The Wolf Of All Streets - Elections, Rate Hikes & Inflation - Can The Economy Survive The Pain? | Macro Monday w/Mike McGlone

Episode Date: October 31, 2022

Bloomberg IntelligenceSenior Commodity Strategist Mike McGlone is here to discuss the latest macro news and to provide his opinion on what's going on in the world of crypto and finance. Mike McGlone: https://twitter.com/mikemcglone11 ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Macro #Economy #crypto  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.

let's go let's go once again we have the fomc rate hike meeting coming this week, and all eyes are on that. I'm talking to Mike McGlone today from Bloomberg, one of your favorite guests of all time and probably the most frequent we've ever had on this show at this point. And he's likely going to tell us why you don't fade the Fed and why the Fed is the only real macro story in town. But we do have a lot of things coming up. Of course, that Fed meeting on Wednesday, 2 p.m., we'll get that announcement.

Then we have the U.S. jobs report on November 4th. Of course, the midterm election on November 8th. And then USCPI coming in on November 10th to let us know exactly how bad inflation is. As I reminded you guys last week, we have a new schedule. And every Monday is going to be Macro Monday Monday where we talk about these topics and more. You guys don't want to miss it. I've got Mike McGlone coming up next. Let's go. Let's go. for the FOMC meeting on Wednesday for Jerome Powell to come out and give us a speech so that we can hang on every word, and not only the words, but the tone of his words,

and we can talk about what he might say and how he might say it, and of course, what that news might be. I hope you guys all had an amazing weekend, and of course, happy Halloween. Happy Halloween. I know you guys don't celebrate it all over the world, but it's a pretty big deal here in the United States,

especially when you have little children that's lives are fueled entirely on sugar. And that is the case for my three-year-old and seven-year-old, certainly during Halloween time. If you guys didn't see it down there on the bottom, of course, this is sponsored by BitGet, also the sponsor of my newsletter. You can get up to $8,000 signing bonus if you deposit a whole lot of stuff and i've got a

promotion going on right now that you can read about in the newsletter but that's not what we're here to talk about guys we are here to talk with mike mcglone of course mike from bloomberg how are you doing today i'm good scott thank you for having me on me on Halloween and for bringing back a lot of fond memories. When I was a kid and when I had my kids were kids, what better unique holiday when you just knock on someone's door and ask for candy when you're like nine. Does it get better than that? No, I don't think there's anything better than that. And do you remember that the biggest fear we had back then was either that you I guess there was always the you'd get kidnapped and put on a milk box or something. But then that someone's going to put razors in your candy. Do you remember that one? Oh gosh. Yeah. Yeah. I grew up in the South suburb of Chicago. So yeah,

got all that, but it was awesome. It was just too much fun. So, but I love how adults have taken this holiday. My wife and I had just had dinner on Friday, Saturday at South Miami Avenue, just enjoyed watching all the people walk by with their costumes and stuff. Yeah, it's good. Miami is an absolute, absolute circus for Halloween. I remember that, especially down on Lincoln Road. So I guess people aren't here to hear us talk about Halloween. Obviously, we have the Fed meeting coming on Wednesday. There's the expectation of another 75 bps rate hike.

I think then the expectation at this point is 50 for December, 25, 25. And that gets us to effectively a total of 5%. And then maybe they're done. So if that's the case, I guess the question is, is it now priced in? Do we expect and know what's coming? And now markets can go ahead and rest. Well, that's a good point. I'm glad you started off with that because I wanted to start out with a happy note because

we're going to dig into the negatives of what's happening with the Fed. But cryptos are actually on some pretty good divergence strength. We'll get into that part, too. But a lot of this, I view, is somewhat noise, these targets and things. The key fact is that the Federal Reserve is tightening, intensifying, is tightening almost unprecedented as financial markets drop. I mean, one thing you could count on for almost the last almost 40 years is every time the S&P 500 dropped 20 percent, the Fed was there to save you. And they're doing the opposite now for a key reason is they're trying to prevent financial

markets from rallying. That's a quote from our chief economist. And that's why it's a perfect day to have me on. I just had my morning meeting with our Bloomberg Intelligence Economics team. We're all kind of on the same page. Last year, I was one of the few who just said, don't fight the Fed. And now we're getting to that extreme case. So this is on a scale one to 10

that happens on a global basis for everything. Fed is the 10th and everything else is pushed lower. Like you hear what's happening in China and GDP and everything. The Fed is the 10th and everything else is pushed lower. Like you hear what's happening in China and GDP and everything. That's just nothing right now compared to the Fed tightening as the world tilts towards recession. Our economic team says,

their model says there's 100% chance of a US recession during the Biden administration. So two years, assuming he lives. And sometimes presidents don't always make it. Fair question. I don't want to wish anything bad on anybody, but this is all tilting in the other way. Even our Bloomberg yield strategist, Ira Jersey, who's been spot on with the Fed, he thinks

yields are peaking, which means yields should drop. As the world tilts towards recession, that's the key thing that's happening. And this is potentially, I hate to bring it up, but the fact is it's potentially bad. It's 1929, where we've seen the most central banks in history tightening because of lagging inflation measures, yet all the forward working indicators I see are collapsing. Look at housing. Let's look at, except for one, and that's U.S. unemployment is still sticky. We're too many people working.

That's unfortunate. But I was going to say, we'll talk about that in a minute. But yeah, but that's a key thing. So maybe Fed getting the 5%. What happens if and when they get there? What's going to happen to the economy? Everything you saw, the tightenings you've seen this year haven't even trickled into the economy yet. Barely.

Maybe in mortgage brokers. Yes. But this takes the lag. It's typically 18 months. And this is the fourth consecutive 25-base point hike. So they're catching up to what I think is going to trigger an enduring deflationary recession, potential depression that was somewhat created because they created too much liquidity starting two years ago. That's just a classic, simple economic model.

Virtually every bust in history has come on the back of a big boom, on the back of easy liquidity. Now, we had the easiest liquidity ever in terms of money supply, and it's all going back. Now, the difference, it's global. Source of demand pull from China for the last 20 years is gone. That country has gone negative. We've been pointing out this for years, but the property crisis is way overdue. Yes, there's a short-term issue with COVID, people locking up for that. And then what's the leadership doing? They're going back to the days of Mao and communists, and that pushed Chinese into poverty. And you look at Europe, no better.

There's only one engine of growth on a global scale right now in the US and our model is for a recession. Just point out facts. And this will typically at this stage, you'd get central banks to start adding liquidity and they're still pounding the sledgehammer. Now, you mentioned something that I love because you said, listen, too many people have jobs. We live in a world right now where the more people have jobs the worse that is for our prognosis, correct? Somehow we actually wanna see people losing their jobs. It's sad, I hate to say we,

but from the Federal Reserve standpoint, I'm telling you, I'm gonna point out what they're doing and saying and what's happening. And maybe, you know, there's a lot of good that's gonna come out of this, but that's the case right now. And the key you know, there's a lot of good that's going to come out of this, but that's the case right now. And the key thing is what created this issue. That was way too much liquidity, way too much pump priming into a system that when we have to give credit to credit was due. There was two years ago, the world was heading to this plague and we had no vaccinations. Now we have those. china doesn't

give credit to the western economies who came up with right away that autocratic systems who were not able to figure them out and so we pumped too much liquid hitting quitting into the system now we're going to be suffering because we pumped it up too much we still look at you know average money supply in this country went up 40 what did condos in in Miami do in farmland, Illinois? Everything went up 40%. Now everything's going back down. It's hard and potentially harder. And that's just the way things work. So I have a couple of comments here from people about that specifically. Kristen says housing hasn't dropped here. Cosmic Contrarian says houses are still on complete nosebleed level. The prices are beyond stupid expensive. That's a bad sign, right? Because the point you're making, it's the metric, it's the slowdowns, the mortgages, all of those things that are going

to precede the actual price drop, correct? So exactly. And I think, unfortunately, it might be worse than the correction from 2006 to 2011. Unfortunately, now that was much more centric on very speculative financing and issues with banks and things. Now it's just classic example of pumping too high, too far, too fast and going back. So what person now can go get a mortgage and buy a home versus just two years ago when they can get it for less than 3%. Now you're at 7%. Your average payment that for a mortgage person was $2,000 a month. Now it's $3,000. That's to buy a new house.

And then you look at things, this simple statistics is new homes under construction in this country is the highest ever. Our data on the Bloomberg terminal goes back to 1960. That means the supply coming on and sales are collapsing. So there's nothing good about that. And the simple, that's's if you want to dig into the weeds. The fact is we just pumped too much now and going back down too much. And a lot of

that was because of government and fiscal and monetary created way too much stimulus. And then we pumped basically what, six years of transactions into two. So, but the difference is in 2006, you can see it was silly, stupid peak and and it dropped, and the stock market didn't drop until 2008. And then everything bottomed by 2009, except housing. Housing didn't really bottom until 2011. But it was kind of U.S.-centric. Now it's global. I mean, this is absolutely global.

And a lot of the pandemic created it. So I'm a commodities guy, so that's cool. Well, that's the difference. So now there's going to be great areas of isolation where you'll do fine. They say real estate's all local. And I'm macro. So this is the big picture macro. But overall, if housing prices do not drop in this country And reduce CPI through owner's equivalent rent.

The Fed will keep tightening until it does. It's just that bad of a scenario going back to the 1 to 10. Everything's about the Fed tightening right now. And until you see, the thing is, at some point they're going to break. As Norio Rubini says, they're going to wimp out. I love, I think he's Italian. I love him using that good American vernacular that we learn when we're kids. And with his accent, it just sounds cool to hear.

But that's what they do. They typically wimp out. And the big difference is time. He's beating that drum. He is beating that drum hard, man. Every time now I turn on any news source, there's a podcast from Dario Rubini, the Dr. Doom saying that they're going to wimp out. He's literally everywhere.

But speaking, so here's one. I'm going to bring this one up. CNN exclusive. I don't know how that's a CNN exclusive. Treasury Secretary says she's not seeing signs of recession in the US economy. Is this one of those things where we go back to the old monkey meme where it's hear no evil, see no evil, speak no evil, and it's the three monkeys? Like if you close your eyes and close your ears, it doesn't happen because you didn't see it and hear it. She has a vested interest in saying that. That's why I really appreciate people like David Rosenberg on LinkedIn, Twitter.

We saw he turned 62 recently. He pointed out he's a pretty prominent economist and pointed out, yes, when he worked at Bank of America in Maryland, he had to have a bias because now he's neutral. And he points out we're heading to a recession. Our Bloomberg economics team is somewhat more neutral because we have to respect all these people who pay for the terminals. Our model says 100% chance of recession. Now someone in administration, for instance, Biden and her, they have to get reelected. And that's the number one thing you learn about politics is that one thing is you need to get reelected and you need money to do that. And that's part of the reason that that was very bearish. And one of the reasons I was very bearish as we head into the November elections. But it's also part of the reasons we're going to completely push back on the Democrats who

really messed up the energy and have Republicans come in. In addition to the fact we almost owe in the midterms and we almost always do that anyhow. It's a check and balance in the U.S. system. It just usually works out that way. Right. I mean, we historically see a rally in midterm election years, actually, in general, October to December, the best three-month rolling period for stocks. We have generally election rallies, Santa Claus rallies. And interestingly, October 2022 was the 10th best month on record in history for the Dow since 1915. I mean, every single of the 30 indexed

companies was up at the top. Calib Caterpillar, 34%. I believe at the bottom, Microsoft was up about 1%. So is this just a simple fourth quarter election rally? Is this a massive bull trap? What do you make of the fact that we've seen such an incredible month? The number one reason to learn or thing to learn about bear markets is they will take money from everyone. And the most significant rallies are most always in the midst of bear markets. They rip your face off. I'm an ex-trader. I've learned my lesson. And that is to me a classic bear market. And I think anyone who thinks the stock market or maybe maybe if we go get lucky, will drop in an environment where the Fed's tightening harder and where they really need the stock market to go down. It might be a little delusional.

Now, you still see that from sell-side economists. And this is where I have to really give some credit to Lizanne Saunders. We used to be in the same, in Connecticut. Our kids were in the same sports district. We met on a ball field. This was 20 years ago. But she's been suffered points, her Twitter points, even though she's someone else. And Schwab, she's been pointing out the facts that this is big and real and you might get short covering rallies. That's for the traders. But for the big picture is if the equity market does not drop, it's going to intensify the need for the Fed to tightening more. And the fact the key thing that's changed in our lifetimes is they will probably never ease with the ease that they had in the past because of the risk of inflation, which we know now.

So that's a short covering rally when you see massive pumps like that. And that's intended to rip your face off. And that's what markets are supposed to do. and if this turns out to be a bottom mcgloan was wrong i don't see what changes right now you got to change something with the fed and that's the key thing that's really been driving markets for almost 40 years now is every time things went down and got bad fed saved you they are not doing that and everything's tilting over. You look at housing, earnings, unleaded gas demand, virtually inverted curve. I mean, global economy. I mean, where are we going to start? It's just the global economy.

Everything's tilting over except one key thing, U.S. employment, which is very much lagging. And so I think that's a matter of time, unfortunately. You talked about earnings. Obviously, last week we saw, I mean, Apple was fine with Slaughterhouse with Meta and Amazon, like absolutely trading like illiquid altcoins after hours, dropping 20%, 15%, 30%. Well, now we have these companies this week. Everyone can see it, but I mean, huge week for earnings. Moderna, Pfizer, Airbnb, AIG, Maersk, Barrick Gold, BMW.

I mean, is this the bad news that could thwart this rally? Just a slew of bad earnings once again? Well, to me, it's very much lagging. Again, I put earnings down below a five on the one to 10. What's the 10? We are talking about the Fed. Very much lagging. And of course, everybody reduces their earnings. And that's for equities. And to me, I'm also you can tell my commodity guy look at that has always been lagging. So I was just kind of playing along with the earnings yield. the S&P 500 this weekend, around 5%. It's actually negative 3% if you divide by CPI. So I have to play with that one a little, check my lowest ever.

We can go back to 1960. So the earnings are going up because inflation is going up. That ain't good. So the quote from our economist, not an equity person this morning, Chris Kane pointed out 70% of S&P 500 have reported 70% of beat, which has been much worse than the previous. It's much worse than the previous quarter.

So again, to me, that's part of the noise that's lagging. What are we looking at going forward? The Fed's tightening. Most central banks in history are tightening into recession, into declining markets. Those are tense. Yeah, I love what you said about they'll never basically ease in the same manner because people are looking for this pivot. But I think people are looking for, mentally, looking for a pivot to going back to what it was. But now a pivot is just stopping the interest rate hikes,

but not actually reversing and going the other direction with easy monetary policy, right? That's a good point, Scott. And I think it's one of the key things you have to remember about markets, particularly in things like cryptos, is human nature will never change. And this is classic human nature. So a year ago, the risks of being a strategist like me, I have to try to be ahead usually by a year, which means you get the idiot factor. Oh, you idiot, it's not going to happen. So a year ago, the key thing was don't fight the Fed.

Now everybody agrees with that, don't fight the Fed, but everything's tilting that ways. You have a significant major downtrend in virtually everything. And then people still, it's the human psychology to think, okay, something's going to change it. What's changed in the past? This is different. It's not going to change. And the key, there's one key thing that will change the Fed, and that's a lower plateau. Let's say if we wake up this week or next week, and in two days, maybe three stock markets down 20%. Yeah, that'll flip the Fed. They'll stop tightening, but that's what it takes. You probably, I think right now to flip the Fed from that

trajectory, which is clearly pushing the world and the U.S. into recession. If it stays slow like this, nothing's going to really stop them. But if we can get one or two bad days, that's usually what it takes to stop that where there's death threats, then that's kind of what I'm not hoping for, but I'm just pointing out what can happen. So the key thing I'm pointing out that's really missing this year is there's one asset class that's still up on the air, and that's commodities. And they've given back a good portion of their gains. I mean, copper was up 40 percent. Now it's down 20 percent, almost that.

Crude oil is still up about 16 percent. And to me, that's the key thing it has to give. So let's say we wake up and commodities drop 20 percent in a couple of days. That'll help. The Fed might say, OK, that leading indicator of inflation is plunging. You look at things like iron ore. Iron ore was a darling of the rally. It was up almost 100% or so. It's down since the beginning of 2020 or the end of 2019. It's down. Lumber, down. It was up 300%. So those are things that might help. Those are forward-looking markets that might help alleviate the Fed. But right now, they're not dropping fast enough. I mean,

you've got to see crude oil drop below 68, I think. Right now, it's 86. You've got to transpose that number. You've got to do it fast. Yeah. And I get your reports, obviously. I brought one of them up here. Obviously, I attentively read the Bitcoin and Ethereum reports that you regularly do. But you have been beating the drum on the commodity deflationary narrative for quite a while. I mean, here's your last one that I've just brought up. November metals outlook, gold versus copper, T-bonds, China. I mean, maybe give us the two-second summary on exactly what all of that means. First of all, the facts are I've been against consensus. I mean, Goldman Sachs, Morgan Stanley, Bank of America, a lot of these people are calling for much higher commodities,

$150 crude oil and things like that. So it's been, you know, I was an idiot eight months ago, less of an idiot now. It's just the simple facts of supply demand elasticity versus a fixed commodity, for instance. Why is the price of crude oil right now, about $86 a barrel, the same as it was in 2007? That's the first time it got to that price. And what happened in the world was what was the world's largest energy importer, the U.S., is now a net exporter.

With Canada, a massive net exporter. So we used to be OPEC's best customer. Now we're a competitor. That is what's changed in the world. And the thing you never always want to point out in commodities is the lessons of the Malthusians. Thomas Malthus was a economist who kind of rivaled Adam Smith in the 18th century. And he always he was worried that, oh, the population is going to go too fast for production. It's the opposite. Human ingenuity will always create more stuff at a lower cost and that's why i tilt commodities i'm saying you got to be bearish commodities unless you're

um unless you're bearish human nature and ingenuity because we'll always come up with more ways just look what the us has done in the last 10 years it's the opposite in cryptos now we obviously created this new type of assets and money but you look at the top two and i don't have to get them too much there's a complete opposite when you see in commodities in the top two bitcoin ethereum there's definable diminishing supply by code now ethereum's less by code but bitcoin clearly definable diminishing supply and you look over demand and adoption they're're clearly increasing. So it's a simple rules of Adam Smith and economics that prices have to go up over time unless something shifts that trajectory negative. And I only see it increasing. Adoption and demand are increasing.

And it's still way early days. I mean, less than 1% of global, way less than 1% of global equities are in crypto. So that's's changing so that's the big difference the key thing that may remember is don't underestimate the forces of supply demand elasticity to keep crude oil low and commodities low because we can create more of it for less and we use less and now of course everything's tilting towards technology what's part of that technology cryptos um and then there's the macro things for for that i've been really embarrassed about cruel china's in decline is one of the biggest sources of demand for the last 10 years. And you dig into some of the deeper

weeds, U.S. unleaded gas demand is rolling over just like it did 2008. And supply in this, I'll leave you with one simple fact. In commodities, the rule is when under stress, you almost always go to the cost of production. So let's look at the largest producers of the two top agriculture and energy commodities on the planet. Agriculture is corn and energy is crude oil. In crude oil, the average cost of production in this country is about $40 a barrel based on the data and the turnover. The price on the screen is almost double that. OK, so what does that mean?

Price is high. You're going to create more. And in corn, it's almost the same thing. So my bias all along is if you're bullish commodities, buy the producers because they're going to make more and make money. But don't buy the actual commodity. Now, Bitcoin Ethereum, you can actually easily buy that actual commodity, put on

your phone in storage and never have to pay for that storage. In commodities, you still have to pay an average five, maybe 10% of storage, except for things like gold. Before I let you go in a couple of minutes, here's an article from Bloomberg on Friday, which summarizes kind of what we were talking about. Fed's seen aggressively hiking to 5%, triggering global recession. We've obviously discussed that. We're at about 3.08%,

I think you said was the average, meaning that 75, 50, 25, 25 basically gets us to 50. What I love and I see in every single one of these articles that I just want to mention, Fed Chair Jerome Powell has said the central bank is strongly committed to restoring price stability. And he's repeatedly invoked his predecessor, Paul Volcker, who boosted rates to unprecedented levels to counter inflation in the 1980s. And I have to, I always just keep bringing up this chart, which is debt to GDP. Yeah. Right. I mean, if you look at the 1970s, it was sub 40 in the 30s. Right now we're sitting at a cool 123.

Yeah. So that's a good one to point out. And it's part of the reason the Japanese yen is finally breaking. It's down almost 20% a year. Debt to GDP in Japan has been almost 300% for 20 years now. I used to work for a lot of Japanese firms and they, Japan basically

didn't implode, but it's falling on the global scale and there's no, I mean, who can, you can't, so you can't immigrate

to Japan and there's the population decline and all that fun stuff. In the U.S., yes, that's part of the problem, but like Churchill said

about democracy, what you see there is the U.S. is the least worst of virtually every other economy on the u.s um yes that's part of the problem but like churchill said about democracy what you see there is the u.s is the least worst of virtually every other economy on the planet and money i'd be big economy i mean the data i see out of china and europe are just double those numbers so the key thing to remember is that's part of the strength for the us dollar the fed's tightening it's but it's part of that major collision that's coming on. And that is what's really crushing the world economy right now is dollar strength is a big part of it. And what stops that? I don't know, because the world's gone to a dollar from a fiat standpoint.

Right. Because the dollar versus all other countries is doing great. But versus other things, it's not doing so great. It's just it's the least worst of all the economy. So I look at that. I see this is the collision I'm afraid that's going to happen. And that is what's been coincident in driving the dollar for at least the last 10 years. It's the U.S. stock market outperforming the rest of the world's stock market. But now, if that doesn't change, and that's what's pushing the dollar, if the dollar strength does not change, the rest of the world is breaking. And we saw what happens in England. Our EM strategist, Damien Sassauer, says he does not see what's going to help emerging markets. He does not see how they're not going to continue lower. And so that's the world breaking on dollar strength. And the key thing that can break dollar strength is U.S. equity market going down. You see that collision coming. I don't know what something has to give. And that's where there's an alternative in things like

Bitcoin, gold and treasury bonds. They haven't been doing well this year, but I think they're coming out ahead. And that's the collision I'm afraid of. But you mentioned those debt to GDP and things like that. If it's so bad, why is the dollar not showing it yet? This is where it's at some point it probably will, but it's measuring different fiat currencies and maybe it's moving away from those fiat currencies. And to me, that's the macro that's going to happen and it's happening. Mike, thank you so much, guys. We're going to have so much more content from Mike because we recorded at least, I think, three things together in Vegas that are yet to even come out. And now

that we have the Macro Mondays, I have a feeling that Mike, hopefully, if he's willing and accepts our invitations, will be a very regular guest. Mike, thank you so much for your insight. Everybody, please follow him on Twitter. And I don't know if your reports are open to the public, so I don't wanna put my foot in my mouth,

but people should follow. I can, I post on LinkedIn and Twitter, mostly CliffsNotes. I'm happy to put people on my distribution list. And yeah, the terminal is basically the main place, Bloomberg Terminal. I'm an employee of Bloomberg. But again, Scott, thank you for having me. Happy Halloween, and please, everyone be safe.

All right. Thank you, Mike. Okay. Cheers. You can find him at MikeMcGlone11 on Twitter. MikeMcGlone11 on Twitter, Mike McGlone 11 on Twitter. You're not going to get better analysis. And as I love that Mike always mentions, you know, he is at Bloomberg and gets to be unbiased and just have a view that has absolutely nothing to do with any pressure from anyone. And so I think we get the most measured and realistic approach from him in general. Of course, he did just mention the dollar strength. Listen, I mean, we keep talking about maybe the dollar will drop, maybe the dollar will

drop. But at the end of the day, it's showing incredible resilience. People betting against the dollar topping could be correct. But man, is that a risky bet to believe that this is going to change anytime soon? Even if it does, I think we get some drop and then it continues to rise over time. It's really about timeframe, right? Even if the dollar is topping, that could be for this last quarter when we generally see the Santa Claus rally, where we generally see midterm election pumps, things like that. And then next year could be absolutely miserable, even in the face of less

tightening from the Fed. I mean, he mentioned the yen. I mean, this is the dollar versus the yen. I've showed you this chart so many times, but this is, I mean, it's absurd, right? It is absolutely absurd how much the dollar is viciously punishing the yen. Now, this is something really interesting that I pulled from James Lavish's, this is going to be like Inception. I pulled it from James Lavish, who will be here also quite a bit. I have a feeling in the future. James Lavish's newsletter, where he was quoting Genevieve Roach Dechter's newsletter and Twitter. But this is the point that she made.

Interest on U.S. federal debt is heading towards $1 trillion a year at an alarming rate. It is now the same size as the annual U.S. military budget. That's it. That's the tweet. as the annual U.S. military budget. That's it. That's the tweet. So think about that. I mean, so recently someone was giving an example of our debt being $400 billion. It might have been, James, $400 billion, $500 billion, and basically that we were operating like a zombie company in the United States.

If the United States was any company in the S&P, if it was any individual, you would be declaring bankruptcy because, I don't know, the simple economic fact of making less than you spent, right? The United States government spends a lot more than it makes, and that's not even accounting for the incredible amount of interest being owed on this ballooning debt, on this ballooning debt. So now the United States government just to pay the interest payment on their stupid credit card, it's not really a credit card, a trillion dollars a year, trillion dollars. That means not only would the United States have to spend a trillion less than it makes, which is just your taxes, by the way, right? It would also have to then do that by over a trillion dollars more just to pay the interest payment. So listen, I don't understand. I don't understand how that gets fixed. And that's above

my pay grade. I will tell you that speaking of the dollar strength specifically, tomorrow, I'm recording a podcast with Brent Johnson from Santiago Capital. He's the guy who coined the term dollar milkshake and the theory. So I'm actually looking forward. That will not be live. That will be recorded. But I'm looking forward to digging in with him because he's the guy who basically predicted all of this. Texas West Capital Chris is here.

He says, agreed Scott Melker about the dollar could take a bit more time to continue lower. Listen, I think it's topping, but that doesn't mean it's topping forever, right? Those are two very, very different things. I mean, it could even drop, like I said, down to this 103. I mean, that's the level that, you know, when the dollar finally broke out basically a year ago in December, I mean, it hadn't been there since 2002. It had been 20 years. So maybe we come back and retest that level, retest maybe even the lower 103s off these highs right here. I mean, it's just a chart. But more than likely, things have to drastically change in the world for the dollar to crash.

And Mike McGlone kind of laid out the scenario. So it's not even worth getting so deeply into that. But this just, I mean, a trillion dollars, trillion dollars in interest payments, more than our defense budget, which is more than the defense budgets of like, I don't remember the number, but you know, like the next 20 or 30 companies. Absolutely insane. Absolutely absurd. China's economy weakens and signs point to more strain ahead. Well, that's great news, right? That's where we want to be. That seems exciting. It's great. No, it's not, right? China's factory and services activity continue to contract in October with signs that things could worsen in the coming months because they are sticking

with their COVID zero policy. Maybe they're going to change that, people predict, but nobody knows what China's going to do, let's be real. March of 2023, right? And that's disrupted activity all over their economy, but of course, disrupting activity and supply chain all around the world. Now, the official manufacturing purchase managers index that people watch and the non-manufacturing gauge, which measures construction service activity, fell in the month to 49.2 and 48.7. Those are well below the predictions. And we know that markets move based on what happens versus the estimate, not what actually happens. And that missed economists' expectations. Any number below 50 indicates contraction, while any number above 50 suggests expansion.

So very clear that the Chinese economy is continuing to contract. And since they're having, once again, a major, major for them, COVID breakout, well, we know how they're going to deal with that, right? They've had 2,600 cases since August. That's the most that they've had in a very, very long time. That's bad news. Bad news for markets, not bad news for the billion of people and like a fraction of a fraction of a percent have contracted COVID. Bad news because that's China's policy. And every time China decides to lock everything down, it hurts the global economy.

We already talked about, I believe, the fact that the Fed is going to go to 5% and showed you this chart, which leaves no more macro stories left for me to discuss today. I hope you guys are enjoying the fact that we are doing this new schedule, Macro Mondays. It's alliterative. It's got two Ms. It's alliterative. I haven't even looked at what Amazon meta stock market. nothing's even looking good today, man. You know what? I'm going to bring these charts up really quick. Here's meta on the weekly, right? I mean, I'm not really a golden cross, bear cross kind of dude. Right here, you did have a pretty aggressive bearish cross of the 50 MA below the 200 ma and that was in september right and that is literally exactly when things went absolutely bonkers to the downside after this bearish

consolidation that we had right here meta now trading at 96.12 i mean that's the same prices as i don't know 2016 for facebook it's It's real bad, really bad, really bad. Amazon, obviously the other one that got smashed on earnings. Now it did, if we were watching this on Friday, by the way, this is the weekly chart, but I was like, wow, it would be epic if it could close back above 102.53. We were down at like 97. It did do that. So it'll be interesting to see if this week can also hold these 2018 highs once again. But who knows? SPY right here. Obviously, this is the ETF that you can trade the SPX. Well, showed you that there was bullish divergence here ages ago. And look, if you increase this line, let's do this thing. Right. This is where I said, hey, I think we're bottoming. Well, it got a little more, but all you ended up with was a much bigger bullish divergence.

I would expect that the market at least pulls up here to overbought on the SPY before we see any meaningful retrace, maybe up to 408, this kind of area. Although, listen, that line's not as meaningful as it was when I first drew it. But yeah, guys, Christopher Inks is here. He's the king of this. I know he doesn't talk about it as much, but he is the king of the oversold bullish divergence and the overbought bearish divergence that I get so much credit for. Guess where I learned it? Yeah. Massive oversold bullish divergence bounce on the stock market. Not really that hard there to predict. Matt A said, it's bad. Ligma Johnson bad. Chief Twit, he's not the CEO, Elon Musk. I don't know if you guys saw this. It was one of the

funniest things I've seen maybe ever in my whole life ever of all time on a social media platform, because I, like Elon Musk, am a child and a child of the 80s and 90s. If you're missing the reference here, two guys, I can't remember what they said their first names were, posed as ex-Twitter employees. They carried their boxes out of the office. They did interviews. They pretended that they were engineers that had been fired. They were literally just playing a joke. Media surrounded them. They said their names were something Ligma and something Johnson. Elon Musk quickly put two and two together and said Ligma Johnson deserved it or something like that. Lick my Johnson, guys.

The old joke was Ligma nuts, but I think that nuts would have been far more obvious a joke than Johnson, so they went with Ligma Johnson. Right? I mean, this is like that guy that used to talk to you at the water cooler, you know, Jack, Jack Mehoff.

You know? that guy. Do you remember Ben? Ben Dover. Remember that guy? I mean, you can do these for days, right? Yeah, Rahul Ligma and Daniel Johnson. Ligma Johnson. Yeah, you guys know Barry McCockner?

Hmm. Yeah, Barry's a nice guy.ry barry and i actually went to college together uh we were we were in the same same uh same fraternity of course there's mike mike hawk mike hawk he's a good guy he's tony hawk's cousin um professional skater people don't really know mike hawk he's because uh mike hawk is always sort of just overshadowed by Tony cock, Tony Hawk. Um, and then of course there's my cunt, you know, my cunt. I don't know him. I don't know him. Oh yeah. And the twins I'm a, and she's a, she's a whore.

I think those are from the Connecticut whores. That's H O R from Stanford, Connecticut. I'm a, and she's a whore. I'm sure you guys have a lot more of these, but I mean, pretty incredible. Like my Johnson, like this guy is the CEO of some of the biggest companies in the world. And yeah, Jeff Bianco comes with Jack Mehoffer.

I already did Jack Mehoff, buddy. Sorry. Oh yeah. And you guys know Hugh. I actually, uh, I remember I voted for Hugh, um, in the eighth grade election for president of my class. Uh, Hugh Jass, Hugh Jass. He's a really good guy. He did a great job actually as the, uh, president the president of my eighth grade class. So, guys, listen, that is all that I have for you today on this Macro Monday. We're going to have some amazing guests coming for you. And I don't know if you guys saw, but I've now, we've literally like laid out, laid out exactly what the week is going to look like.

I'm trying to pre-plan. I don't know if you guys can feel it, but I was actually prepared for today. Not a thing I always did in the past. But this week, we have Macro Monday. That was today. Tomorrow, Trading Tuesday. That's going to be with Texas West Capital, Christopher Inks. He's going to share all of his charts and thoughts on the market in general. And then I'm now going to compel him to just find some shit that looks good. Good luck, buddy. Uh, on chain, we're going to talk about on Wednesdays.

And of course we went straight to will Clemente as the guest for Wednesday. You don't want to miss that Thursday's round table. We are working on the topics well in advance so that they're not just free for all. This week is going to be the United States versus DeFi who will win working on the topics well in advance so that they're not just free-for-alls. This week is going to be the United States versus DeFi. Who will win? Working on the guests, but we already have the CEO of SushiSwap that will be joining and others. And, of course, Friday, we'll talk about whether we're going to do guests or not. I don't know yet.

But we're doing the weekend review, which we did start last week. Yeah. It's going to be great. It's going to be great. Downtown Music says he's listening to this in the office. Best ever. Tell your boss that we're just talking about Hugh Jass and Mike Hunt because they're friends of ours, not because we're being crude.

Yeah. Anyways, guys, that's all I have for you today. Thank you, as always, for tuning in. Y'all are the best. Oh, and the Discord is coming soon it's actively being built so i expect all of you to be in there making huge ass jokes see you guys tomorrow peace let's go.