vacation place is in South Jersey, which is very strong Trump country. And I live in Florida. Okay. And Miami Beach is kind of, you know, mixed or whatever, but you know, it's when you talk to people on the street and I don't ever, because I actually haven't declared until Bobby Kennedy dropped out of the race. I didn't say who I'm going to vote for him. And now it's pretty obvious who I'm going to vote for, but it wasn't obvious until that happened because I was sort of like where Scott was. I'm not a fan of Trump, the human being from what I can see, but I don't know him. So I give him the benefit of the doubt. I'm kind of different that way, but I'm definitely not a fan of the policies that we're seeing. Compared to me, it is unbelievable how angry people,

if you want to get someone angry, like go to my local gym and mention to the gym owner insurrectionist, you'll hear a screed about how, yeah, but the other guys, what did they do? It is unbelievable. I'm not doing that. I'm just telling you there is an entire, there's a large percentage of the population in America who are not going to forget vaccines being mandated, people being, you know, speech and, you know, being, although it was admittedly in Canada with the truckers, but, you know, people are not forgetting that stuff. They're not forgetting the riots, not forgetting that stuff. It's just the media doesn't talk about it. The media talks about January 6th incessantly and keeps calling Trump

a felon for things that, well, you know. So, but that's the key thing. You mentioned the media a couple of times. That's the key thing. My sense of being in the media and observing it 24 7 is kamala has won the media oh there's no doubt the media is actually a function that's why that's why this telegram story matters because what is the alternative media it's x it's telegram it's reddit you know, et cetera. And basically if the argument, and we haven't gone this way in this country yet, but if the argument is that unmoderated content is illegal because people can say bad things, that is more or less like they taking, I mean, Gutenberg was long dead by the time it happened, but taking the printing press and saying that

Thomas Paine's common sense and people who did the newsletter writers, it doesn't matter what show you watch about the old days. There's a show my wife really likes. It's not bad called Outlander. And one of his jobs in the past was he was a rogue printer. And so you had these this is the factual thing in history. You had people who would print news sheets, and then the government would want to shut them down, so they would have to hide their printing press, because they'd see these news sheets, and the news sheets would be critical of the government. And effectively, with the First

Amendment in America, and then theoretically France after their revolution, although obviously not so strongly, you know, we basically said, listen, our founding fathers said, look, these news sheets are important. We are never going to abridge it. We want people to be able to get speech out. And so the whole notion that you have a platform that you can literally be liable and be considered a criminal if you don't moderate the platform, i.e. if you don't do something to stop people saying what they want to be able to say is complete anathema to the First Amendment. This is even worse than Ross Ulbricht, in my opinion. And we can dig into that. But Ross Ulbricht, they made the case, obviously, that he was facilitating it by creating a marketplace for the direct sales of these things. For people who haven't dug into this Telegram case,

first of all, France hasn't said whether he's just been detained or arrested. There's a lot of assumptions. We're going to see. They're supposed to make a statement today. But the idea is that Telegram's encrypted. No backdoor was ever given to a government. The governments obviously don't like what's happening on Telegram. There's ISIS groups and all these things. And therefore, he should be punished for not moderating, to which I say, should the mayor of a city be punished for all the crimes committed in that city because he failed to moderate that city? Or even a better example, which I always gave about Bitcoin being used for criminals. We all know that there's probably some nice terrorists using iPhones or criminals using

iPhones to sell crack. Should Steve Jobs and Tim Cook be detained and put in jail because their technology is being used for illegal things. They allow their iPhones to be sold to them. They are, you know, they don't turn them off because they're known criminals. TikTok, Telegram, Twitter's next if we, if the world stays the same way. Yeah, I mean, Elon cannot travel to Europe right now. Elon can't travel to Europe right now. Yeah, I wouldn't.

Do you think he would like go to France? I mean, it's unbelievable. Or the UK with their hate speech law. He can't afford that either. I mean, this to me is a very big deal. So if you ask me, what is the election swinger here that no one's talked about? Is

there anybody who believes that if a Democratic sweep doesn't mean we're going to get packing of the Supreme Court because an elimination of the filibuster? Well, I think they've already said they're working towards that, right? Yeah, that's right. So now it's not going to take a whole lot to say, well, wait a minute, what happens to the, forget the Second Amendment, what happens to the First Amendment here? That all of a sudden starts to become a very big deal. And, you know, I hate to be reactionary because, but these are the sorts of stories there where the old expression,

they're not even pretending anymore, is what's happening. And if you really care about the country, we can survive. Look, I normally would say we can survive four more years. We had four years of Trump. We can survive four years of anybody. I mean, America is self-healing, but the reason we're self-healing is because of our institutions, our institutions of checks and balances. And no matter what you want to say, that the people who I know who are the most violent anti-Trumpers out there genuinely believe, now I do not believe this, but they genuinely believe that he will end those institutions. I now genuinely believe there's a reasonable chance that the other side will end those institutions. And that is scary. And honestly, I want to walk,

I would hope to see us walking things back from the brink, which is why everyone should literally listen to, you know, you could book the RFK speech from last week where he basically said, he gave a definition of what MAGA should be. Effectively effectively what he's trying to do is de-escalate that's what he wants to do and and you could argue that you know you don't agree with his stances on on x y or z on vaccinations of some things the fact is de-escalation is what is needed but what this telegram story is is a huge story because effectively i mean noel put it well noel who I mean, Noelle put it well, Noelle, who is often on this show, put it well in her newsletter this morning, which if you don't subscribe to, just like I say, you should subscribe to James' Informationist, you should subscribe to Crypto

is Macro now. What she said this morning is, listen, if the crime is lack of moderation, it's a huge problem because essentially what it means is you can't have an independent platform. That's right. It has to have a backdoor and it has to be controlled. Mike, you loved that checks and balances comment. I saw it. So I want you to read it. I have to because to me, that's how great our country is. When Dave, you push back on all time, what's happened with crypto under this administration is how important it is to have those checks and balances. We had Chairman Gensler completely push back, yet we do have ETFs now.

Why? Because the rule of law prevailed. That's what this potential Trump 2.0 is pushing back on. Everybody gets it. Also, the key thing is he lost Wall Street when he said he can do better in the Federal Reserve. I remember when Clinton was running in 1992. Wall Street loved him. That's part of the reason he got in.

Ross Perot also can, but you lost you lost that i mean it's just silly you look back at any history of the independence of u.s federal reserve is what's made this country great so he lost that aspect maybe he's got cryptos it just that's why it's so important we have these checks and balances and that's one person person pushing back on them can i make a point the independence of the reserve did not make this country great. It made Wall Street great. The percentage of the economy that it had... I profit from this, okay? I

worked on Wall Street for 35 years. The percentage of the economy in the S&P, Wall Street quadrupled as the Federal Reserve continued to really ramp up the money printer. But Trump wants to print even more, so it's not like I'm backing what Trump is saying. And I sort of agree with the essence of what you're saying, Mike.

But I want to push back. I'm not a big fan of the Federal Reserve and what they've done. I understand the Wall Street circuit. But the checks and balances of the courts is exceedingly important. And that is at risk. And that is a serious problem. The branches of the government. James, you're the perfect person to unpack this

and bring it home for us. We have a couple minutes. Yeah, I mean, that's the whole point, that you need the checks and balances of the branches of the government. That's why we have them. I mean, you've got Congress. You've got the executive branch.

You've got the judicial branch. You must keep those sacred. You've got to keep them separate. as far as the Fed and being independent. It's independent. And they try to do things independently, but they do have tremendous political pressure from all sides. I mean, it's just reality. And whoever's in office has more pressure on them. And that's just it's just the way it is. So. But, you know, I agree with a lot of things that Mike said. And obviously, I agree with a lot of what Dave has said. We are coming into a pretty uncertain period here.

And I would watch for gold to to get some clues of what's going on. And and I would still expect quite a bit of volatility in Bitcoin. But I, too, think that Bitcoin is going to just benefit from every single nonsense and legitimate policy that we have coming forward. It's the the the relentless spending out of the government is not going to stop. And the deficits are only going only going to grow. And that's just reality. I mean, we have we have too much unfunded. You know, we have too much unfunded. We have too many unfunded liabilities in front of us. They're just going to have to keep growing deficits and borrowing in order to kick that can down the road further. And what benefits from that? Assets,

period. I mean, the Fed may be independent, but I would argue that maybe their incentives come from the same place as the incentives of the government that they're independent yeah well which every chairman powell's been tremendous like he's a lawyer layers no history like it's part of being a lawyer and he's used volcker i mean just i finished i just finished um um alan binders of fiscal monetary policy in the united states 61 to 21 it's one thing no central bank in history and in future will ever want to be put in the same category as arthur burns who was a personal friend of president nixon and helped get elected and

went down it's going down in history as oh yeah i don't want to be like that they want to it's it's just the nature of when you get to that level you want your it's your legacy that matters and the independence of federal reserve i I think is so important. It's more significant now than ever. And when people push back on, I'm like, just imagine if you're sitting in that seat, how do you want this history to remember you? They know that. Good point. Yeah. And, uh,

Jerome Powell has the luxury of maybe keeping the boat afloat and looking good until, uh, 10 weeks from now and then he can magically disappear and see what happens. Right off of Jackson Hole's sunset. Yeah but he may actually be remembered well regardless of what happens after for orchestrating during his time a soft landing. Remember. Paying much attention to that he caused the uh problem in the first place. Well remember something his goal is to is to help the United States government finance those deficits and if you look at the long rates, he's doing a great job. Yeah. Not only are we not touching 5%, but now we're below 3.8. And China's 2.16. Yeah. Well, sure. But China's not a global

reserve currency. But the point is, is that you've been on that score. You've been correct. And so credit where credit is due. And Powell's doing a great job if he keeps the long rate in and allows us to finance these crazy deficits. I can't wait to do these shows in November. Oh, that's going to be great. We're going to have so much more clarity on all of the predictions on what Bitcoin is supposed to do in the fall. But also we'll sort of have, well, hopefully we'll have the election wrapped in a bow and we'll be able to talk about moving forward without conjecture based on things that are actually happening. But I guess I'll knock on. Yeah. If this is wood, then yes, we can knock on it. That's what I was doing, knocking on wood.

That we have a result. Yeah, and I would just invite the people in the audience. I know that like the political conversations for all of us can be very triggering. But if you're so passionate and even the simple mention that like your party could lose or something could happen gets you that trigger, then work harder because right now it's 50-50. And so if you're 100% sure that there's an outcome that's going to be favorable to you or against you, it's time to step up and do what you can because I would handicap it really close to even. So many things are going to happen in the next 10 weeks. True or not, AI, deep fake, real policy, who knows? But it's about 50-50. And if not, it's 50-45, and we've seen that switch. All right.

Thank you, guys. That's it. We will be back, of course, next Monday. Amazing. Later. Let's go.