The Wolf Of All Streets - Debt Ceiling | Time Is Running Out | Macro Monday With Dave Weisberger & Mike McGlone

Episode Date: May 22, 2023

The US debt ceiling is the most important news in macro. Dave Weisberger: https://twitter.com/daveweisberger1 Mike McGlone: https://twitter.com/mikemcglone11 ►►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/ ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget ►►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 ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/ Follow Scott Melker: Twitter: https://twitter.com/scottmelker Web: https://www.thewolfofallstreets.io Spotify: https://spoti.fi/30N5FDe Apple podcast: https://apple.co/3FASB2c #MacroMonday #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.

Gone are the days when you can trade, invest in, or even analyze Bitcoin and crypto in a vacuum. Macro rules everything at this point, and man, is our macro currently a disaster. As usual, on Monday, I bring Mike McGlone and Dave Weisberger, the two foremost experts in the topics, to really set the table for the week, what we can look for and how that will affect the crypto market. Of course, we once again have to discuss the debt ceiling, even though last week we were hopeful that this conversation would be over seven days later, but they're still dancing around the topic and trying to get it done. We have to talk about the Fed and we also have to talk about what's happening with Bitcoin. And well, we probably also have to talk about what's going on with the Biden administration. As depressing

as that is, I know Dave has some hot takes on that one. Can't wait to get into this with you guys. Let's go. Thank you everyone for showing up a half hour earlier. This is going to be our new time, 9 a.m. Eastern Standard Time, largely because I'm launching a big Twitter spaces. Looks like that's going to be delayed about a week. Next week, 15 every single day with rand neuterham mario knoffel but today here we are at 9 a.m and we are going to talk about macro because it's macro monday and that is what we do going to bring on both of our guests mike dave how are you both good morning good morning scott recovering from btc miami let's talk about it how uh well i mean it's interesting it was down about 50 i would say overall and down about 90 on industry day which is to say which

explains why they announced what they're doing next year is in nashville and the ticket prices are down by a lot uh even the sticker prices are down by 60, 70%. I mean, general admission now down to 300, industry day down to 800. So now the pricing for individuals looks more like a normal conference as opposed to a great party that was the only place to go, which is what it was three years ago. So maybe they'll be able to reinvigorate it. But my problem with the Bitcoin conference is the people who run BTC Magazine and do the content are functional morons. They don't understand what's going on. They're literally tunnel vision.

They're not morons. They just have tunnel vision and they're ignoring it. So I did a rant and I don't generally plug our youtube channel and stuff scott oh it's my this week in crypto last week was from the floor of the bitcoin conference and effectively not to steal its thunder not to go about it i basically said are you kidding me that that the feature of the conference is laser eyes against wizard hats. In a world where we have all the serious people in government and the president of the United States attacking crypto and you're making us look like a bunch of cartoon characters, are you kidding me?

This is a serious thing that we are trying to do. And we at least want the U.S. to not get in the way of Bitcoin's global adoption. And what they are doing is provoking people in power by stupidity, especially, and then you add to that Max Keiser's ongoing rants about, I specifically dissected him. In fact, I'm going to separately publish the rant about him because I want to challenge him from the rooftops to debate me anytime, anyplace on his idiotic thesis that he should sink the SEC on altcoins. And I won't spoil it for people who want to watch it, but there is

no answer to the argument that I presented. He will look like a fool, and I'm happy to make him look like a fool, despite the fact that I have enormous respect for what he thinks about monetary policy, because I think he's right there, but his constant whiny attacks on technology-oriented platforms is a problem. But the problem is the Bitcoin conference highlights and amplifies that nonsense. So I'm actually glad it's gone from Miami, to be honest. Mike, did you end up going? Yeah, I went and I had similar feelings as Dave. It's such a sensational retail event.

There's a few things. I want to start out positive. I was really impressed with the proliferation of female involvement. I mean, professional females. So I went stopped by the women in crypto event and I wasn't allowed in, I didn't want to go in, but I was really impressed with the professionals there, females. So that's good to see. It's not just a bunch of male coding geeks anymore. But there was a few things that really struck me. One was there was one booth that said, oh, how to avoid taxes with cryptos. I'm like, man, if you want to be a flag for the IRS, I had to talk to this guy.

He's based offshore. And I'm from an accountant family. I was an accountant. My son's an accountant. He's crushing it at PwC. My father was an accountant. I'm like, you just pay your fair share of taxes and say, thank you, at least in this country, it's pretty fair. I was like, dude, if I'm the IRS, I'm coming straight to you. So that was kind of silly. But

the key thing that struck me is when I was asked, I did an interview with Rand Newner on the Crypto Banter. And when I point out my simple facts of when I sense extreme bullishness and Dave knows this, anybody who's been a professional trader all their lives knows, when bullish or bearish, fundamental or not, when you sense most people are long, you want to do the other opposite, at least for a trade. And I sense so much bullishness. So when he asked me my views on crypto, I was like, yeah, this high around 30 could result in self in a new low.

It's probably going to do that, particularly if the stock market goes down. In history, they were the shock I get from people, which makes me feel I'm more likely to be right. I don't want to be bearish. I just want to be right. And that is pointed out things like, oh, this market's above the 200-day average and that market's above the 200-day moving average. And I think that's my sense of what really messes up people sometimes who ignore the fundamentals. The fundamentals technically right now are fundamentally very bearish in terms of liquidity. We're having a liquidity rug pull. Look at banks, look at the Federal Reserve still tightening, look at money supply.

And cryptos are just the fastest horse in the race. So I look at it as their leading indicator. We'll probably get into this later. But that was my really sense from the, that really struck me for how people are so bullish and not realizing that, yeah, sorry, like you mentioned earlier, crypto is a significant part of the macro space. It's probably the fastest horse in the race. And you look at the VIX at 17, this debt ceiling coming up and commodities collapsing. To me, the risk is cryptos are just going to go down like copper and natural gas. We're going to dig into that in one second. I mean, I was dismissive of the conference as well,

but to be fair, I wasn't there. Dave, you know, I really like Mike Germano and David Bailey. I had them both on the podcast in the last few weeks in advance of the conference to the ones who obviously planned it. To me, it just feels like a rock at a hard place because the community can't get out of its own way, right? I mean, we've talked at length here about Pepe and meme coins and all the things that are happening once again in the face of you know regulation and legislation and everybody having a negative spotlight on us i you know i don't know what they're supposed to do if that is one of my answers on stage i would love to give you the answer so we you know as a two

block sponsor which is not i mean it's not an insubstantial amount of money and we're in the top half of sponsors. I was given five minutes on a stage with about six people falling asleep from a guy who had 15 years before me talking about mining that his English was so bad that nobody could really understand what he was saying. He didn't even have slides. So by the time I got there, no one was there. And they knew what we were talking, I was talking about was cost of trading as a path to adoption. And that topic is kind of important. You know, they had, here's the perfect juxtaposition. So I was extraordinarily annoyed with the way they treated us to the point where you could tell David Bailey from me that I think he's an idiot.

I mean, literal idiot. They don't curate who they have listening to. I had lunch and a nice conversation with a brilliant woman, Lynn Alden. And, you know, she was nodding when we were talking. They had a great conversation. That conversation was better than half of the panels that I've heard talked about. But the worst one they did, this was criminal, is at the same time they had B kaiser with his buffoonery because you know when he does these conferences he gets completely as opposed to real at the same time

they had the single most brilliant macro economist on the planet buried in the deep lounge where all the people who paid him out late amount of money were gifted it. Zoltan Pozar was on the opposite, Mike Max Keiser. How the hell do you not put Zoltan Pozar on the main stage so where people can actually see him? The man is one of the most brilliant macroeconomists on the planet. I mean, so it's not just me. I'm telling you, David Bailey and his promoter, what he did was try to maximize every single penny he could

by putting people up on the stage that would attract retail name recognition as opposed to grow the community. And when you're running a conference that is self-destructive behavior, he deserves the fact that their total budget went down by, you know, I think from 30 million to 8 million, and they have to cut their prices bad in national. It was self-inflicted and it was done that way. It was obvious. So if you wanted to look around that place, the number of serious people who actually were sponsoring was down dramatically. And that's why it's down dramatically because they've given in,

they gave themselves into the hype and the bullshit. And that is exactly the opposite of what they should have been doing. So yes, I'm a little bit on a rant with that. And frankly, I want to talk to him. I would love the introduction because I would say it to his face. I would happen to be on a conversation with him and he could explain to me why Zoltan Pozar was on opposite Max Keiser. He could explain to me why they didn't have anybody who understands about the dynamics of the market. Do you realize, here's a rant, do you realize what happened in equities to get to modern adoption? We used to have a society where the only people who own stocks were the upper class.

You know why? Because it cost a ton to buy and sell stocks. Then this dude named Charles Schwab came in and lowered the cost of trading. So the fact that we have people like Corey Klipstein selling people how Bitcoin is going to be globally adopted and all of this other stuff, and he charges 1% aside. And that is basically the average or actually even above average. I mean, Coinbase is worse for retail. So, you know, maybe I guess that's good in a way, but that fact that retail Bitcoin buyers and sellers, you know, basically pay what retail stock traders used to do before Charles Schwab, you're not getting a global adoption that way. And it annoys me that no one talks about how you're going to integrate into the financial system with one exception,

brilliant exception, it's Michael Saylor. Saylor gets what I'm saying to be true. And in fact, his buying and selling, he was paying a lot less because he's doing it the right way. So I find it hard to believe that if you're worrying about global adoption, that the two biggest barriers you have, one is cost and two is regulatory, they literally put their head in the sand and anymore boat. So yeah, I have a problem with it. But let's un-rant this and let's talk about the press. Sorry.

Yeah, I think it's a valid rant. And I did hear and I saw the same consensus to one of your points before that the bulk of the boots or a lot of them were lawyers, legal firms and tax and accountants. And so, yeah, that I don't think that's ever a great sign. But yeah, let's let's dig in here. Mike. Good. Yeah, you're having a little feedback on your mic. It sounds good now. So, Mike, I want to go up, bring up your actual report from this morning. So I think it's a great starting place and my favorite way to start my Monday. Bitcoin and copper appear to be heating the Fed. Can you talk a bit more about this and what you're seeing, what it means for the market? Yeah, first of all, it means virtually all risk assets are probably going to go down. Crypto is a riskiest asset. Bitcoin is the least risky asset. So it might not go down as much. But I first want to cover a little bit what we went through in our morning meeting with Blue Ring strategists. And from Harry Truman, we said he wanted a one-arm economist. Well, we got one this morning from our chief economist, Anna Wong. Her quote, I was kind of surprised by it. She's been spot on and says she expects the second half of this year to get very ugly in terms of U.S. debt ceiling, in terms of inflation, in terms of the economy. And part of it, the debt ceiling is part of it.

So expecting a pretty severe recession to get started. And I think that's what's showing up in things like copper. Copper, if you take the price of copper and malt, and it's $4, it's like $3.76 right now. You take it, overlay with the S&P 500, divide by 1,000. It's been the same price for basically 15 years. I'm sorry, since 2015. And copper is collapsing. Copper is up 12% beginning of the year. Remember, that's happened to the stock market. Now it's back down in the years. So it's pointing out what's happening globally. We're getting this severe recession. It's kicking in in China. All the data I'd say out of China is horrible. And Bitcoin's done it

too. It bounced to 30,000, now starting to roll back over. So it's not down in the year and it still could be. That's to me, my point is you look at things that are not kind of stuck in that FOMO area like the stock market, but are really reflecting organic global economy commodities down 25% from last year's on a 12 month basis right now. That's a Bloomberg commodity. That's never happened with the Fed tightening and they're easing. So I look at these two, like copper is known as a metal to have a PhD in economics. It's showing you the tilt in a global basis in terms of the economy. Now, I look at it as if you're, anybody's been looking for all this demand pull for crude oil and stock market and economy. With U.S. heading towards recession, it seems very irrational.

So I look at it as let's look for all the leading indicators. And sometimes you get head fakes and equities. I think that's what you're getting right now. I think you just got that in Bitcoin, that big pump in stock market, VIX at 17, the big pump above the 200 day moving average, and S&P 500. I think those are just those little, we used to call them the trading pits. We used to call it the baby seal trade. The baby seal picks its head through the ice, and this is what Japanese, you whack it, or the whack-a-mole trades. That, to me, is the biggest fear here, and I'll end with this. I think the key thing that's going to maybe tilt everything back down is I don't see an end to this budget impasse.

I mean, it's a low probability that we'll have this meet an agreement with, we wake up in the morning and finally it's agreed without markets forcing our great parties to come together and agree. And that's what happened in 2011. You dropped that S&P maybe 10%. Yeah, they'll come to agreement. But right now, to me, that's the trickle down that I think we're heading towards. There's one key thing keeping us from severe deflation. We're on a cliff's edge, and that's the stock market. Bitcoin and copper and commodities may be showing that way. Dave, what do you think? I think that it's very hard to argue that we are on a bus careening toward a cliff.

The guy who's driving the bus is licking an ice cream cone and kind of enjoying the view because it's pretty out one side and ignoring the cliff that he's driving the bus to. It's very hard to argue that. The reality is the farther or the more likely it is that we're going over the cliff, the more likely it is that the Fed is going to be forced to pivot. And I think that is why markets are kind of in this deer in the headlights situation. The fact is, if you go over the cliff, you go over the fricking cliff. and that's what Mike is talking about. So it really, it really is a fascinating period of time. I mean, there's no other way to describe it. The, these, there are multiple ways this could come out. Okay. Uh, they could come, they could finally say, you know, grow, you know,

basically it's become adult and say, okay, let's actually negotiate. And, you know, that's what we thought last week. I kind of still think that they probably will, but there are two other outcomes here. Outcome one, they dig at both sides, digs in their heels. The Walter Journal had a great editorial over the weekend and they pointed out something that is extremely important for your listeners to understand. And it just shows how disingenuous our leadership is. So when Yellen, who knows this, actually lies to the American people, knowing she's lying, any respect I ever had for Janet Yellen is gone.

Biden, I don't think he knows necessarily where he is at any given point in time. So I don't know that he's necessarily knowledge. You have to know what you're doing, the lie. But the lie is this. There is zero probability of the U.S. defaulting on its debt. I'm going to say this again because I want people to understand it. It's a great editorial over the weekend. What it basically means is that the U.S. debt service is lower than our tax income, meaning, and the Constitution says the first thing the government has to do is pay their debts. The second thing is discretionary spending. So what's really at stake here isn't a default on our debt. What's really at stake here, unless they want to violate the Constitution again, what's really at stake here is a government shutdown

and potentially a prolonged, messy government shutdown, which will cause, I'm not going to say it won't cause problems, because it will. But the U.S. defaulting on Treasury payments is literally not on the table unless this government wants to violate the Constitution and prioritize other payments over its debt payments, which is more or less the same thing as you as a human being. If I decided to not pay my interest on my mortgage, well, that's a bad example because in Florida there's homestead.

But if an average family decided not to pay off all their bills, people come and seize their crap. The U.S. government decides not to pay their bills. I don't know what happens, but I do know that the courts are going to say, wait a minute, your tax receipts are whatever, you know, $2 trillion, your budget deficit is running, whatever it is, but your debt payments are what, $437 billion right now? So they can pay the debt. And so when Yellen says we're going to default and this will cause it, no, there's no risk of a default unless they're planning on being disingenuous.

So that's thing number one. And so I don't think, so the normal thought process on macro is that you default on your debts and the yield curve gets screwed because people start demanding more, yada, yada, yada. I don't really understand, I mean, why the CDS spreads are what they are in the U.S. government. The fact of the matter is that they're basically saying that this administration is going to be willing to go to the Supreme Court to actually do something that the Constitution says they can't do. And I found that fascinating. So, but let's get that piece of the rant out of the way. I agree with Mike about copper. Obviously, you know, we all know that Mike and I agree on the basics of all of the way. I agree with Mike about copper. Obviously, we all know that Mike and I agree on the basics of all of this stuff. I also read something over the weekend. I think it was,

I can't remember who it was. I wish I could give attribution. But the commentary was that as long as the US can export its monetary policy globally, the whole world is hostage to what our monetary policy is doing. And in a world where everyone is frozen, that's not good. And the demand side of the equation, if you look at what's happening in China, that's not going to give the demand side any particular favors. And the first shot in what potentially could win the trade war is yet another issue, the blocking of them buying chips from Micron. Now, do I care about Micron particularly? Well, I don't know. Micron's been a pretty good bellwether for the entire chip industry. So, you know, that's kind of a big deal. So there is a lot going on that's negative. I don't disagree

with Mike. The one place I disagree is, and I'll continue to say it, is that Bitcoin is a very small market. There are enough global funds who understand that Bitcoin at its core is a hedge against distrust in institutions. That it won't take a lot to keep the price of Bitcoin from falling nearly as far as one would think it would based on its high beta to a declining stock market. So I can see a scenario where Bitcoin gently settles, where the S&P drops 25%, 30%, and it starts to panic the government. And Bitcoin over that same period of time drops, instead of the 60% or 70% that you would expect with its beta, drops 15%, 10 15 10 whatever and kind of gently goes as people

kind of dca buying those those people who look at it that way i could see that scenario on the extreme downside and at the same token if in fact the fed blinks which i think they will blink and blink hard uh i think you could see a real delinking. But this is all based on game theory because the one thing that's starting to get floated again is in the 14th Amendment so that the government can say, yeah, you know, we could just kind of do this without you, Congress. The impact of that should be Bitcoin somewhere around $200,000. I wrote a thread literally on the 14th Amendment

because it's so dangerous that they're even invoking it. For people who don't know, the amendment says the validity of the public debt of the U.S. shall not be questioned. That's what it says, right? to raise the debt ceiling after that was written in the 1700s seems like a massive jump and would be immediately, immediately fought in the Supreme Court. I mean, invoking the 14th Amendment to me is just an unmitigated trade wreck. Right. Well, it's either that or mint the coin. But the implication of both of those actions is the same. It's the complete and final breakdown of separation of powers. In the exact world where you have a complete and total breakdown of separation of

powers, trust institutions, I mean, if you think it's bad now, it will go dramatically worse. I mean, we may not love Congress, we may not love the executive, but the one thing that's been common for as long as Mike and I have been in the business, and we've all heard it, this is, it doesn't matter whether it's Republican administration, a Democratic Congress. It's that markets love gridlock. And what are they basically saying? Markets love the fact that the baser instincts of the extremes that might inhabit the White House at any point in time can be kept in check by Congress.

Take that away. And I mean, that is a prescription for chaos. And I feel like get Jeff Goldblum in the Jurassic Park movies when they talk about chaos. But I don't think people are going to like chaos in that regard. I think that the ultimate chaos asset to own is gold and will be Bitcoin. And so I do think that there is a much higher risk. I talked about it on the show for months now. I thought it was in the 1% range. I think we're flashing at this point into the 25% range of significant chaos because these yahoos don't understand what's at stake here. And they're more concerned about their narratives than they are concerned

about actually doing the right thing and understanding what's going on in the economy. I mean, reasonable people could disagree on the margin. I mean, it feels like, and I hate to say it because it makes me sound partisan, but it's not about that. There are multiple Democrats that I have direct personal knowledge of that agree with this sentence, but it feels like McCarthy is trying to be an adult. And when you have a president who actually equates a government shutdown that might hurt healthcare workers with not benefiting crypto traders, anyone who's filed taxes for 20, you know, this, this year's taxes for, you know, what happened in 2022, the fact that, the fact that he could actually call crypto

traders as something significant in federal budgetary talks is so dumb and so misinformed that it's obvious that he cares about the narrative much more than he cares about actual facts. And that's the problem. Because when you get to that level, who cares? It's not until he feels there's consequences. I mean, without consequences, no one's going to stop this childishness. And that's what's going on.

That's what scares me. So let me figure back on that a little bit and rope in the macro. A little bit of politics. My inside scoop from my colleagues in Washington is Biden's a lame duck. He just can't claim he's not going to run because it would make him an extreme lame duck. We all know he's basically not there mentally anymore and everybody gets it. But he can't say that yet or he's done. I mean, we'll just put him aside as a dead duck. But the key thing I want to point out is what you said, we disagree and we actually do agree. And I completely agree what

you said is it's gold, definitely in a risk off asset, very bullish gold. And at some point, Bitcoin. The problem I have with is all risk problem I have with this, all risk assets went down last year. All risk assets went up this year. We've only seen little inklings of Bitcoin showing that divergent strength. Little inkling. You've got to see the big one. You've got to see that S&P 500 really drop 20%, maybe go down to 3,000 like foul copper. And Bitcoin not to make a new low.

Yeah, that would be great. I think it's more likely to do that, screw everybody, and then go back up. So let's look at the facts of Bitcoin. Right before that massive liquidity pump in 2020, Bitcoin in 2019, the average price was $7,000. Okay, so it bumps to $60,000. And now we're $27,000. It's still what, 4X that price? We still have a little bit of mean reversion risk. And so the way I look at it, this is the kind of market we're not supposed to be along any risk asset. The government's given... Let me finish. Bobby, for one second, I just want to be really clear about this. The problem of looking at the

absolute price of Bitcoin as it's growing and its network is growing is fundamentally problematic. It's like looking at an individual company and its stock price when it had 100 employees and $100 million in revenue and saying, well, its price used to be whatever, $100. And now the same company has $1 billion in revenue and 500 employees. You're not going to value that the same way. And the reason I'm making that point is because of my favorite chart, which Scott can pull up, which is the famous blockchain.com Bitcoin hash rate. And if you look at where it was, you know, if you look at where it was three yearsied by a factor of four and the hash rate is rallied by a factor of three. We all know it'll overcorrect, but that doesn't mean it should be thinking about going back to where it was unless the market or the network collapses. That's the only point. I mean, we please keep going. I just wanted to make that point because it's directly, we get to agreement very quickly if the argument is that its outperformance

of its hash rate should really fall in line with before the liquidity. That I agree. So let's point out what Bitcoin's always does. It corrects a lot, goes down, and it's higher correlation to the stock market than to gold, and it's still much higher correlation. So yeah, I get that. And also it's more of a commodity.

Just why is it on there? See it, why is it in trading? It's a commodity future. It's not a stock. I get it. The hash rate and everything matters. Completely get it. But I'm just pointing out that this is the risk.

The key thing I like to point out is the government's telling you to buy US 2.0s, 4.3%. They did it 5% and it's dropped. It's what you're supposed to do in an environment like this when you have that opportunity. And that's the key problem the macro economists even pointed out is we all, everybody's price for this ease from the Fed. And it's the fact is they, when things go bad, which we all know they're tilting that way, certainly we see this significant deflationary forces. The Fed will not ease until the indicators, until things are really bad, like we give that headline when they see the Washington Post and these farmers down 10%. And because their inflation metrics are so lagging. I like the one major inflation metric is owner's equivalent rent in the CPI. It's at 8%

annual, the highest ever. There's no room for it to go but down. Just look at housing prices are collapsing on a U.S. basis. So I look at it in the macro is this is an environment, I say, don't touch risk assets, housing. I mean, they all look like they're just, let's put that, they're all going downward and they've had little bounces and the Fed's still tightening. So I look at what's the leading indicators, cryptos, Bitcoin, and then things like Pepe coins, we pointed out just examples of the massive speculation that will be purged. It's not an if, and it's being purged right now. So yeah, I get it.

I've been seeing the thing about the hash rate. It's such consensus. Now I see it in everywhere for people to justify bullishness in Bitcoin. I like to just watch simple supply declining and demand adoption increasing. I get the complete degree, but it's just the indicators are right now that if the stock market has a rug pull, Bitcoin is probably going to go down its normal beta versus the stock market, which is 3X or so. If it doesn't, that's great. Then you'll have that divergence strength. And if we don't have that rug pull, which would be very unusual, Bitcoin's going to outperform anyhow. But we're still at that stage now, I think it's

early days, that this recession that everybody says it's completely priced in as a soft land, I'm like, yeah, good luck with that one. We'll probably get out of normal, which means it gets bad and people lose jobs. I see in the comments, everyone thinks a crash is coming this year. When has everyone been correct? But I think actually, Mike, you lose jobs. I see in the comments, everyone thinks a crash is coming this year. Why? When has everyone been correct? But I think actually, Mike, you nailed it. I think everyone thinks a recession is coming. They don't think it's going to be worse

than that recessionary soft landing. And that's a very different thing. Could I answer that? Because markets are trying, you know, this is like my favorite movie, The Princess Bride, the scene with, you know, the surely you can't choose the glass in front of me scene.

The fact is, everybody thinks that the recession is coming and everybody thinks that the Fed is paused and everybody thinks that the Fed is going to be the lapdog of and actually pivot. And that is why markets haven't followed. And it is that simple. So one of two things is going to break here. And it is one of two, obviously, which is either we don't get a recession, in which case both Mike and I will be actually quite stunned, or the Fed is going to actually wake up one morning, read their Bloomberg, read Mike McClone, and say, you know, this dude is right. Crap, we can't, you know, we really got to get ahead of this stuff.

Because looking at lagging indicators, it's like, you know, effectively what Mike is saying, I'm going to paraphrase Rob Arnott, who once talked about quantitative finance this way. What Mike is saying is that the Federal Reserve is driving a car, probably actually driving a bus, and that bus is holding women, children, the whole economy. And they're driving the bus on a mountainous road with lots of twists and turns. But instead of looking out the windshield, they're looking through the rear view. They're facing where they've driven. And that's not really a good thing. Today is my cliff analogy day, so we're going with that. But the fact is, that's what Mike's saying. So maybe they'll start to figure this stuff out. I think the fact is, and I've said this before, I think Powell gets the importance of inflationary expectations, and he is acting. I don't know what all the rest of the Fed

governor's doing, but Powell, because you can hear in his speeches, is acting in a way to try to quash inflationary expectations. And at some point when he thinks that the future expectation of inflation is low enough, then he'll take his foot off of the brake. I think that it's that simple. And his hand will be forced. I mean, we already saw it forced once when they realized the entire regional banking system was going to go kerboom. And I want to talk about banks in a second. We have to come back to that because there are some signs of stress and some very disturbing rumors going on out there. But that's, well, let's get there in a second. That they put the BTFP in and essentially said there's $4 trillion

available to the banks. Do not worry about losses on treasuries. They essentially said that. They saw what was going on and they pulled out the howitzer and went boom. Now, the fact that $4 trillion didn't get borrowed, that's good. Although borrowing is starting to tick up again. So what could cause the next big one? The next big one, as I've said many times, is commercial real estate, which disproportionately hurts the regional banks. The rumors, and they're very, very persistent, strong rumors, are that there are multiple other banks teetering and multiple other enforced shotgun marriages with SIFI, with too big to fail banks planned. So don't be surprised if you see another one to whatever bailouts where JP Morgan sized banks,

I don't know which ones, buy out other banks at the behest of the government to kind of quote, contain the contagion effect of this. And I think that is worthy of a conversation in many ways, but that is also something very important because when Mike talks about credit easing and Powell understands this, there's two ways that you could tighten credit. Tighten credit number one by ratcheting up interest rates. Wave credit tightening credit number two is kneecap those who actually extend credit to the real economy. Now, the Fed isn't doing that, although they sort of did it by raising rates. But the fact is, and Powell talked about it in his last press conference,

if the network of 1,000 plus regional banks that supply most of the capital to Main Street can't stop lending because they can't afford to anymore, that is a massive tightening in of itself. And that is more than enough to trip us into recession. And they do understand that. So I'm curious what you think about that. Your economists must be talking about it, Mike. Absolutely. Well, as you saw me typing, as you were speaking, I had to bring up the latest commercial bank liabilities deposits leaving. Right now, it used to mean deposits going into banks, but it's dropping at a 5% pace. Our data only goes back to 1968.

It's never, ever, for a little while, got below zero in the 90s, but mine's 5%. So it's on a fraction of reserve basis when you leverage basically 10 to one at least, someone gives you $100 and you're lending that out and everything, and you keep maybe 5% of that. You don't see effects of that for another year and there's just no way to say anything, but that's completely contraction of loan demand. Now, I've only been around 58 years. I've never seen that. And the Fed's still tightening. And so, me, what I think is going to happen, risks and predictions that Mr. Powell's going to go down in history as a person who made the

wrong mistakes, who was stuck at the wrong time, the wrong decisions, too much liquidity, and then not taking it away, and then tightening too fast and created the next great depression. And that's what we're heading for. That's just based on the facts of where things are heading. The key triggers that's still not dropping is the stock market. But the key thing also I want to point out from our economists, what they pointed out is the future's not bright. I've just made my notes here.

And all the models our economist team says that Fed will be cutting rates, but bless you, but they don't expect to be cutting rates this year because the lagging measures of inflation, wherever you mirror, and also the lesson, I think it's the human nature lesson of the rest of our lifetimes, we're going to hear these every single time things get bad, we're going to hear, okay, no more QE, no more easing too much, because look what happened in 2022, all that inflation was created. It was one thing. It was a monetary phenomenon because we added too much liquidity. We're never going to do that again, ever, which means an elongated period of low economic growth.

Sometimes I'm mind boggled by the groupthink in the economic community and how absolutely outrageously dumb it is. I mean, let's call it what it is. What caused the consumer inflation was not monetary policy. Monetary policy has been consistently accommodated. We've got zero interest rates, zero real interest rates for the better part of 30 years. And we've had massive inflation as a result, but all of that inflation went into asset prices. What changed in the pandemic was we said, oh, okay, instead of keeping it confined to asset prices and helping the rich people, which is what has been the bipartisan policy of every administration dating back to basically since post Reagan, we said, oh, we're going to start giving stimulus checks to individuals for them. At the same time, we're going to allow people to get federal benefits and not work,

therefore causing minimum wages to go up and causing retail. I mean, for how many years did you see help on the signs in every single restaurant and store that you went to? These are the direct effects. You know, I am mind boggled by how obvious this is. I mean, this is literally painted in 12 foot high letters and yet they proceed to say, oh no, it's not that. No, let's be clear. We have had rampant monetary inflation for the better part of 30 years that has gone into asset prices. Just look at the share of financial companies in the S&P if you want to get an idea about that. And it, you know, over, over that period of time. But the reality is, is it wasn't

until we decided to enact policies and body once again, bipartisan, this happened, started under Trump. So this is not a Republican Democrat thing, but we, the leadership decided to put money in the hands of the people because they were hurting. I'm not saying it was bad. I'm not making it value judgment of a what about it, but that uncorked the genie and getting the genie back in the bottle is tough. So they basically took this. I was just in Dubai recently and they did that. And they said, here, of course, I can't get a genie to come out and grab me. They have to rub it first. They have to run it first. They couldn't get it back in the bottle.

And it was a big amount of money. I mean, you're talking about, you know, multiple stimulus checks and unemployment and other benefits to the point where actually the biggest impacts in the budget crisis today is McCarthy trying to stuff the genie back in the bottle, which, you know, on at least benefits to making it available for work, which is basically the last person to do that was Clinton. Once again, this is bipartisan. This happens to be who the players changed. I just disagree with the notion that the Fed is the only one responsible for inflation. What they're asking the Fed to do is to stop inflation. That is true, but let's understand where the cause is. So here's the lose-lose to that scenario. That's exactly right. Writing checks to people, increasing money supply 40% in a couple months. Yeah, that's going to create inflation. You just give people money. But here's the lose-lose to that is now that inflation is somewhat entrenched,

it's going to take a while. It's the Fed's job to take it away. Well, they're taking it that way. So every lesson of history points to this being a severe recession. They're all in the back of massive liquidity. We got the biggest pumping ever. That dumps. We're getting the biggest dump, the highest velocity dump ever. And the key thing that's lose-lose is we're seeing those lagging inflation measures, like you mentioned.

The Fed keeps tightening despite the serious signs that everything's dropping. So to me, that's what the lose-loses, the inevitability of where Mr. Powell sits in this place in history. There's no way out of it yet. Because every time you saw this last week, the stock market popped up again in interest rates. The probability of the Fed hiking, which right now at the next meeting is about 22%. They're going to go 25. There's still priced for hiking. It's because the stock market keeps going up. You see that bait and switch? They are not going to stop until the stock market tells them. And by that time, it's too late. They raised too much. And then the repercussions, the long invariant lags, will just get started. And that's what I'm seeing in commodity. Mike, to your point, I'll just show you guys right here. This is from the Kobisi letter.

Interest rate expectations swing from a 15% to 50% chance of rate hike, then begin pricing and rate cuts all in a matter of hours. Obviously, he's saying here that we have so many Fed speakers that were schizophrenic and the market is pricing these different things. But as of a few weeks ago, there was a 0% chance of another rate hike. And now we're seeing the market even pricing it up to a 50% chance, right? There's zero confidence. There's zero confidence. Yeah, exactly. There's zero confidence what's to come. But I do, Dave, I know you were about to jump in,

but I want to play this clip. I really want to go back to Biden and what he was saying. I have this clip, false equivalency. I'll let everyone see it. Sorry for your ears and eyes, everyone, but we need to play this really quickly. If it'll work. Not working on my end.

Let's try here. Of course, now the clip's not working. You want to send me the link? I am... Usually it loads right up. Anyways, guys, I can, I guess, just tell you what it says. Oh, here we go.

You're at it. I got it. I got to......do a deal that protects wealthy tax sheets and crypto traders while putting food assistance at risk for nearly 100, why, should be nearly 1 million Americans. There's time for Republicans to accept that there is no bipartisan deal to be made solely, solely on their partisan terms. Okay. So listen, I know he's not saying that our crypto traders are responsible for starving

homeless children all over the country, but it sure is what it sounds like. But the fact that crypto is now in that conversation simply because apparently crypto traders take advantage of a wash sale rule that doesn't exist in other markets. Okay. First of all, they should probably have that same law for crypto. Sure. Of course, we shouldn't be able to sell and immediately take a tax benefit and buy back. But the rhetoric, the way it's being presented. I mean, listen, when you look at the facts of places that things are being spent.

I mean, listen, this is an old article, but Defense Department fails another audit, but makes progress. We know that the Pentagon has failed their last five audits. They can't account for 70% of the money that they spend. We're talking about an $860 billion a year budget, and 70% of that is disappearing into the ether. But the potentially like 10 billion that crypto traders are making is the problem. I mean, the US has lost almost $2.4 trillion in simple payment errors over the last two decades 247 billion in 2022 simple payment errors but what we're hearing about in debt ceiling speeches is the tax breaks for wealthy crypto traders who by the way made no money last

year so i don't even know what we're talking about here. As I said before, it is, look, he's being fed those words. From Elizabeth Warren. From Elizabeth Warren and her 30-something-year-old staffers who failed basic math and have absolutely no understanding of how incentives work, etc. And there is one rule that is insane. But the reason the rule is insane is because they don't call crypto a financial asset. All they have to do is actually try to regulate crypto as a financial asset with basic principles-based regulation. I have yet to find one person, one, who's serious, who seriously objects to crypto having these similar wash sale rules

than equity does for tax purposes. Of course. And he's treated it as property. It's different than treating it as a financial asset, and there are other implications of that. And you could talk about this until you're blue in the face, but the simple magnitude, it's sort of like comparing a scale model of a city to the real city. You know, the crypto is so small relative

to all of this. It's rounding error in the budget. Meanwhile, his million people on food stamps that he's talking about, what the Republican policy is, what they actually said is they want to work test it. All those people should have to at least try to find work in a world where the labor force participation is plumbing all-time lows. And honestly, if you actually look at the data of how many people have left the workforce because they're on government assistance, it's a very large number. Now, we could debate whether or not it should be smarter, whether or not there should be more exceptions for child care and other.

But there's lots of good reasons to argue with what the Republican proposal was. But that requires negotiation. The reality is the concept used to be a bipartisan concept that no longer is. But the fact that there's an equivalency between discussing whether or not we should ignore the human incentive that if you give pay people more not to work they won't work which is exactly one of the major causes of inflation if anyone disputes that statement literally is a moron i mean you know it's like you cannot dispute human nature it's like saying that we shouldn't, we don't need police because people won't commit law, won't commit crimes if there's no consequence, you know, despite lack

of consequences for committing crimes. You know, I was listening to Jason Lowry this morning on his podcast with Robert Breedlove, which was brilliant, you know, and I haven't finished it yet. But the core of history of the human species is all about consequences. And Bitcoiners all love to point out that the trust that's inherent in the blockchain versus having to trust people, the truth over trust. The fact is all of this boils down to incentives. But when your narrative at the top level is we don't care about any of this stuff. We simply want to to do what we want to do. And they point at crypto and they're making crypto traders an equivalency to what he calls MAGA Republicans, which is yet another rhetorical device.

We have a problem. And it's it's one that is extremely interesting. We'll see how well it plays out. But to me, it just makes me angry. Yeah, I think that everybody agrees on that. The interesting thing, though, is the Republicans, I think we have a long history, both parties, I would say, of screaming from the mountaintop when you're not in power and then getting nothing done when you are

and talking about spending when you're not in power and then opening the floodgates when you are. I'm not taking the party view here. In fact, of all the politicians that I've heard speak recently, the one that I was most impressed with was RFK Jr. Everyone in crypto. He's a Democrat. So it's not, look, this is not a Republican Democrat thing.

This is a individual thing and a failure at the top right now thing that is problematic. Okay. You wanted to talk about banks, Dave, and I don't want to forget that we said we were going to do that. So, Mike, you know, the data that I've been seeing is highly suggestive that there are some massive holes in bank balance sheets stemming from commercial real estate and that there's a feedback loop that goes on when banks liquidity dries up because of the businesses that are out there on main street, which require bank liquidity. And so you end up with a situation, bank liquidity dries up companies that were required, that were using it to finance receivables or finance whatever, effectively

can't anymore, then they fail, which of course means their loans fail, which causes liquidity to fail more. And you get into one of those circles, those kind of spirals. I don't want to call it a death spiral, but that's kind of why a lot of people I've seen other than you, despite you being Mike McLoom, I've seen multiple people agree with you based upon that eventuality. The question that I have, well, there's two, is first of all, do your economists kind of see the same thing as a possibility? And do you think that that is what finally gets the bed to act? Or do you think they really only care about the big liquid mega caps in the stock market? Well, based on my reading of Ben Bernanke's, The Courage to Act, the one thing that's going to

make them act sooner than things like that, which are lagging and take forever and they're measures and sooner than inflation, which is a measure is risk assets going down hard and not the commodities, which they are as a stock market. So I look at that whole banking situation, very similar as the commodities. Last year at this time, you could not find a strategy that was bearish commodities, except McLone. And yes, I was wrong. I was early. And now my colleague, one of my favorite colleagues I've known well before Bloomberg,

Javier Blas, his headline was OPEC plus trapped in inflation storm of its making, pointing out how what I've learned from Jeff Booth and the book I'm reading right now, Super Abundance, is humans are smart, commodities are. They're always going to create more. So I think what's happening now is we're going to... What we saw in commodities is going to show up in banks, but it's a year from now we're going to be looking back and say, yeah, that was kind of obvious. How come we weren't more on top of it when that picture was about 17 and now it's hovering at 30 and the stock market's dropped 20% because we're in a pretty severe depression because banks

are contracting liquidity. That's what's happening now. And the key question I ask when I see these deposits contracting is what made that happen? Well, rates went up so fast that we had this mismatch in duration in assets and liabilities. And has that changed? No. The government's just trying to pick off a few that went down. I mean, I hate to use it, but it did feel similar to March with Bear Stearns, March 2008. But that was just a one-off.

But this, to me, is going to come out the way commodities are now a year ago. Everybody's looking back and say, yeah, it was kind of dumb to be long commodities. Some of us got it right, not early. And we're going to, a year from now, look back and say, yeah, it was kind of dumb to be long commodities. Some of us got it right, not early. And we're going to a year from now look back and say, yeah, it was kind of dumb to be long in the economy and bullish, a slight recession, bulls equities with banks completely contracting, the Fed's still tight. I mean, I keep saying it, history doesn't repeat, but it rhymes and i would not be remotely surprised if first republic is the moral equivalent of bear stearns yeah and what happens next uh is a shadow of what happened then well dave here's what's happening now i just want to show you guys from the wall

street journal after buying first public bank in government-backed fire sale jp morgan chase now is more than 13 of the nation's deposits and 21% of all credit card spending, a bigger share at each than any other bank. I mean, and I've actually read since then that it's increased. So, I mean, we're really talking about a consolidation into the national bank of JPMorgan here, right? Well, I mean, at least a national consolidation. Nationalizing the banking system seems to be what Elizabeth Warren wants the economy to do. Feels like that's what they did when they opened up the bazooka for Silvergate. But there are others. I mean, I would not be surprised to see the next dominoes falling into Bank of America and Citigroup, et cetera, so that we have a tier of banks that have

north of 90% of deposits in the economy. And anybody who believes that is healthy for the mainstream economy is absolutely delusional because for a host of reasons, but it certainly does give the government more control over the economy, which seems to be the lever that they're most concerned about. That is extraordinarily problematic, but that for a lot of reasons, and by the way, the bull case for Bitcoin, when people wake up and see what's going on, but that for a lot of reasons. And by the way, the bull case for Bitcoin, when people wake up and see what's going on. But I agree with Mike that people have to wake up and see what's going on. And that doesn't happen like that by any. By the way, do you guys know it's Bitcoin pizza day? Yeah. Unfortunately, I wore my Bitcoin pizza socks during the Bitcoin conference,

so I don't have them today. So I can't show you lots of wear dirty socks. You could pull a use go and just, you know, get on the table and, and show your socks. But I mean, still astounding to me when you think back that somebody spent $10,000, that 10,000 Bitcoin on a pizza. Yeah, it is. It's, but you know, it's funny. We celebrate it because it's amusing and it's a funny thing. But the truth of the matter is, I'll say it again. I say it most weeks on your show, Bitcoin trades like an option. And options, most, you know, we could talk about options and how expensive they are as a way to get leverage and all sorts of things. But the fact is, it trades like an option.

So back then, it's like the same guy who was given, you know, 25,000 shares of Amazon when it was, or name that, Apple, when it was a dollar and sold it to buy a car and now could buy a mega yacht, right? You know, Bitcoin was more extreme because it was in its infancy, but it's still the point. Don't sell upside optionality. And that is why I believe that Bitcoin will not display the beta when the shit hits the fan nearly as much as Mike does, because I think there are enough smart people who don't want to sell that upside optionality. Yeah, I agree with that. I guess my only question in that context, you dried up and costs to trade Bitcoin dollar are up 50% or were in April, actually. And it doubled in April when Jump and Jane pulled out. But liquidity in Bitcoin tether hasn't moved. The liquidity globally for Bitcoin is not as bad as

people make it, but the actions of the U.S. regulators which have caused this have directly impacted U.S. purchasers of Bitcoin. Yeah, 100%. Bitcoin is fine, in line with historical levels. It's certainly not at the top end of historical levels by any means, but it really has impacted the dollar-based Bitcoin,

not the Tether-based Bitcoin, which matters because most of the global crypto traders are using Tether these days. Do you view it as impactful that Tether is going to take 15% of their profit and continue to buy Bitcoin moving forward? I think it's extremely impactful because basically that's all the supply there is. So now there's no natural inflation in Bitcoin for the foreseeable future until the Fed cuts rates enough that Tether can't afford to do it. Right. Mike, do you think that it's relevant? Do you think that we have enough liquidity to really detach and become our own asset class? Or is it so small that it's irrelevant?

Well, it's so small that it's only going to get bigger. Great. Big picture macro, it's only going to get bigger. And that's good news from Tether, but I fully expect those rates that they're making around 5% T-bill going to drop by this time next year, probably closer to two, maybe three. And it's good they're buying. I think it makes sense to buy Bitcoin, but it also makes sense to overweight in two units at 4.3%. It's guaranteed money. Oh, I agree. Thank you very much.

Think about it in a buffer, though. You know, today, it's decreasing the inflation rate of Bitcoin, which is kind of a big deal. If we actually do get rates cut in half between now and then, I think right now people would sign up for new all-time highs in Bitcoin if they thought that the Fed would be at between two to two and a half percent in a year. And so, what you need- They're going to do it that way. That won't necessarily help Main Street economy. It will help.

Typically, what we're going to need for that is the liquidity to start pumping. And right now it's still dumping. That's my bottom line. Oh, no. there's no doubt. No doubt. Yeah, I'm not buying the pivot. I don't understand why it's being so heavily priced in. It's scary to me. Because if the scenario that everybody's pricing in is the best case scenario, I... It's always a problem.

And that it's... What? This time is different is one of those things when people say it to me, I always cringe. And I'm sure Mike does. Yeah. Well, I like the quote from Benjamin Disraeli, former prime minister of UK, is what we anticipate seldom occurs, what we least expect it generally happens. And that's been kind of my trading mantra being a contrarian forever. It's just trying to identify those moments. I look at it right now as this is one of the most unique points in history where we're going to get this normal risk asset correction. And in the shorter term, to put it in context, it was the exact same thing last year when the

world was so bullish commodities. And here we are down 25% and no sign at all of that downward trajectory stopping. Nothing that I see except lower prices. Yeah. Yeah. Go ahead, Dave. You can take us out if you have a final comment. It looks like you had something to say there.

My final comment is that there's a lot of cross currents here, but it all starts with trust in institutions for me. And I have no trust in their institutions. And I don't think that I'm the only cynical human being out here. I think maybe I'm more cynical than most. But the truth is, Scott, I've heard your rants on Fridays. I didn't listen this Friday because I was. It wasn't as epic.

So it's fine. The truth is, is the very fact of the statement about crypto traders coming from the president at a G7 meeting press conference is just so actually disturbing because it is so divorced from reality and so focused on narrative that somewhere, you know, my friend Ben Hunt, who runs Epsilon Theory, and his partner Rusty are probably laughing because people, they've been banging the drum for years about how narratives are in control of society. It's very clear that that's the case now. Well, I guess we can take the silver lining, which is that the president of the United States said G7 summit and feels compelled to talk about crypto.

I mean, the fact that it's on your taxes, it seems that's pretty significant. Yep. So I'll take that. Guys, incredible. Thank you for showing up a half hour earlier. We'll be at 9 a.m. on your taxes it seems that's pretty significant yep so i'll take that guys incredible thank you for showing up a half hour earlier we'll be at 9 a.m it seems that the audience liked it because we have more people here than uh usual so that's very very encouraging uh just for a very quick uh very quick housekeeping everyone i will actually be on youtube tomorrow because with this new schedule uh starting a big space as i've told you about with Rand Nuder and Mario Noffel,

but that's gonna be in a week from Wednesday. So we're just going to 9 a.m. every day on YouTube, space is launching next week. It's all I got for you, Dave, Mike, thank you guys so much. Appreciate the candid takes about the Bitcoin conference. I think that's largely what I've heard. It aligns with what I've heard. Maybe next year in Nashville, we'll get our mojo back.

Take care, everyone. I'll see you tomorrow morning, 9 a.m. Thanks. Bye.