The Wolf Of All Streets - Expect A Market Correction With Bitcoin Coming Out Stronger | Mike McGlone, Bloomberg

Episode Date: January 18, 2022

Mike McGlone, Senior Commodity Strategist for Bloomberg, made his third appearance on the podcast to share with listeners his current perspective on the state of the market. Mike believes that the data is pointing to an imminent market correction that will surprise most people. His tagline “Don’t Fight The Fed” encapsulates his belief that tightening monetary policy is the largest contributor to this short-term pullback. You’ll have to watch the full episode to find out how Mike is preparing for 2022. -- Amber Group: WhaleFin is a digital investing experience offering easy portfolio management tools, attractive investment yields, and access to the emerging digital lifestyle. With over $1T in volume traded, WhaleFin offers personalized, compliant, and secure service across dozens of digital assets in 150+ countries. Find out more at https://thewolfofallstreets.link/whalefin -- Horizen: Horizen is the zero-knowledge enabled network of blockchains powered by the largest node system with scalability and flexibility unmatched by others. Blockchains built on Horizen are enhanced by zk-SNARK privacy tech and provide massive throughput without compromising decentralization. Horizen can support up to 10,000 independent blockchains running in parallel and issue an unlimited amount of tokens. More at https://thewolfofallstreets.link/horizen ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co

This episode of the Wolf of All Streets podcast is sponsored by Horizon and Whalefin. Please stay tuned for more information on them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where two times every week I talk to your favorite personalities from the worlds of Bitcoin, finance, music, art, sports, politics, basically anyone with a good story to tell. And today I have the amazing opportunity to talk with one of my favorite guests who is going to tell his story for the third time on the Wolf of Wall Street's podcast. That's Mike McGlone, who's the senior commodity strategist for Bloomberg Intelligence. Now, Mike has worked his way all the way from the trading pits up to being the senior commodity

strategist at Bloomberg. And I find he has some of the most measured, actually based on data and analytics, God forbid, information in this space and always has very strong opinions, loosely held, I should say, as anyone intelligent should about what's happening with the markets. Mike, thank you so much for coming on again today. Well, Scott, that's a lot to live up to, but thanks for having me. And I'm honored because, as I mentioned, I listen to every one of your podcasts and I appreciate the edumacation you provide. We try to, we try to edumacate, edumacate well, certainly. So I, you know, I try not to be too hyper focused on exactly what's happening in the market

today, obviously, because these podcasts can be a bit delayed and things change fast, but in general, you and I are talking now in the first week of 2022. What are the market gods telling us? Yeah, number one theme I've been using for months now is do not fight the Fed. Cryptos, if you're long risk assets, you are fighting the Fed. And cryptos are the riskiest of assets. The key thing to remember is Bitcoin is the least risky among cryptos. I think it's transitioning from a risk on to a risk off asset. And having worked for primary dealers,

starting in the trading pits in the 80s, the lesson I learned about the Fed is what I think is happening in this case is they will jawbone until the market does their job for them or they have to just keep raising rates until markets go backwards, which means the stock market, which means we all know we have a high correlation with broad cryptos to the stock market. And I look at it, I published recently an article that said, I think the game's over. That rally we've had since the swoon of 2008, the Fed started cutting rates aggressively and stock markets gone

up forever and everybody says the Fed's got their back. Now we have a chairman, Jerome Powell, who's been emboldened. He's been reappointed. He's the guy who pushed back against Donald Trump. And then we also have him facing the highest inflation in 40 years. And I'll leave you with this, his last press conference. He said exactly what I hope he would. He said he's looking forward to how the markets will perceive what they do 25 years from now. So it's

number one thing I try to do in this market, in this business is judge human nature. And my judge is they will be restraining until markets tell them they have to stop. And that's the macro, but I think Bitcoin will come out better off. I think Bitcoin will come off better as well. That's an interesting take because you rarely hear someone in that position talking about 25 or 30 years from now, right? And it seems if you've been watching, it feels like they've been hyper-focused on what's happening next week or next month and not what's going to happen in 25 years. And so why do you think that change of perception now? Is it because he's emboldened, as you said, by being basically reappointed? Or do you think

that that's just what he has to say at this moment? All the above. I mean, I know a lot of people in crypto push back on Fed people and Fed governors, but having been in the business for almost 30 years, they, they're kind of stuck. They have to do what they have to do. And they have, you know, they have legacy. They're very educated people and he's facing very severe inflation. He's thinking of his legacy. And I think that's one thing that's happened a lot with COVID is people have become more accustomed to death, unfortunately. And what are

the world, what the world, how the world's going to perceive them when they're gone. And as his space as the chairman of the Fed, if he does not do something about inflation, history will not judge him well. But he can do it easily. He can jawbone and prick as much as possible, which I think they're doing. And the markets might do it for him. So I think like we saw recently at the Fed Minutes, what we saw with all the markets are expecting about 100 basis points of tightening in the next 12 months or so. For me, that's still a dream. But that's just what we have to think about in crypto investing, because the bottom line

is they are the riskiest of assets. There's massive speculation. I mean, the dog coins and even in things like Solana. But I think what people are not getting yet is what's going to happen. And that is, here's my prediction, and that markets pull back finally. We finally get a 10%, maybe 20% correction in the stock market. All correlations are one, which is usually the way it works. Bitcoin comes out better off for it. Now, Ethereum potentially too. But in the rest of the space, we do have to admit

the speculation you saw in the dog coins last year was indicative of this is just stupid and we're going to tell the story to our grandkids. I think that that is accurate as well. And even myself, it's hard not to get caught up in the euphoria of altcoin trading and gains, but there becomes a certain point where they've risen so high that you know that the ones that have gone the highest have the furthest to fall, right? And so it's very easy to sort of identify which ones are likely to be the biggest losers

if we do see that tightening and sort of a general market wide correction. And again, you'll want to be in the strongest assets if you're not leaving the market, which likely are Bitcoin and Ethereum. But I guess it begs the question, you made a very important point, correlation all goes to one in a risk off sort of environment. But then you see people making the argument that, quote unquote, Bitcoin is correlated to the stock market. And to me, that feels like cherry picking data from those rare moments when that's happening and ignoring the rest of the data. The other 90 something percent of the time when markets are moving freely. Do you think that Bitcoin is generally a correlated asset?

It's hard. First answer is there's not enough data. I mean, it's only been around about a decade and only realistically in the mainstream the last few years. So it's in that transition to becoming a global digital reserve asset collateral. Everybody gets it. There's bids below. The greater risk in Bitcoin is staying on zero allocation. And then there's the rest of the space. And I think Ethereum fits in there. And we've seen this from the main people in the world. There's like Elon Musk and Michael Slayer and all the above. And that's just, I look at it as a bell curve. You look at the bell curve five years ago, it was all naysayers. And now the naysayers

are such a small part of it. The bell curve keeps moving towards, I got to get into space. I'm going to buy dips because if I don't, I'm looking stupid. So to me, that's the way to look at it. And it's going forward that matters. And that is, as a commodity guy, I see clearly, simplistically, increasing adoption. It's a nascent technology. It's a nascent asset that's becoming adopted. Volatility is going down. Let's not nascent technology. It's a nascent asset that's becoming adopted.

Vow till is going down. Let's not complicate this. Supply is declining. Demand's increasing. Prices should go up over time. There's not too many assets. I can say that. I mean, I compare that to things like commodities and crude oil.

It's the exact opposite. We can create more of it. We use less of it. And in 10 years, we're not going to need it for driving. It's just a fact. And that's if you watch Current Trends. Of course, you listen to people like Jeff Booth, which you've interviewed. We all know what's happening there.

I mean, I drive an electric car for a reason. But to me, that's the key thing I see about Bitcoin. And then I see Ethereum similar. I can see that supply schedule declining. To me, that number go up technology is shocking that they were able to accomplish this burning of coins. You can see supply clearly declining. I'm like, okay, well, that's got to change or prices will go up because of adoption and use and everything. So boom, it's that simple. Getting caught up in the prices will make you lose your hair. So I'll go there a little bit. Supply and demand are positive. It's the world's going digital. And these are the key worlds digital assets. And I'll get to price in a little

bit. The key thing I want to add to that is the number one is, and I'll end with this for the next segment, the three musketeers of crypto is fully expected to continue. And they've been the top on coin market cap for at least five years. and that's Bitcoin, Ethereum, and crypto dollars. And people call them stablecoins. I think that's the wrong name because the vast majority are all, they all track the dollar. And that's the key thing we need to point out in this space. The world had a choice. It could have gone in this free market capitalism of tokens and cryptos, it went for the dollar. And Tether's just one. And there's a dozen wannabes. And to me, that's where I think what we're going to look back at from the future, where

China's pushing back because they have to, and they're a communist country. And the US and the rest of the world is leaping forward. Yes, it's not perfect. Yes, capitalism can be sloppy. But it's clearly being embraced by more adoption. And what's happened in the US is funds are leaving the country for Canada and Europe now, and the U.S. is going to figure it out and say, okay, we just have to regulate this properly. I love the point about the digital dollar and calling it that.

And I think that that's what the crypto community has largely missed the mark on over the past few years. We've always talked about the unbanked or the underbanked in a free financial system for people who don't have access. But then we take a leap to assuming that Bitcoin would be the answer for that. And the reality is most people in the world, in my opinion, who are underbanked or unbanked want access to dollars, right? That's the thing they can't get access to. And now they have the ability to do that in a digital wallet via stable coins or digital dollars. Well, that's a cool thing I see about, I could call them crypto dollars. And I want to be able to maybe transition later.

I'm hoping Bloomberg will create an index. We'll trade futures on those eventually. So that's part of my end game, part of where I sit here. And it's that ability to be able to transact 24-7. I mean, if you use your normal dollars globally, you got to wait for the bank to open, right? Instant settlement, no cost. And then the key thing that I've really got, maybe from one of your podcasts, is you don't have to hold it in the bank. Once you have dollars in the bank, that's their dollars.

You have to get – it's a problem moving them out. You can hold them in your own wallet, and it depends on the security. But to me, it's just a world better way to, you know, it's a better mousetrap. It's the automobile replacing the horse. And the US is crushing it. And the US is not going to mess this up. Of course, I'm an optimist. But I just see that happening. And then I also find, then I look at, the key thing I like to look at is, okay, so all these crypto dollars are all based on tokens and the vast majority are Ethereum. Like, all right, well, I get it.

It's pretty bullish for Ethereum. Then I look at NFTs. I'm like, okay, they're all denominated in Ethereum. All right, I get it. It's pretty bullish for Ethereum. So, yeah, maybe it got expensive around $5,000. It's probably getting a little cheaper around $3,000. But they're stalwarts there, Bitcoin, Ethereum, and crypto dollars, I think should continue.

Everything else is, I leave that to you to help me figure out. Things like Solana. I mean, I was working on Solana a little bit lately, and I just dug in a little bit. I cannot define the supply and demand and adoption yet that makes me bullish. But I see massive speculation. I think it's massive speculation on the road to those metrics that you're looking for. And I don't think that you're wrong. I just think it's early. And I think that a lot of these other layer ones will probably find their place

and maybe we'll have a multi-chain world, but I don't see any of them competing with Ethereum on the level that it's currently at. It just has too far of a lead, in my opinion. And I think going back to Bitcoin, we obviously both agree that it's solidified sort of its case as digital gold, right? As a store of value asset. Do you believe that the store of value pie expands or that Bitcoin basically just has to take market share from other perceived stores of value? I think it's more of the latter. Here's a simple fact that I love to work on in my analysis. It's a fact that Bitcoin is replacing gold in portfolios. So I look at it, try to project that forward in the future, Just three options. It increases, stays

the same or decreases. I just pick this. Okay. Trend stays the same or increases. Simple fact. I don't see what stops it. And it's been accelerating. So to me, it's got this most unique thing that any commodity person who's been in commodities, I still have my trading pit on. I had to do a TV hit earlier. So I left it out. It gives me good luck. This is the jacket I wore in a trading pit in the 80s. It looks at it and it's like, OK, I have the fine supply incrementally going down, increasing adoption. Something has to change or price has to go higher. And I think that's why I see Bitcoin in the macro world. And we all know what's happening. It's just the baby steps. You know, what's what could happen last year with El Salvador. And that's a baby step. And what happened with Tesla, a baby step. And there's so many, so many things that I see as mostly positive.

And the biggest thing I think is most significant was when China banned the mining and then major reset, how organically it did it without it did it without human intervention. I used to work in a trading pit. You remember when things are closed, you have limits, they shut down. Everything. It was so impressive to me. Sure, the price corrected, but came right back and just adjusted. Here's a key thing I take out of that. It just emboldened the U.S. to embrace it because there is a Cold War going on. It's accelerating. And the U.S. is crushing it in cryptos. In fact, I was so shocked when China banned it because I figured if I'm China, I'm like, all right, I'll start loading up some of these.

I mean, they're the biggest hoarder and miner of gold on the planet. Throwing all your eggs into the old analog gold, I think, is kind of risky. So I figured they would just nationalize the miners and keep the Bitcoin, but they didn't. I was kind of shocked. Now it is emboldened in the U.S. to do the opposite, to embrace it. And there's also a unique thing here, Scott, that I don't think people are speaking about a lot is most of those miners migrated to publicly traded U.S. companies,

and most of those publicly traded companies hold those Bitcoins. They're not just selling them. So it's already gone into the mainstream of the average investor in the US can just buy miners and you're getting exposure to Bitcoin. Yeah, absolutely true. Mining has been definitely one of the big stories

of the last year. And you just touched on a few of the other big stories, El Salvador, Tesla, which you could also then extrapolate, obviously back to 2020, when Michael Saylor and MicroStrategy put Bitcoin on the balance sheet. I hate to always play, to sometimes be pessimistic or devil's advocate, but I find that it's very interesting that we had those huge events and then no follow through, right? And it's not something people have been

talking about. Michael Saylor, they bought Bitcoin, Tesla bought Bitcoin, and then Saylor sat down with the CFOs of 2000 companies at his MicroStrategy conference to teach them how to put Bitcoin on the balance sheet. And since then, we've seen none, right? And we haven't seen any other countries adopt Bitcoin since El Salvador did. So why do you think that is? Well, because I'll speak for myself, I'm impatient. It's about being in markets forever. And it's sometimes, you know, being too early, obviously, and many times I'm too late. But I think a lot of it's the US accounting system is not favorable for companies to hold Bitcoin. But I think it's a matter of time, you're gonna see companies like Apple do it. When the head of Apple, Tim Cook says he owns Bitcoin, you know, it's about time. It's just, there's laws that need to be changed. There's so many things that need to happen. And then there's, I love that narrative. Oh, it's too high. The volatility is too high.

I'm like, okay, well, great for the volatility to go lower. I guarantee it's going to probably happen from a much higher plateau. But it's just one of those things. We're impatient because we're ahead of the game. We've been in it for a while. The average person to get their mind around it is still very difficult, this concept of a digital asset. And I like to describe it sometimes as when people say it's not a physical asset, I like

to say, well, here's an example of where the world's going. We all know what happened to Blockbuster and Kodak and stuff. But let's say if you have a Tesla that's fully charged in your middle of the desert, in your 200 miles from any type of refueling station, what's the value of that Tesla versus one right next to you that's not fully charged? There's your digital value. There's your value of something that's not physical. It's not exactly, but I like to use that in commodities when people give me a hard time

about it. I'm like, hey, supply's going down, demand's going up, adoption's increasing. It's just going to take time. And what I see right now is very positive because the market is forming a good base. And generally, I'm always skeptical of bull markets that are so extremely bullish, like the stock market right now. Just looking at the charts and just looking at the mentality is I'm going to have to, it's things like you've read about in history, the highest percentage owned of stock markets in US history, the greatest appreciation ever, the most expensive versus GDP versus the world versus real estate ever. And now the Fed's breaking the bubble. I like to say, okay, well, that's a problem. Then I look at this other asset. It's new.

It's just being adopted. Demand's going up. Adoption's just in early days and supply's going down. I'm like, which one do I want to be allocated to in the big picture? And so I say, well, you're supposed to be buying Bitcoin. So I do enjoy that narrative also from analysts like at Goldman Sachs looking for a super cycle in commodities. I'm like, what are you not remembering about commodities when prices go up, supply comes back? I used to own a farm. I mean, that's what you learn in the farm is as soon as that price of corner beans go up, you're going to plant a lot of it and take it out of conservation reserve. And to me, that's the big difference with all assets on the planet right now versus Bitcoin. Yeah. Even just when you describe what's been

happening in the market sentiment, just the mean reversion trade means that it has to come back down to earth, right? I mean, just to get back to where, not even to have like a proper crash or a real depression or anything like that, just to get back to where fair valuations are could be a pretty serious correction. Well, that's the key thing to remember about markets. A lot of people don't look at the 1987 crash as just a little, you know, a normal year was. In 1987, stock market was up 2%. But most people remember it as a significant crash. All it did was mean revert. Now, that was short term, but that's what started this cycle that I think we're ending now,

where the Fed's got your back, the Fed's got your put, is your put, and you're fine, you can move higher. Now, we have a Fed that is facing this. We all knew it was going to come to an end someday. And it's the highest inflation in 40 years. PPI, producer price index is running 13%. Last time that was in 1980. And I was right around 1979. I was pumping gas.

I was a gas jockey. And gas went over a dollar a gallon. We had to start pricing it a half a gallon. I mean, I was like 15. It was like little lessons that you learn. To me, that's what happened. The game's over. That's my view in terms of the equity market.

Maybe real estate's still good because interest rates are very low, and real estate's still very valued in many places. But the equity game, I think, is over, and that's really against consensus. But it's not going to be believed until it's already at least – well, let's look at it this way. You haven't had a 10% correction since the swoon last year. So to me, that's what we're going to be looking forward to this year. And it's a major part in cryptos. That's what pushed Bitcoin down recently from 50,000 to closer to 40,000 is when the S&P 500 and the NASDAQ corrected. But I think that's going to disengage at some point. It's just we have to get through the tough period first. You talk about the 1980s. I was a kid in the 1980s, obviously. But I remember, you know, my parents saying, listen, you need to open a savings account. I want you to get a feel for what this is like. Get a checkbook. And I was getting like

11, 12, 13 percent interest. Right. And people don, of my generation, maybe, but anyone younger does not remember a time when, A, you could make money in a savings account, but also to your point, if you bought a house, your interest rate could be like 15%, right? But it's so funny, we talk about raising rates now, but we're going from effectively negative to still very, very low rates. Yeah. It's a key thing to remember is I started trading JGBs. I like using that term because I use it with a young person recently. And they said, what's that? Japanese government bonds.

People who've been around for a while knows what a JGB is. But a lot of your guests have used the term. I started trading those in the 90s. I was, and I remember I was sales marketing at the U.S. primary deal, a major, it's not the largest Japanese bank, which is Mizuho, back before it became Mizuho. And everybody I talked to on the planet was, we're short and we're happy. And that was the wrong trade because yields kept going down and went negative. And then they went negative in Europe.

And to me, there's only one thing that stops U.S. 10-year yield from going negative. And that is the stock market has to keep going up. But once we get a bear market, it's just our turn. And to me, that's what we're looking forward to. And that's to me, that scenario that might be kicking in this year, I think is getting started and really is part of that transition where Bitcoin should be one of the best performers.

And I don't really, I think Ethereum too, because it's just more of the infrastructure. It's rebuilding the whole fintech infrastructure, but that's the macro. And for that not to happen means the Fed's got to keep tightening. The Fed's just going to tighten until markets inflation goes down.

And it's just, I think that end game is kicking in now. Yeah, I think so as well. Talk about bull and bear markets. Something I just found very interesting that I actually was just looking at today on the chart. So people know it's January 6th. A year ago, in two days, on January 8th, 2021, Bitcoin topped at $42,000. There was peak euphoria, peak greed. It was all anybody was talking about. And then we went through this sort of consolidation or corrective period. Now we've tested forty two thousand from the top almost a year later to the day. And it's peak fear, peak panic,

and it's going to zero. Same price a year later. Oppos opposite sentiment. What do you make of that? Oh, exactly. That's the environment you want to be the person looking around behind the door, I'll buy a little. That's the exact environment you want to be selling when you think, I mean, there were some major bell ringing events last year. I didn't pick them as much as I could have, but one Doge got within, within i think was the top five for

a little while that was just stupid 75 cents yeah i mean it was just silly stupid speculation um and unfortunately you know when the bitco etf launch i didn't think that was going to be as much as a peak and it was but now the sentiment is just what you want to see is when, I mean, there's a few times when I, like I have my live TV outfit. I'm going to anchor will nail me say, Hey, I remember last year was this, this technical analyst, Bitcoin was about 30. So that's going to 20. If it breaks 30 and I just love those kinds of things. You mean if it goes down, it's going to go down. And like, those are usually the best signals to buy.

But I think we're close to that now, but you just got to respect the macro. I leave you with this. The bottom line is don't fight the Fed. People forgot that. This is a different world now. That world we've been in for most of our lives is over because we have inflation higher than most people are alive today. It's, what, 40 years? Certainly, most people in cryptos don't know what inflation is.

And we're getting it. I think it's transitory. I agree with what Jeff Booth says, but Fed works behind and we kind of need reasons for it to pull back. And it's just this sentiment where people just don't want to work. They pull out of labor force.

Yeah, the numbers of the labor force are astounding. I mean, how many millions of jobs are available with nobody willing to take them? Which is, you know, I haven't dug deep enough to quite formulate an opinion on what that means for the economy, but it's pretty mind blowing. Yeah, well, there's only one way to really make that happen is higher wages, right? So that's inflationary aspect. But I look at commodities, I see massive potential deflation just getting started. But they work with a lag and we're not at that stage yet. The future of cryptocurrency is a multi-chain world.

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Check them out now. You said you agree with Jeff Booth on the idea of it being transitory. Maybe not the most popular opinion in the crypto space because for people who don't maybe understand, can you talk a bit more about what that means to you? Well, let's look at one simple fact. I'm a commodity guy.

Price of crude oil just peaked around 80. That's about half the price from 2008. Just imagine we said that about the stock market. There's one main reason why, because supply exceeds demand because of rapidly advancing technology because the US has just harnessed shale and brings on supply. And U.S. liquid fuel consumption has been the same for 20 years.

EVs are just starting to kick in. Look at U.S. natural gas. That's the most significant measure of heat and electricity on the planet. The price right now at about below 4 mmbtus is the same price as 1996 just imagine we said exactly so that's because of massive supply and we're just using more and more of it but we're exporting yes europe has problems but you know they haven't hardest the technology like we have so you know come here's someone who's going to be talking about bullish america i just point out the facts and that's part of what Jeff Booth brings out to me. I show on commodities all the time. And the average cost

of U.S. shale crude oil right now dropped about $40 a barrel last year. It's now inching up a little bit. But then in 2014, it was around $70 a barrel. Why is that? Because of human ingenuity and technology. It's just the key thing that happened. And what just happened is we just had the biggest boost in prices in a while, which is going to bring on that technology. It's just the key thing that happens. And what just happened is we just had the biggest boost in prices in a while, which is going to bring on that supply. It's called elasticity of supply and demand. Now, that's a key factor in commodities, but it's the opposite in Bitcoin and Ethereum. They don't have that elasticity of supply where higher prices bring on more supply.

So as a guy like me, I look at it, that price has to go higher over time, unless someone shifts the adoption trend. And I think it's early days. So obviously, then deflation is the natural state and natural pressure that's being pushed, not inflation. Inflation is literally, they increase inflation because of a fear of deflation, right? They're a lot more afraid of a deflationary environment than an inflationary environment. Well, that's the unique juxtaposition we're in right now. Jeff Booth pranks that out. I completely agree with him. From a resource, technology, technological standpoint, absolutely.

I mean, your average, Kathy Wood points out, your average electric car is going to be more cost effective than your average internal combustion in four to five years. And that's just following current trends. Yes, there's been blips. I have a Chevy Volt. I love it. It's been the best car. It's just a better way to get around.

But the technology is forcing that. Now, where are we seeing issues of inflation? Owner's equivalent rent, physical assets, number one. Owner's equivalent rent is a major part of CPI. And that's just a measure of how you would rent your home or your whatever asset, a condo. Yeah, physical assets. I get it because the bottom line is what just happened is since the beginning of 2020, US money supply increased 40%. Guess how much the stock market and the commodity market increased? About 40%. What's going on? That's what the inflation is. And where do we have issues

where there's an asset that is not responding to the higher price with more supply? That's Bitcoin. So to me, that's the key thing. This inflation could be sticky, but it's how it's measured. And people poo-pooed a lot. And I like to say, well, just look at PPI. It's up 13%. PPI is maybe 17% annual. But then I point out things like the most significant measure of heating electricity in this country is the same price as over two decades ago. The same crude oil is down 80% from the high 14 years ago. That's kind of deflationary because those are areas where the technology brings on supply, but technology cannot bring on a supply of a home or land.

Your Thanksgiving turkey is a lot more expensive. There you go. And when you really zoom out and look at that, it's pretty crazy because your average person just sees their consumer goods going up and doesn't really think about the bigger picture that you're talking about there. Interesting, though, you talk about a 10, even 20% correction in the stock market. That's not really the gloom and doom that you see from quite a few people, right? I mean, that's a call for a healthy correction. That's not a call for a depression, which you see. So I have to be careful, just use historical analogies. We should at some point get a 50% correction of the rally. The question is, where is the rally from? It's just how it always happens, especially when you go up without interruption. That's in 2020, which always means it usually corrects 50%. And the thing, the difference is it has done it twice since the peak in 2008. The thing with the stock market is it's, to me, so overdue for some normalization. Every point in history is there. I thought this

was happening earlier around COVID, but what I misjudged, own your mistakes, was the massive liquidity that was thrown into market. So I think that gave us the final boost to get everybody in. So when the correction comes, when people finally realize the stock market doesn't just appreciate 25% on average like it has for the last three years, that changes everything. Because we are the most overweight equities in the history of mankind, even greater than 1929. The most dependent upon it is our savings account. And the Fed knows that. And to me, that's why I have to be careful about it. So a standard correction is 20%. The key thing is it just comes right back, right? So let's say we go down 20% and stay down for a while. That changes

everything. So in the immediate term, to me, that's what every investor should be planning for and should prepare for. What are you going to do about it? Because it's so overdue. Now, what might happen is it goes down 20% and then stays down for a long time. Let's look at the peak in 1999. I think it took until 2015 or so. What was that? I can look at the charts. So it took at least 10 years. We're overdue for that. Everything points that way. It's just like I said, don't bite the Fed. They will jawbone until they have to because these inflation numbers are sticky. Basically, owner's equivalent rent, the numbers they look at, and the data they usually get from their measures. I just, I don't see them going back, but I sort of

see pretty good signs of deflation going to kick in in commodities and sort of getting started. You keep using the term don't fight the Fed, which we love, but I think for a younger generation, who's maybe only been in the market for the last 15 years, don't fight the Fed always meant don't short, right? It sort of took the opposite, right? The opposite meaning. So I think to most people, don't fight the Fed means they're going to print money. Don't fight it. It's going to continue to raise prices. But now don't fight the Fed means listen to what they're actually saying. This might be reversing the direction. Oh, that's a fact. It is reversing. And Scott, I'm glad you brought that up because I say it intentionally as a 57-year-old fart

that I still feel young at heart. And I feel as a baby in crypto. There's so much I don't know. Every day I don't know. But that's the key thing I emphasize. And I love to say it with young people because that's what they know. Now it's the opposite. Everything changed.

The world has changed. There was a flip that switched when inflation hits 40%. And it's just we all knew what's going to happen eventually, that that Fed put would only last until inflation got a hand. Now it is. And it's going to be sticky. Those measures that they look at, they use will be sticky until things go down. We shut down consumer spending.

And that's going to take the stock market to go down, bottom line. And it's already, so let's look at what's happened this year. U.S., the consensus, I love this, is I love to look at a chart of the U.S. long bond. And Bloomberg, I just pulled up for 40 years. It's been going down for 40 years. And the consensus last year was everybody said yields are going to go up. Like, okay, they peaked in March, peaked around 2.5%. That long bond, which is 30 years, I'm a long bond guy because I started in that trading pit, is 2.10.

You mentioned the date on January 6th. I think it's going to 1 or below. Why not? Because it's a simple trend. Why? Because it looks forward, and those trends are heading low. But to me, that was my key signal last year when all those smart people on Wall Street, I used to be one of them. I'm now in Miami.

I don't know what I'm considered here in Miami. Told me yields are going to, yeah, yeah, yeah. Oh, shit. Wall Street's out. It's Wall Street's out. It's coming that way. But the consensus was wrong. And they're still looking for higher yields.

I'm like, OK, well, then you need the stock market to go up. Just get that stock market going down. And those yields are going to just follow the rest of the world. Bernanke said that in his press conference. They ignore those things. Obviously, I pick out the stock market to go up. Just get that stock market going down, and those yields are going to just follow the rest of the world. Bernanke said that in his press conference. They ignore those things. Obviously, they pick out the things that matter. So to me, that's a key thing is it's happening already. Yields are ready.

Yields peaked in March. The grains and commodities, they're the most elastic of commodities because you can produce them in a year. They peaked in May. Copper peaked in May. Crude oil peaked in October. Lumber, I think, was in between there. Everything'saked in May. Copper peaked in May. Crude oil peaked in October. Lumber, I think, was in between there. Everything's turning that way. Yet the last one usually to go is the stock market, almost always. And this might take a month. It might take a year. Who knows? But that's what's going to happen because if it doesn't go down, the Fed's just going to keep jawboning and

keep tightening until it does. Yeah. And I love sort of what you described as the difference between a 20% drop and a bounce and a 20% drop and living there for a while. Right. And so I think that, again, when we're talking sort of about the generational approach and how you should consider that for your own portfolio, that really matters if you're in your 50s or 60s, right? Because it's your retirement. But if you're in your 20s or your 30s right? Because it's your retirement. But if you're in your 20s or your 30s, shouldn't matter, right? You should just keep buying basically when the prices are down

because eventually it's gonna correct, back to the upside or revert. And you'll have benefited from being patient during that time of either sideways or downward action. Those are the rules of investing. Long-term dollar cost averaging in stock market will always do better. You know, then the general rule is you take your age divided by a hundred and that's what you should be in stock market. So if you're in the inversion, if you're

20, you should be 80% in the stock market. If you're 70, you should be 30% in the stock market. But I have a feeling that they work great. But when you go through this unprecedented rally we've had since the bottom 2008, there's certain times you're supposed to underweight. And it's particularly when you have an alternative. So I like to use the example since the end of 2019, right before COVID, S&P 500 total return is around 45%. Money supply is around 40%. Stocks, commodities up around 40%.

Bitcoin's up 500%. Obviously, Ethereum is much more. What do you want to – is that trend going to end? I might as well stick with the winners and buy dips in the winners, particularly when they're nascent and the world's adopting. And when the airplane was first invented, you just got to, you know, you just got to go with it. And that's the way I look at it. But I'm concerned that what usually happens, Scott, is that narrative is so ingrained, it has to be shaken a little.

And when it's shaken a little is when the best time to buy. When people say, oh, it's over, that long-term trend of buying equities is no longer in work. To me, that's what we're going to run into. We always have in history. Every major correction runs, and correction. Every maker major bear market runs into it. Okay. It's over. We're not going to have that appreciation anymore. And then you have to find always one thing about equities is they're based on earnings and almost all the earnings are in tech. Cathie would, um, we'll, we'll tell you that. I mean, there's some

in energy right now, but that's going to go away because prices will go down. That's the key thing to remember about energy equities is if there's profits in equities, it's bad for prices because it means they're going to bring more supply. One of those things you'd have to look forward to. But to me, this is a narrative I think we're going to look forward to is there's going to be a point, the time that I think to reallocate overweight equities is when there's chinks in the armor of that old narrative that you have to be in for long term, have to allocate it. When we start hearing people say giving up on it, then it's time to do it because it's just too ingrained. Yeah, last I checked, you were supposed to be selling on the way up and buying on the way down. At the most basic level for any market, right? Well, that's for commodities.

It's extreme in commodities. Oh, the rule in commodities is the cure is for higher prices, higher prices. Just because it brings on supply. But in the stock market, the rule has been buy high, sell higher. But I think it's, like I said, I think the game's over. Yeah, it seems like the game is over, but trying to time the top in my experience is a very difficult errand

because I think we could have said the same thing a year ago, right? I mean, you didn't have the same signals as you did before, but we've been talking about this market top probably for as long as you and I have been talking. Oh, sure. I agree with that. I've been wrong, and I gave up for a little while. I don't think wrong. Well, I mean, to me, this is the difference now. It has changed. And that is just listen to the Fed and watch the facts. The highest inflation in 40 years. Most of our listeners are not 40 years

old. That's significant. The Fed has to do, unless we change the mandate, which if they do, that's going to, you know, we're going to end up like Zimbabwe, but it's just, it's the way it works in this country. It's something that hasn't very rarely has never happened in history. And to me, that's, I wrote this, published this recently. You probably saw it in some people seen on LinkedIn and Twitter is, is game over. And obviously, my view is it is. So what does that mean for the dollar? Bitcoin maximalists love nothing than the story of the dollar going to zero and Bitcoin becoming a reserve global currency. But that's probably not what happens here, right? Yeah, you got me on that one. That's a good question. So the key thing to look at the dollar is if you measure the dollar

over time, the trade weighted broad dollar is the most unique and best measure. It's produced by the Federal Reserve because it measures it relative to our trade partners. It's been going up for 50, 10, 60 years overall. The chart's clearly like this. It's had one big dip up to the bottom in 2010, but there's a good reason why the dollar appreciates because it's what Churchill says about democracy. It's the worst form of government, except for all the others. The dollar is the same way. When you measured against fiat currencies, and I challenge our audience, give me a better currency over time and in the future. And the key thing that's been driving the dollar for last few years is a good point, is the relatively outperforming U.S. stock market and higher U.S. rates.

Now, we still have – and not rates, yields – still have the relative highest, deepest bond market in the world with the highest yields. That's a win-win for the dollar. If the stock market really goes down, if there's any type of risk-off event, where do people go? The dollar. Because what currency is better? And here's the picture i want to end with you so i i got this from my son who's um 24 he's an accountant and we were bantering over alcohol about the dollar and his scenario was dad if the u.s wants to they can just go invade canada boom

we got on north america just invade mexico, it's silly, but it's like that. The US could do that. I mean, won't, but could. There's no other country on the planet that can control a planet and has, I mean, an entire continent and has safety on both all shores. It just doesn't exist.

And then with the system, the dollar is unstoppable. And now what's going on in cryptos just means anybody's bearish a dollar, I'm like, good luck with that one. I will buy from you. I mean, I don't, I'm just saying the next trader, because you can only get bearish a dollar short term versus a basket of other currencies because there's nothing that beats it. It's becoming the, you know, the world used to be a gold standard. The world's increasingly on a dollar standard and cryptos are accelerating that. That to me is what's really happened in 2021, the significance of crypto dollars. That's why China,

I think, has peaked. The Chinese Communist Party has peaked. They're banning and they're pushing back and free market capitalism is a sign of the limits of what they can do with their society. I mean, we all knew communism doesn't work so well because they don't have free markets. And to me, that's what's happening. Cryptos are in the center of this new Cold War. To me, that's the macro. And I can show you the facts and point it out. Here's dollar, I mean, just total amount at market cap on crypto dollars is approaching 160 billion.

It's up 10X. Tether is obviously the biggest one. And I love when people push back on Tether. I'm like, okay, well, there's a dozen wannabes. If tether fails, there's a bunch of them otherwise. It's just a better way. So dollar is a key point. But if we do have risk off, what are people you should go to? The dollar. Where are you going to go? Maybe the yen, maybe the Swiss in the short term. But just those countries can be taken over with a couple simple invasion in a heartbeat. It's a fact, but it's silly, but it's true. And they just don't have anywhere near the oomph that you have. But what's the major competition? China, managed economy, no free flow capital, no gap. I mean, general accounting, except accounting principles are priceless. And that's a big problem we found out lately. There's no better system than U.S.

Yeah. And it's unpopular opinion, but supported by fact that crypto helps the dollar. It's not crushing it. Completely. Elizabeth Warren needs to know as our leaders. And that's one of the things I find is my duty when I have the facts behind me. And it's one of the things I find is my duty. When I have the facts behind me, and it's my duty to publish this on the terminal because they read some of this. I mean, it's Bloomberg. And their advisors read it. And it's my duty to point out, and I have, I'll make headlines.

I'm like, this is for the US not to mess up. Crypto dollarization, digital dollarization is accelerating. I gave a presentation to the Department of Defense and they were all like, shocked, you're an optimist. No, I'm a realist. This is a fact. You need that trend to end.

Otherwise, this is for the US to just not to mess up where the dollar is becoming, like gold used to be, it used to be silver. Silver was the global currency. Gold took it over and it's the dollar. And the dollar is only accelerating despite the fact the total part of US GDP, of global GDP, is decreasing.

Now, that's really not upsetting our rivals, but sorry, that's just what the world has decided. I mean, to your point, it's not in a vacuum, right? You just have to be the best of the currencies that you're compared to. It doesn't mean that it's strong in a vacuum. It just means you're sort of the prettiest pig in the pen, so to speak. And what I find so interesting about that is you can look at any chart over time, and generally, the dollar is inversely correlated to these other assets. Dollar weakness, stock strength. So if stocks go down, the dollar should absolutely rip. I mean, it should, the dollar should absolutely rip. I mean, it just, it should, right?

It should rip. And that's not what crypto enthusiasts probably think is the way. Well, it's okay. But I mean, that's one thing, wonderful thing about crypto enthusiasts is they're getting major education in macroeconomics. But sometimes they need to think less technical

and listen to old farts like me and you, and especially a lot of your guests. And that's the bottom line. If you debate the currency, of course the assets and the value of that currency are going to go up in price. This is the way it works. I mean, it's a lesson in the Weimar Republic. A lot of the people who owned assets and stocks felt like they were getting rich, but they weren't. It's just the denomination was declining. But that's where Bitcoin changes the world.

And I hate to say the things like I, but, you know, when I first heard this stuff five years ago, like, yeah, that's silly. And every day that goes by, people like me are realizing it is. It is happening. And what stops it? And that's what I think is happening with our Congress now. Those latest testimony I thought was ideal. They're going down the rabbit hole.

Yeah, they're getting it. You know, when your first response is like, yeah, it's selling internet money. That was my first response. And then every day I realized it's like, yeah, NFTs are, you know, Ethereum is kind of the denominator for the NFTs. And that's becoming the money of the nomination of the internet. And Bitcoin is becoming the, you know, the, the new global digital reserve asset, but you don't want to spend your Bitcoin to things you can't like that.

You want to be able to transact in dollars. Anything that's designed to appreciate over time, you're not going to want to spend, but dollars are, you know, they're, they've, they've already won that game and there's no one who's going to beat it right now. Maybe Bitcoin in the long, long term, but I'm not kind of worried about that in my lifetime. Yeah. I've made the argument many times, even though the white paper says peer-to-peer cash, that's not what Bitcoin became and stable coins are a far superior, or we'll call them crypto dollars for you, are a far superior version of what that was intended to be. There's one thing that you said earlier,

you were speaking about the dollar. You said, you know, be a bear on the dollar. Good luck. You know, and it's something I talk about quite a bit, but being a bear is almost never a good long-term strategy in any market. Right. And it's something that I think it's something that's so lost, especially in the trading community and the crypto community that people think you can just like be short forever. And that's just, you know, important to remind people that being a bear, being short is usually something that requires impeccable timing. That is true in most assets. And there's some exceptions like crude oil since 2008. If you had to roll those futures, you're making a killing.

People forget that. They say, oh, invest in commodities. Like, okay, how? You have to roll that future. Unless you want to buy the storage and pay for it, good luck. You buy the equities and some currencies. You know, the difference is being a short a currency means you typically had to pay the interest rate. Now there's no interest rate, which is – Elon Musk said that he's got negative interest in his European accounts, and Bitcoin kind of looks attractive to that when they had that conference last year.

But that's the key thing about shorts. You have to cover. But I look at it as an ex-hedge fund guy. There's shorts you want to hold against longs. It's the hedge fund. You're long and short, long and short funds. And there's enduring bull markets in Bitcoin and Ethereum. Those are longs I want to hold. There's enduring bear markets in crude oil. I wouldn't mind holding that short. I mean, it depends on how you do it.

Enduring bull markets and U.S. bond prices. Now, everybody like keeps saying how bond yields are going to go up. Some of your guests even said that. I'm like, yeah, they've just been going down for 40 years. At some point, they might go up. But the trend is your friend. We've had a bounce in yields. And I loved it because, Scott, this is a little of my history. This is what got me to New York from the trading pits of Chicago. I was working for a primary there on the phones and dealing with institutional clients. And after a while, they got sick of me hearing me how. I was working for a primary there on the phones and dealing with institutional clients. And after a while, they got sick of me hearing me how bullish I was the bond market. And they

finally said, all right, we'll go on, come to New York. You can work on that and be trading bonds there. Because I was just pointing out facts of trends and what's happening. It's still the same. It's just yields in the long run were 9% when I came over in the early 90s. And now they're less than 1% or less than 2%, about 2%. And I'm like, okay, has that trend ended? That's why I keep saying, all we need is one little stock bear market to get over that, and then I might change my view.

But we have to get over that for everything I look at. We have to get past that period, which always happens. Down 20%, stay down a little while, then I can reassess everything. Because I look at crude oil, it's probably peaked. It needs the stock market to go higher. I look at bond yields, they probably peaked. It needs the stock market to go higher. If the stock market just does what it has done in history, is correct and stays down a little, I'm not saying be embarrassed long term. We got to get over that reset before I can really have a good analysis based on more fundamentals. Right now, to me, everything right now is about not fighting the Fed and it's how the stock market reacts.

I agree. And one thing that you said that I loved and that I also found so shocking was that last congressional hearing about crypto. Because every single time I've turned on any of them, it has seemingly been uneducated politicians who have refused to do the work, who are clearly disinterested in just there for the press opportunity or, you know, to get their one liner out. This time, it really did feel like they were trying to understand it. Exactly. That's good. I think it was just our judgment of human nature. And we pointed this out well before. The minute China banned it, it's just like the Democrats battling Republicans. Republicans have a view,

the Democrats have to take the opposite. Now, when you're arch rival in the world, and one thing that Trump did prove to us is bashing China gets votes. When the arch rival in the world is pushing against something and you embrace it, it's win-win. And it's like, why take the risk? And who did kind of, you know, why has the U.S. just crushed it the last 10, 20 years? People say China's taken off. I'm like, really? I can show you some things that are really bad. Because we embrace the Internet. Not perfect.

But I mean, why is Amazon in the U.S.? It's a good reason. And I think that's, I hope that bastion of free market capitalism, which is the reason I'm here. I mean, I'm just a descendant of European peasants and most of us are similar and that's part of the reason I'm we're in, and it's one of the best books I read this year was, or last year, was by Dominic Frisbee called Daylight Robbery about tax. And that to me is accelerating. The world's migrating to where they're getting low taxes.

And why are we both in Florida? So a lot of our listeners aren't, but come on down. Yeah, absolutely. And it's on the way to Puerto Rico for those of you who need to stop off and maybe you want to like test the waters here before you jump all the way down to the next island. I mean, there's been a major migration down there. I'm definitely surprised at how many people I've seen making that move, but I guess you can't be particularly surprised. Yeah, well, you know, it's just that lesson of the tax. And I think that's where the world,

the U.S. is crushing it because we have 50 competing states. And it's really seen that. It's amazing how that showed up in Bitcoin between New York and Miami. It's pretty cool. But New York has a bid license. And yeah, it's got the old guard. But, you know, we're here for a reason. And people are coming down here for a reason. Cathie Wood came down for a reason. Scott Miner, you can list them, go down the list. The people could right away. And the other ones are just realizing it's a better place to do business. And particularly if the laws are against you.

But to me, that's what's happening where the U.S., even with COVID, we were less restrictive than the rest of the world. You know, that's the benefit I have of working for a global company. And I speak to people all over the world on calls like this. And most of them envy where we are and both of us in Florida, because we have freedom and they were by law and not allowed to leave their apartments or their homes. Yeah. As a, one of my former guests, Andrew Henderson, nomad capitalist said, go where you're treated best, you know, from a tax perspective, certainly, and from a life perspective, which islone 11, I think it is, or at Mike McGlone 11.

You can find me on there. Happy to. And I'm happy if people reach out to me. I usually mostly do LinkedIn. I post stuff on Twitter. I just don't have the time for it. I'm happy to link in with people, and I'm happy to put people on my distribution list. And I just like to stay civil and people disagree with me.

That's great. I just, you know, so that's the best way to get me LinkedIn. And it's the best way Twitter. I just, I just post stuff there. I can't recommend it enough getting on that distribution list. It's definitely a good with my morning coffee, whenever it comes out and always keeps me, like I said, grounded and on top of the markets with actual analytics and data to back it up, which I think is somewhat rare these days. I appreciate, once again, your perspective on what's likely to come.

I tend to agree, as we usually do. It will be very, very interesting to see how 2022 plays out, right? If it continues to be delayed once again, or if we actually see that correction finally come to fruition. Yes, well, we we actually see that correction finally come to fruition. Yes, well, we've already had a correction, which is good. That's the key thing about 2021. It was a pretty substantial correction.

And Bitcoin around 43,000, as you mentioned, is the same price as a year ago. And there's a lot of negative sentiment, like, yep, that's what I like to hear at a bull market. Yep, that's why I'm buying it. Thank you so much, Mike.

I appreciate it once again. And we'll do this again to get an update in a few months. All right, Scott, That's why I'm buying it. Thank you so much, Mike. I appreciate it once again. And we'll do this again to get an update in a few months. All right, Scott. Thanking you. I love your program. I'm one of your biggest fans. Thank you, man.