The Wolf Of All Streets - Fear Of Recession Is Rising | Macro Monday With Mike McGlone& Dave Weisberger

Episode Date: April 10, 2023

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Fears of a banking meltdown have seemingly subsided as we haven't gone. We've now gone, I should say, almost two weeks, I think, without a major bank collapsing. So, of course, that means that it's completely out of the narrative. But what is back in the narrative is fears of a recession, seeing articles about it everywhere, that it's almost guaranteed that we're going to see a recession, which is funny because at no point did I realize that the fears of a recession had subsided at all. But that's what happens when you try to keep up with the 24-7 news cycle. We're going to talk about the likelihood of a recession today. I think we all agree it's very likely.

And what that might mean for markets, Bitcoin, gold, silver, everything else you guys have come to expect on Macro Monday with Mike McGlone and Dave Weisberger. Let's go. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button. I hope that everybody had a wonderful holiday weekend, that your kids didn't eat nearly as much candy as mine because yesterday was a complete disaster by 4 p.m.

But that's what happens. Anyone who has young kids knows that when you fill them with candy, there's only one way, and that is down. But you're not here to talk about candy and Easter. We're here to talk about macro and, of course, to touch on Bitcoin and the crypto market as well. I've got my co-host. We're just calling you guys co-hosts now.

Mike McGlone and Dave Weisberger, both down in much sunnier, I would imagine, South Florida, North Florida. Not such nice weather. Welcome, gentlemen. Thank you so much for joining on this Monday once again. Thanks, Scott. It's always a pleasure. Thank you. It really has become my favorite morning of the week because I inevitably have to go on 10 shows throughout the week, and I just reference everything the two of you guys say on Monday. I basically just steal all of your thoughts and recycle them as my own.

It's very effective, a great way to start the week. As I said, though, you know, renewed fears of a recession, Mike, I'm going to let you jump in on this one. So I didn't realize, as I said, that we had reduced our fears of a recession, but I guess a lot of people sort of brushing it off because of the job numbers last week, right? We basically came in right around expectation and unemployment once again dropped from 3.6% to 3.5%, causing a whole lot of people who didn't have better things to do this weekend to say that maybe we won't have a recession or maybe that means something. What do you think? One of the most significant lagging measures in the market that has only one way to go up and to go that's up in terms of the unemployment rate which

means almost for sure recession and i don't like to say it unless it's factual um and there's um so that to me is and that number was kind of a meh number uh from stuart paul our chief economist who came on my we just had our macro call this morning it's always nice it's right before you quote was softening the labor market. Cuts from the banking sector is key. And all eyes are on small banks' propensity to lend. And that's a key thing that hit Friday. The key headline I saw Friday was I was – I have to admit, some of us – like Dave does it for sure.

But being an ex-hedge fund guy, just weekends are a time to catch up on all the reading of stuff i'm supposed to know and the headline that struck me friday afternoon that came out after the close was bank crisis drives 280 billion in institution money flows it's not so much the fact that banks are collapsing it's the money flow it's just the key question is there's a massive liquidity pool go this poll going on it's accelerating and the key question you have to ask yourself is what stops it and in that environment we've had this pump in assets bitcoin's been the leading one stock market's been a leader one so it it made me um just a few things i want to mention that struck me this week and a headline i saw in the terminal it said bond market is overplaying the risk of a deep recession it's on my di list that one was I deliberately ignored it until I dug in. And I'm sure Dave knows that sometimes you just see stuff like, yeah, no kidding.

And then I dug in and it was one particular journalist covering one particular hedge fund type guy who was lamenting about how quickly yields have dropped. I'm like, that's what always happens in significant crashes. They're almost all simple mean reversion. And that's what we're doing right now. We mean reverted natural gas. It dropped 80%. Poof, back to the cost of production. We're mean reverting crude oil.

Still going. And the biggest risk of all mean reversions is what you're seeing on the screens right now with the S&P 500. We're on that 4,100 level. And to me, that's where everything is trickling down to that level. As I see major lofty prices in Bitcoin and in crude oil and in bond yields and everything is dependent on and even copper. For those markets to stay at these levels. You need that stock market to not go down, to not do what it normally does when it gets the Nasdaq. It's now 10 percent above its 200 week to I'm sorry, it's a 200 day moving average. That's the most since the end of 2021. That might be a bear market bounce. So to me, that's the macro of everything. And as a macro strategist, I have to just keep my eye on that.

And if that stock market goes down, everything falls, including Bitcoin. If Bitcoin just oftentimes leads, it just doesn't go down as far. So I want to end with my morning thoughts. I mean, I do so much reading and researching this week, and I had to go back in and dig into some of the stuff that Ben Bernanke wrote. Because when I read his book, The Courage to Act, that really helped me formulate my views the minute the crisis, the pandemic kicked in. And I was spot on because of reading his book. They would pump so much money in the system. I never thought they'd pump that much. But what I fully expected that would pump gold and Bitcoin.

But I didn't expect the stock market to be as lasting as it was. And it did. But the key thing, quote, I want to read from his essay. I'll end with this, that I went back and read a little bit, Essays on the Great Depression, was, quote from him, I believe that there is now overwhelming evidence that the main factor depressing aggregate demand was a worldwide contraction in the world of money supplies. Boom. That's exactly what happened in our database since 1959. Money supplies dropping at the highest pace ever. Bank deposits are dropping at the highest pace ever. And the Fed's still tiny. Back to you. And no lending, right? As you said, I think we're seeing insane lows.

And I love the point you made about the banking collapses. They're not collapses, but they're also doing nothing. Well, they're losing their deposits. And by losing deposits, they can't lend. And it's that fractional reserve. There's that exponential. You have fractional reserve, the exponential pump. And now we're getting that contraction. I mean, just get a mortgage now. It's not only harder to do, it's what doubled the rate from a year ago. Yeah. Go ahead, Dave. I mean, it's hard to disagree with a lot of what Mike's saying, except for I don't think that assets are as monolithic. I don't think markets are as monolithic as is being portrayed. I mean, certainly in major down moves, correlations go to one. We all

understand that. Got it. But the fact is, is I will continue to talk about that in the Great Depression through the decade of the 30s, the best performing asset was home stake mining. And what was going on there was that people were saying, I need to own something that's not going to get inflated away in value, which was gold, but you weren't allowed to own gold because back then we had the seizure of gold, the theft of gold, actually, where they stole it at $20 an ounce and then revalued it immediately as soon as they had taken it to 30 some odd dollars an ounce, giving, you know, basically giving a huge injection of liquidity to the federal government in order to effectively monetize debt. It's quaint to look at those numbers today because the scale of the numbers, the scale of the debt is so large. On this program, I have made multiple comments multiple times. I sound like a broken record, and I'm sorry for that, but nothing has changed. The two comments I've made that are most salient here are one, the Fed is trapped. They are absolutely trapped. There is literally not a thing they can do

to decrease the borrowing costs of what is becoming runaway debt cycle. And when you take in unfunded liabilities, and we've seen more and more murmurings about Social Security and Medicare going bust, it's a big deal. So the Fed needs the long end to be lower. And so they're happy about what's going on. They love this, quote, forecast of recession narrative, unquote, because the truth is, it's the only way the government can actually afford to not crowd out all investment within a, quote, budget. So it also takes a dramatically larger amount of aggregate money supply expansion to have a smaller effect time after time after time. So I look at what's going on as very simple. I mean, yes, there's no doubt that aggregate demand in the U.S. economy is going to contract. And you cannot have this large amount of money flowing out of the banking system,

which is, after all, the community banks, it's not the J.P. Morgans of the world, it's the community banks across the United States that fund small businesses, which is the engine of growth in the economy. And that is a leading indicator as lending goes for small businesses throughout America. And I'm not talking about, you know, the next tech company or the next entrepreneurs that I'm talking about. You want to open a local store, a local laundromat, a local, you know, bodega, whatever. It doesn't matter. You know, whatever it is you're doing, those are the businesses that rely on bank lending, which now is getting incredibly tight.

Why? Because, as Mike said, bank deposits are leaving and moving to money market funds and other sort of things. And the banks are sort of zombified because they have all these losses in their balance sheet. So that's a long term process. Now, if you're the Fed, it's they're going to end up in a world where they have two things to worry about. And we always do. They're going to have titular headline inflation moderating ish because of the collapse in commodities that Mike talked about. At the same time as the leading indicators are going to suggest unemployment is going to increase. But that takes time. And so the likelihood of what they're going to do is the same thing they did the last time and the time before that and the time before that. They're going to tighten too much and tip the economy over and then have to panic. And the

asset markets these days are playing a, I don't even want to say chess. I mean, it reminds me of my favorites. One of my favorite scenes in one of my favorite movies, The Princess Bride, where Wallace Shawn, the character, the Sicilian is saying, you know, surely you cannot choose the glass in front of me. And it's like, well, because I know you're a smart and he goes through this whole thing. You know what you can do? Well, at the end of the day, asset markets are saying, yeah, we kind of understand this is what's going on, but we think the Fed's going to inject money again at some point because they're going to have to, and that's going to float assets. Now, the problem with that narrative, and there's lots of problems with that narrative, is that it will not be even. The assets that will rise more than others are going to be ones that are delinked from the material

Main Street economy, and ones which have to do with basically are inversely related to confidence in institutions, because ultimately, when Belay was going on his brilliant narrative on Tuesday on Twitter spaces, you could sum it up to basically that there's a set of assets that effectively represent a hedge against loss of institutional trust, and that loss of institutional trust is likely to accelerate. And so this is a very long-winded way of making my point, which is, I feel like if as long as the quote recession that is induced by what the fed is doing is not incredibly severe from an asset point of view and as long as people continue to think they're going to reliquify afterwards i would be really surprised to see bitcoin go you know go down uh i would not

be nearly as surprised to see the s p and more more importantly, the Russell, which are the smaller companies in the stock market, would not be nearly as surprised to see them go into bear markets. Now, make no mistake, I'm not talking about a crash here. I'm talking about a gentle delinking. It wouldn't surprise me to see markets diverge. Because the last time we looked at Bitcoin at this level, it was, we have to go back way before the, you know, not this level, but this sort of chart pattern, this sort of behavior of volatility compressing. We have to go way back before the recession, before the pandemic, to when it was bouncing around in March, April of, what was it, 19, at somewhere between 7,000 and 9,000.

And we kept saying the same thing. It was in a really tightening, you know, the range was there, yada, yada, yada. I think that 28 and that trading range is very similar to that. And at the same time, if you look at my favorite chart, which you should pull up from, you know, the total hash rate. Baltic Dry Index. What? hash rate. Baltic Dry Index. What? Is it the Baltic Dry Index? Well, that talks about the economy.

My favorite chart about Bitcoin is the hash rate versus the price. Yeah. That is, you know, the Bitcoin hash rate just continues to look like the bull market in the S&P, you know, from the lows after the global financial crisis to right before the pandemic. And it is it's one of the tightest, you know, upward sloping to the right charts, and price doesn't look anything like that. And the I was reading a post this morning talking about something that was I thought was a profound point, which is the use cases, the utility, the reasoning behind Bitcoin is starting with the, quote, global south and will eventually migrate to the global north. And talking about what that is and how Americans have a hard time

conceptualizing it, particularly academics and especially the ones that get called from Congress, like someone from Duke who basically assumes his answer before he makes his point. And this is a very long winded way of making the point that, look, you know, the macro situation is very interesting because I think everything points to what Mike is saying is going to happen. And then people are saying, okay, well, what is the fed going to do there? What is, are people going to be more or less confident in our institutions going forward? I mean,

we are literally politically facing a nightmare scenario of a Biden Trump rematch, right? You know, it's like, it's, it's like, you know, our macro situation. no i mean seriously that that but that is literally what that would be so depressing you're right that would be a depression but it's not it's not depressing for sure great depression people it's it's it's it's the dream of both parties the republicans want biden to win because he's too old the democrats want um trump to win because people like me just can't vote for that person, even though I'm Republican. Right. It's it's it is. But the problem with all that is it means that gridlock and what goes on in Washington is the same. And you have a very recessionary

scenario with increasing regulation and no end in sight that that's not a good thing, right? And people have to understand that that is true. I mean, the biggest single effect on economic growth, there are two. We talk about all the time, we talk about money and ability for credit, but regulation is a very big deal. And I'm not talking about crypto regulation. I'm talking about all of it, You know, there's the sheer number of lines in the Federal Register and the things that are going on. And, you know, from an economic point of view, you need to do something if you want to keep goosing the economy. And it used to be, it wasn't all that long ago, that the goose to the economy was the Fed. Then it switched to, we need the Fed to bail us out from inflation. But you notice that what's happening is you're getting no real movement

outside of monetary policy. And that is not a great thing. And why people like Belay are talking about eroding trust institutions, that sort of trend could accelerate. And I think that's what he's talking about. And obviously, once again, not the 90 day million dollar thing is is irrelevant. What it is relevant is the loss of trust and whether that could accelerate at some point and what that event could be. And I do think delinking is nigh, as it were,

between certain assets. Now, there are lots of crypto assets that are more like tech companies and will and I think you'll see Bitcoin if I'm right, I think you'll see Bitcoin dominance outside of potentially what could be happening with Ethereum with the Shanghai upgrade, which is definitely worth talking about, by the way, is you will see that increase for those reasons. Can I piggyback on that a little bit? Because to me, what Dave just described is what I started talking about about a year ago, the greatest economic reset of our lifetimes. And every day that goes by, what you just said to me is just adding all fuel to that. Obviously, it's political. It's typical reversion of biggest pump in liquidity ever that's dumping and to the macro, but the political is part of it. And I look over in the little charts like I published this morning, I see the 100-week moving average in NASDAQ rolling over. Last time it did that, the Fed was already easing aggressively. And it didn't give you a chance. Once it got back up to that level of the market, it was time to start buying again. But this time, the market's back up that level. It's rolling over. The Fed's tightening. The economy's going to recession. What are you supposed to do? Sell. It's just my indication is just sell. And yeah, maybe I'm

wrong. But sometimes if I see a hurricane, I'm supposed to see it. But the thing is, I fully expect Bitcoin is going to continue outperforming all cryptos. But 22,000 cryptos and things like Dogecoin and Shiba Inu with value, and it shows the inflation in the system, that needs to be purged. That's just indicative of what happened in almost every major pump and liquidity we've had in the past up to the 29 crash that ended in you know 30 up to what happened to 2000 the internet bubble you got to get rid of that excess of of liquidity and risk assets and excess of a speculation and dogecoin and shipping are just nothing but pure speculation machines and then the maybe the there's a hundred cryptos that matter and the number one is bitcoin

how much we want to get in cryptos i don't want to know too much i don't know if we should get into much but i just cannot see a picture my view of the sv500 going to 3000 dropping just another another 25 which is easy in a recession i just can't see bitcoin going up in that environment right away now initially gold will go down in environment and then cover and the only thing that should typically go up in the environment initially unless the fed's tightening which they still are is long bonds long bond yields should continue declining which as i see happening it's already tilting that way so to me we're getting towards the real part of what you said the Fed is so

trapped, but they're trapped because they put themselves in the trap. They waited way too long where they should have started easing it, tightening at the end of 21 when the stock market started making new highs. And they didn't. Now we're way too far past it. That to me is the lose-lose. And I like to, in this conversation, say, OK, how are we going to get out of this? How are we going to manage our money properly? And why? What stops a normal correction in the equity market, which is almost the complete goal of the Fed to reduce the ability for people to buy stuff?

And then by this time next year, I fully expect we're going to have severe deflation. And the Fed will never ease with the ease they have in the past because the lessons they've learned of too much liquidity and inflation. And this is what's different from every single Fed ease in the past because the lessons they've learned of too much liquidity and inflation. And this is what's different from every single Fed ease in the past, particularly during the 87 crash and particularly during when they started easing in SEP 2000. I'll end with this. SEP 2007, they started easing. PPI and Bloomberg Commodity Index were on clear upward trajectories.

They're still heading higher. PPI peaked around 10%. That's finished goods. That year, PPI is now running 6% and crashing now. And the Fed is still tightening and commodities are crashing. The Fed's still tight. That is a depression based on all the history of what happened during the Great Depression. They tightened when things started tilting down hard. The key, only one shoe's left, and that's U.S. stock market. Housing markets dropping at a greater pace than it did from the peak from 2006. The key thing that hasn't started dropping is owner's equivalent rent, which is CPI. Major lag, usually about six to eight months. Yeah, there's a few things to

unpack in there. First of all, housing markets, not down here, which is kind of surprising, but it is interesting. There are a couple of time bombs in the economy that have to be talked about, and probably the single biggest one is the one that is keeping Powell up at night, which is commercial real estate. Commercial real estate, particularly in the megalopolises of New York, Philadelphia, Boston.

San Francisco. Washington, Chicago, San Francisco, San Francisco. I mean, the word disaster does not go far enough, right? You, we have leases are going to end and all these things are starting to roll over and you have 50% occupancy rate with literally no end in sight for it to go higher. I mean, just there is no way that it just isn't demand. I mean, the companies that are leaving are it's going to accelerate. I mean, Chicago, I mean, no, with all due respect, you know, I went to school out at Northwestern. So, you know, it's a bit sad. Chicago is in deep, deep, deep trouble. You know, they're getting triple whammied this year. People forget that

the new crime bill, which we've already seen what it does in New York, went live in January. So those that's a lagging indicator on crime. They elected a defund the police mayor. At the same time, the Illinois legislature and governor seem poised to enact very tough restrictions, even worse than New York's DFS on crypto trading, which effectively is a very big marginal thing for a lot of Chicago's trading firms. You could see a mass exodus. I mean, Citadel leaving is a big deal when the number one guy leaves. But the real damage is when the hundreds of other smaller firms say enough is enough. I'm not safe here. I need to leave. And this is not a trivial thing. San Francisco, it looks the same. Those commercial real estate loans are sitting on the books of

community and regional banks. And it is not a good thing. When you take that along with all the other unrealized losses, understand that while the Fed is tightening in the sense of they are raising rates, they also made $4 trillion available to bailout banks, because Powell understands what I'm saying. So this is the BTFP, that program. Don't forget about that. So when you talk about the notion of trust in the economy, there's a reason the S&P hasn't rolled over despite what seems fundamentally obvious. The reason is people think that the Fed is actually isn't going to have to and is already injecting liquidity in a sense, while at the same time raising nominal rates in order to try to control it, which is a hell of

a tap dance to play. It's a definite, you know, one hand doing one thing, the other hand doing the other. And so, yes, there's no doubt that we are, that the Fed's raising rates is going to impact. But if you think about what they're doing, and this is incredibly cynical, Scott, so I apologize for that. If you think of what they're doing, they're basically trying to extinguish the massive policy mistake made in the pandemic. Now, the massive policy mistake made in the pandemic. Now, the massive policy mistake made in the pandemic, there were lots, but many actually, but the one I'm referring to in this context is helicopter money. And, you know, we had 30 years more or less of pretty consistent asset

inflation to suck up all the money that was being printed, all the liquidity. And in the pandemic, the liquidity went directly to the individual. And that triggered a massive surge in demand above trend that started that it got to consumer inflation at the same time that supply chains were being crushed. So the question is, is what's the best single way to reverse that? Well, I mean, people aren't saying this out loud because they don't want people to get wind of what they're doing, but it's what they have to do. They have to create conditions for the supply chain to reliquify. Right. So people can do capital investment at the same time as taking money from the average individual because we don't want it to show up in consumer inflation because politically that's what's considered bad. I mean, I hate to say good inflation versus bad inflation, but it's literally what the goal of policy almost has to be. The reason they can't say it is because what I've just described is an institutional attempt to increase wealth

inequality dramatically again in order to get back to what was considered a Goldilocks environment of asset inflation without consumer. Right. And the very, very critical I realize, and I'm sorry about that. Go ahead. I mean, I just want to add to that. And not that this is specific to commercial real estate, but, you know, Blackstone once again limited their investor redemptions again in March. You know you know, everybody talked about how this was happening in crypto last year. You would go to a Celsius or a Voyager before the implosion and try to withdraw and they had frozen the ability to redeem.

I mean, Blackstone, this is one of the biggest real estate REITs in the world. And they're not letting people take their money out because there's been a bank run on these REITs. I would also have to imagine, and I don't have data for this, but talking about commercial real estate and what a huge signal it is, isn't every major institutional investor, including endowments, pensions, they all have to have some sort of massive exposure to commercial real estate in the United States, correct? Through some kind of REIT

or something. So, I mean, it's not just that the real estate market is slowing or that commercial real estate is a problem. It's the domino effect that could likely happen on the back of that. Not my core competency, but that just seems like a very obvious assumption that people are heavily involved in this and invested in it. I mean, Mike, you might have some data on that or just thoughts. As Dave was speaking, it's one subject that i've um done a lot of listening to and studying lately and as he was starting i knew he was going to go there

the key question i like to ask myself i just pull up the bloomberg commercial read index and it looks as bad or worse than it did in 2006 to the bottom to 2009 and the key question simply is you always ask yourself is what stops this trajectory and putting, you know, focusing on a few trees in the forest misses the entire forest. That is rates are still going up from the Fed at the highest base in history. If you do like just log measure from zero and on a global basis and everything is just starting to turn over in the macro. So to me, that's where the one key thing is. We're going to wake up the next time we're going to have a call.

We're going to say, yeah, oh, man, NASDAQ or S&P was down 10% in a week. And that's usually how it happens. It's got to drive everybody crazy. I mean, that's what most markets do. And then poof, it starts to trickle down. I think that's the trigger. That's the final leg in everything you're saying. And unfortunately, we're having this conversation, but it's that serious. And anybody who's still not buying two-year notes at 4%, I think, is seriously missing out what the opportunity is here. You're supposed to just say thank you, buy some safe assets, and just take everything else and underweight. I mean, to me, that's what when the tree was at 5%, what happened right after that,

we had these little few little trees of banks going under. Now you're getting the forest and the forest is burning and the Fed's still throwing fuel on it. Yeah. I mean, it's fascinating because look, the GFC was mostly about residential real estate. Yeah, there was commercial real estate speculation, but residential real estate was a big deal. I mean, you're reading the stories of strippers flipping houses. You know, we all saw the big short, you know, yada, yada, yada. Now we are into year, what are we, year three now of less than 50% and obviously well less than 50% commercial occupancy in commercial real estate. No one's flipping it, but we've had 50, literally 50, five, zero percent. That can't go on for that much longer. The reason Black Sun has to limit withdrawals, just to be specific about it, is because God forbid they actually had to sell residential real estate. Who's going to buy commercial real estate? Who's

going to buy it? So we have a market. Real estate is a funny market, right? Because unlike other assets, we have a couple of cross currents that are going on in real estate. One of the reasons that real estate markets haven't rolled over nearly as badly is because the buyers for bargains, if you were going to try to sell it, are locked into their mortgages. I mean, like I have a three and a quarter percent. You're not going to ever sell while mortgages are 70%. Why would you do that to yourself? I literally think about the but but think about how much everyone, you know, in this economy, you know, people talk about, well, Fed now is going to make things go faster.

We already have smartphones and we can go in here and we can withdraw our money in seconds. We saw the bank runs. How many people didn't refi during the period of 2% to 3% 30-year fix? And the answer is a very small number. Almost everyone did, which means that the real estate market on the residential side is stuck in amber. So that's why you haven't seen a lot of those things. number. Almost everyone did, which means that the real estate market on the residential side is stuck in amber. So you're not, that's why you haven't seen a lot of those things. But in commercial real estate, why is it stuck in amber? Well, I mean, at the end of the day, if you're a tenant,

you know, you're not, you know, you don't care. If you're an owner, then you're forcing people to try to use the buildings. But the fact is, is a lot of the owners are in REITs and the REITs don't have to sell unless people liquidate. And if they gate those assets, it's tough. I mean, that to me is the domino. That's the one that I think the Fed is worried about because, you know, the hole in the balance sheet from them raising rates and causing, you know, duration mismatch. I mean, duration mismatch is a very cold clinical term for the traders at banks lost tons of money and weren't accountable for it, right? I used to be one of those and I remember doing that. Because every trader in an investment sense has to mark their positions to market. Well,

the banks didn't. So, okay, we got that. That is much smaller of an amount than the, if commercial real estate were revalued, say 25% to 40% lower, which by the way, seems tame. You know, for example, rent per square foot in New York is still triple what I'm paying down here still. And that's for the new stuff on the margin. Who knows what happens, you know, when they have to really start, you know start cutting? I mean, you literally could see a 50% fall in future cash flows. And oh, by the way, as Mike points out, most of those commercial leases were done when rates were a lot lower. And so you have a double whammy on value of commercial real estate, which is occupancy

and demand is lower for the actual physical stuff, right? People need less of it. And oh, by the way, the financing is going to have to roll over at some point. So what's part of the key macro to that is I think this is this, this hundred year events and so many things all colliding. And that is, we've never had a period in history like this. I remember reading Sidney Homer's history of interest rates. I'm sure that'll tweak you a little, Dave. And those of us who trade interest rates used to live by that book. Zero and negative rates for so long. So markets got addicted to it, particularly in Europe, when you get these adjustable rate mortgages that one-third are all shifting higher. Almost

every other country but the US. And that, to me, is part of the hangover that just is getting started and the Fed's too aggressive taking away that punch bowl in the macro. So what you're to me, I think REITs, housing peaking, all these things are just, they're all trees and the forest is, tide's going out, macro, and the fed's still tightening and they have good reason because lagging inflation numbers but i like to say well bloomberg commodity index down 20 natural gas and lumber have dropped the same price first traded in like 1991 92 that's like pretty deflationary the markets are telling you that anything that's lofty like you said first that you should be looking to sell rallies. What got lofty recently?

Crude oil popped. What's still lofty? Corn. Corn's up a little bit. I mean, that's probably going to, we're going to have a massive supply coming on. What's still kind of lofty? Copper's popped. And what's the most significant?

The stock market's popped this year. Everything, all these little, we used to call it the, you know, when the baby seal trade, and it's politically incorrect to say that, they get hit when they put their head through the ice. I figured that'd give you a smile. But I worked with Japanese firms. They thought that we would do it as just, you know, nicely, but it's just how it is. It's whack-a-mole.

And I think that's what market's going to start doing as we get toward the end of the year. You're going to just look at whack-a-mole trades and anything that's lofty and shouldn't be is going to get whacked. Bitcoin's a bit lofty right now. If you look at it on a 100-week versus 200- day average, I mean, I'm so bullish long term. But in the short term, you got to put your trading hat when you think everything's tilting over and say, OK, well, what are people going to hit first where they have some money?

Yeah, I mean, there's certainly a element of that. I mean, as I said, there's a ton of cross currents that we've talked about and cross currents get for very interesting markets and markets are a, you know, what's the old expression in the short run? It's a sentiment, it's sentiment driven in the long run, it's a weighing mechanism and, you know, we'll get it, we'll get it right. I mean, look, the thing that, that knowing there's a time bomb in the economy and it's one that it's, sometimes I like to, you know, talk about our leaders as if they're morons. There are definitely some in our leadership that are literal, literally ignore all facts if they dispute their narrative. Jerome Powell is not one of them. I mean, Jerome Powell is not dumb. In fact, I actually think that so far the playbook he's following is pretty much what he has to do. I mean, you know, he's been asked to do something that he cannot do without legislative and administrative help. I mean, the executive branch and the legislative branch do nothing to combat inflation, in fact, actually throw gasoline on the fire. And Powell sitting here saying, listen, you're asking me to do this. But at the same time, I know what I'm causing because I'm the bank. I am a bank regulator and overseer, and I know what the bomb is in the middle of the economy. I mean, just think about that, which is why I think

the market is doing the, surely I can't choose the glass in front of me move of saying, well, they're going to have to reliquify the economy by the back half of this year because of everything Mike is saying. So I don't want to sell my assets. Now, I think it's really important to understand the types of assets, though. If you're talking about tech companies that have no off exposure to commercial real estate, if you're talking about things that are basically the economy is going to be one of those things where if you're not banking exposed or exposed to commercial real estate or other things where disasters are coming, your stock is going to do better than the ones that are. And so I agree with you that there is a hurricane coming. I just don't know what things it's going to hit. I'm not sure that it's a hurricane that hits everything because the market is assuming

that when that leading edge starts to show up, the Fed is going to be forced to pivot. And the hope, and I hate hope, hope is a terrible business strategy. I already talked about that. But the hope among investors is, listen, we're hoping that they do so before my portfolio is destroyed. And you make very good points as to why that won't be the case. And I don't know. But what I know all of this, however, the meta trend here, well, let's go met if there's macro, and then we got meta, the meta trend is distrust in institutions because they can't work. And to me, that is a very big reason why I am in crypto. It's a very big reason why Elizabeth Warren's anti-crypto army and the idiotic report that came out of the White House, which was self-serving and ignored stuff,

or even worse, the New York Times Bitcoin mining expose, which was data deficient, to say the least, why this narrative is being used. And it's because people don't trust institutions anymore. And I think that from a crypto point of view, it's really important to understand that D-Link. It's also important to understand that D-Link, that technology companies that are multinational, are not as impacted as companies that are directly in the U.S. domestic economy that have ties to banking that need bank loans, et cetera, et cetera. You're right, Mike. I just don't know that it's going to be that tsunami wave that affects everything.

And maybe it will. I don't know. But it feels to me like the market at least is saying you know whoops it feels like the market's saying okay the train is going to leave the station because if that's going to reliquify and so they're both they're they're betting on that and i just left the station you just left the station right i kind of want to say that as with my trader hat on the same way you do, Mike. So I think that I actually fall somewhere in the middle. I think that, and we have the data, that factually Bitcoin has largely

decorrelated over the last eight to nine months, right? Starting in sort of June of last summer when we had that final crash, clearly with the black swan of FTX. And now on a 40-day rolling basis, correlation is sub 0.2 with stocks. Okay. That doesn't mean that will continue, but right now we do have a lack of correlation, even if that's just Bitcoin boring, going sideways at 28,000. Mike, I also tend to agree with you that the worst is probably yet to come, but I want to actually just show a couple of charts I've been pulling up here. Just ask you,

Mike. Okay. So S&P, obviously, this is SPX, showed a 28% drop from the top around 4,800 to 35, right? So you, obviously, we talk about 40 to 50% being a true sort of correction in bear market. But if you look at QQQ, obviously, which tracks NASDAQ. We had a 38% drop. That could be enough for a bear market in theory, right, that we've already had. And also, you mentioned that we're trading, you know, about 10% above the 200 MA. If you look at the trend, I mean, at the top, it was 41% above. So number one thing to remember about charts is they're designed to make you lose your hair. I always say focus on the weeklies.

And this is from an ex-PIT trader. And the lesson you learn in a trading pitch in Chicago is there it's all about charts. You come to New York and it's all about fundamentals. Now it's all about everything. But that's the key thing I like to point out is markets and charts will make you lose the bigger picture sometimes at the wrong levels. And one thing I always like to do is like relative values versus moving average. So I pointed out the 100-week moving average in the NASDAQ has rolled over in the market,

just kissed it. And what's the Fed doing? Typically, almost every time in history, markets aren't about the economy. They're about the Fed, unfortunately. That's the umbilical cord the Fed's cutting. And they've made that statement indirectly, indirectly. It's the only time in history you're going to have a chance to finally have, as some of your commenters say, I don't have to know the names of the Fed governors anymore. I can look at the fundamentals of the investment rather than

what the Fed's doing. They're cutting that umbilical cord. And the only way to really do that is to have the pain in the equity market. So that ease that you need for the stock market to go up is not there. It's not going to be there until the stock market goes down, according to my interpretation of what the Fed's saying. In addition, then we have this recession going on, and we have the history of the Fed's never going to ease at the ease they have in the past. So all that stuff you learned about in the past is scary. So the lesson I liked, I was just playing around with the 50-week moving average versus the 200-week moving average on the S&P 500. The 50-week moving average is crossed below.

People call it a death cross. It's about 5% below the 200-week. It's the most and typically pretty deep. And there's never any time in history, I think it went back like 80 years, where the Fed was tightening in that environment or within a day. They almost always started easy. That's the difference. It's the markets changed. Everything's changed.

And we have these confluence of 100 year events kicking in. So I'd say be careful with the charts. And that's why I think I completely like that fact that the de-correlation of the Bitcoin, the key thing to remember, as we all point out, is when the stock market, the S&P 500 goes down with high velocity, which I think it will, everything's correlated to one. And this time it'll probably be bond yields won't go up this time. They'll go down. And gold will probably go up.

That's what was the change last year that really made it worse. The key thing is when that starts, which if it doesn't, McGlone's wrong, that Bitcoin will probably see pretty significant pressures. But we should see a lot more pressure in all the other cryptos, the ones that are just silly speculation, and maybe flush them out eventually. We all know we got to get rid of that for this to be a legitimate space. Go ahead. Sorry, finish.

No, you got it. I mean, it's probably good. It's a rant. So that to me is immaculate, but be careful. It's the key thing about charts now is the lesson I've learned. It was hard enough to do before. It was all bots and AI and algorithms. Now it's the key thing about charts now is that the lesson i've learned it was all it was hard enough to do before it was all bots and ai and algorithms now it's more so and the key lesson i learned being a technician people claim i'm a technician a lot of times they say i'm an anti-technician when i

see signals that the majority and dave's laughing because when you see the widely watched signals you see i say i've watched right now in front of me i have cnn cnbc and bloomberg when i see something that hits the tape sometimes as a trader my first influence is oh death cross okay do the opposite because of course yeah so you got to be careful that so that's why i like to point out as people are saying oh we crossed above the 200 week or 200 day it's bullish then that's usually the opposite yeah to me it's seen the fake outs a thousand times yeah so here's here's the biggest fake out in the history i warn you about and that was in 1929. The S&P, the stock market dropped about 50%.

It rallied about 50% in 1930 and then rolled down. And almost every single time the Fed starts easing, you get that bounce. I remember it in 2007. And that oftentimes is the one you're supposed to fake. Totally agree. I just wanted to make the point. I wasn't, yeah, I agree with you 100% on charts. I was just sort of making the point of how far it's retraced and whether it was enough on the first drop before we got here.

Okay, here's one key thing I'll end with. It's not so much how far it retraced. It's where I started with. It's the mean reversion. How far did it go initially? If you look at the NASDAQ S&P 500 versus, say, a 60-month moving average, right at the peak in 2021, 2022, this is where it was the highest in 20 years. Okay, so what happened in 29? Market went too far, went back down too much. What happened in 87?

Market went too far, went back down too much. What happened to the housing crisis in 2006? When people like even Chairman Greenspan, oh, it's never gone down in an annual basis. It just went too high. It goes down. That's what's happened. We're just reverting from going up too far in virtually all assets because of the most significant reason ever, that pump and liquidity. Now we're going down.

The key question is what stops it? Right. And so that key question is what matters. I mean, as I said, time bombs in the economy that are, I mean, these are not small things. I mean, the Fed, I think you're right. I think they've been very, very clear in speeches. And we're going to get another rash of speeches this week. They don't give a crap about the equity markets. The Fed put, which was there for years and years and years, is gone. Poof, gone. They don't care. They don't want to fuel those asset prices. What they do, however, worry about is the integrity of institutions such as banks,

credit unions, et cetera, throughout Main Street. That's what they care about. And the fact is, I think what you're seeing out of stock speculation is people assuming that that latter effect will mean that they have to reverse their policy. And I maintain that the reason they raised rates last time is I would be beyond surprised if in the halls of the Federal Reserve, as they were talking quietly among themselves, not in the minutes we're going to see this week, because God forbid they say this publicly, Powell or someone said, listen, if we pause now, people will realize just how big of a shit. Well, he won't say it wouldn't say the word shit.

They can't admit they were wrong. So great. How big of a shit show it was. They expect it. And so we absolutely can't pause now or people will panic thinking that the situation is wrong. So let's just put this backstop facility so that no more banks go under. Let's let the economy work things out. Let's do what we're doing and give us the chance, give us the escape hatch to not continue to raise if we see fundamental weakening. I mean, I personally think

that if the CPI print comes in at all reasonable, given all the things that are coming in, that the market's saying 50-50 they're going to raise in May. That's what the market's saying. I saw that this morning. That's what Fed Fund futures are saying. If they raise, it'll be the last one. And it's highly, to me, it's much less than 50%, unless we get a high inflation print that's a nominal thing that the political pressure is forcing it. Remember, Mike and I, we talked about this to 2023. They could allow a lot more pain to happen. 2024, they are not going to allow pain to happen because of the political cycle. So, you know, whatever pain is going to happen is going to happen this year.

And because that's what people are looking at. So yeah, maybe they raise one more time and maybe they wait to pivot. But that's really the question. The question is just how much rot is at the center of the economy when you take commercial real estate into account, when you take housing into account, when you take the T-bill losses and bank balance sheets into account, and how important is the broader banking system to economic growth and small business formation? Those are the things that matter. And I don't have great answers for that, but what Belay was talking about is all of this is really bad for trust. And by the way, just to echo what you were saying about, you know, Shiba, I know I get tons of horrible Twitter people saying, how dare you impugn our community?

Me too. in my mind between probably 95% of all the crypto assets on CoinMarketCap that are not stable coins and the 95% of the OTC and small cap internet. And the difference was those internet stocks did after the internet bubble in 2001 did go to zero. And then, and you know, you had, it was like, there's, if you study sociology and you go look at, at civilizations, the Yamamamo Indians use what's called slash and burn architecture, slash and burn agriculture. They literally burn forests. That's one of the problems of rainforest and deforestation in order to create. So they burn everything and start from scratch. The market creative destruction and capitalism is about the same thing. And what happened post-internet bubble in that technology is it was a huge burn. And most of those companies failed, right? Just literally, factually most failed. And out of those ashes

grew Google, Facebook, et cetera. Amazon was the sole survivor. I agree with you, but I do want to make the point. I think people don't look far enough down the crypto risk curve to see how many projects literally have gone to zero already. I would say that 90% of the cryptos that exist, even though you've never heard of them, have already been slashed and burned and literally gone to zero. I can tell you all the pre-sale investments and seed, that whole sort of wave that we just had that was reminiscent of the icos from 2021 most of those coins literally are down 99.9 percent have been abandoned and aren't coming doge and shib maybe sort of the uh because we live in a world where you can meme something into existence and and we've seen that right i mean listen gamestop and amc are going to continue to exist as well to me that's

the corollary for doge and ship specifically but the rest of this has gone to zero i can't tell you i sat on a twitter spaces last week and it was right when elon musk changed the twitter logo to doge and they had five people come up on stage with myself and simon diction who had a million followers each and some form of doge something in their Twitter name. And I literally sat there for 30 minutes pulling my hair out. I wanted to look like Mike to argue that Doge was literally not going to become like the global reserve currency or the currency of Twitter. And why did he do it? And these people are out there, man.

And they're really serious. But I just want to make the point that a lot has gone to zero. And Mike, I'm going to let you talk about it. But I do also, before we get done, I want to make the point that a lot has gone to zero and mike i'm gonna let you talk about saying it but i do also before we get done i want to talk about the debt ceiling because i we haven't circled back to it i want to see mike if you still think that's hyperbole if there's any threat there but go ahead i'll let um dave and i have a comment on that because um i think it's just part of some of the good and bad of U.S. discourse and politics that the rest of the world, people like Churchill, figured out. But it's part of our strength. Yes, it's seriously still we have this, but at least we debated publicly and you

get to know what's going on. It's not like if you want to do anything in China or Russia or anything, right, you're talking to President Xi or President Putin, it's their whim. So the debt ceiling is unconscionable that we would ever default and we won't. So I don't like to go there too much and let Dave comment, but I just want to follow up on a few things. First of all, this concept of what we do and what I do for a living has been doing this actually with customers since being in trading pits in the eighties. When you have someone respond to your call with animosity, number one, you know their position. It's obviously the opposite of your call.

Thank you very much. I know what your position is. You don't have to tell me. And number two, you know you tweak something. The key thing I like to hear from you, Scott and Dave, sometimes if you disagree with me, that's what I need to help hone that view. Because we all agree,

it's just like what happens in these conferences. You get nice, you get groupthink, and it's the absolute wrong thing you should do. It's the human nature kicking in. Another thing you mentioned, I just, on the Bloomberg terminal, I typed in this WIRP function. I love it. It shows the feds right now for May is 5%. So 73% chance they're going to raise 25 basis points. Then by December, it's going to be 4.4% and going down. And that was where I enjoyed reading that article this morning. Oh, the bond market's insane. And it's gone up the most in history from zero.

Just going down, reversion is going to feel the same thing. It's going to feel insane. But the thing is, it's going to happen um with a serious lag which means it's fed stuff this is that lose lose this is that economic reset that's almost inevitable right now and that's still part of it but it's also what's going to happen next year it's virtually guaranteed we're going to have a sweep out of anybody who's an incumbent will be when you go to a severe recession anybody's in yeah it's pushed. And it's over. And obviously, Trump was, as Scaramuzzi pointed out on your podcast last week,

is still anti-crypto. He has no clue about the dollar. He probably doesn't even know that his NFTs are crypto, by the way. Or that he has NFTs. So the key thing is we're more likely to see a young Republican. Now, who that is, I don't know.

But if they're business friendly, are they going to do just, you know, maybe go back to those days you have to provide the social network system like FDR did. But remember, Hoover got that started. So the one wild card here that I think I don't want to talk about, we're going to have plenty of time to talk politics, you know, as the year progresses. I mean, you know, it's just annoying. But the one political thing that is interesting is answer me this question. The rumors were circulating, you know, five months ago or so that May Yellen was going to step down. When the banking crisis started, it was pretty obvious they weren't going to let her step down because then it would be hanging the banking crisis around her neck. So the question is, if they get another few more weeks, a week, he go through without any other bank failures and everything

gets copacetic, will she step down? Now, why do I care about this? I care about this because of your colleague, Mr. You know, the stalwart, Mr. Wiesenthal. If they put in someone in the head of the treasury who is not steadfastly against the notion of the platinum coin, then you might see a game of chicken with the debt ceiling, which doesn't result in us violating our bond covenants, but does have a symbolic effect that I think could be rather dramatic. And so it really matters. I mean, if you answer the question, if you told us they are through the debt ceiling debate, I think that both sides will blink and eventually 11th hour negotiations will happen. Maybe it goes over the line and we default for a couple of weeks, but we deal with it. If, on the other hand, she's gone and they replace her with someone who's a modern monetary theory adherent, expect to see that minting at least as a credible threat so that McCarthy and those guys realize that, well, we don't really have the leverage we have so that they can't push for as much spending reduction

as they want to push for. To me, that is a very big deal because the narrative space where really matters around the debt ceiling is, is the US going to do anything that irrevocably hurts the symbolic value of the dollar as a reserve currency because it really is all about narratives and symbolism here i mean even it's like people talk about the yuan replacing the dollar i mean right now the one is pegged to the dollar so yeah okay they're using it how many times in your career have you heard that same statement i'm making fun of it when i'm since i was a child i've heard the same thing like okay you get it's like bitcoin's gonna fail i'm making fun of it when i'm since i was a child i've heard the same thing like okay you get it's like bitcoin's gonna fail okay i'm getting sick of hearing it well it's like yeah exactly and so the real question isn't uh will the dollar lose its reserve currency because whoops looks like i

did you guys hear you we can hear you yeah let's figure else just keep talking no problem we're almost done okay yeah i mean, I mean. Right. We'll do it this way, so we'll switch to a different camera. In any case, the fact is it's not about the dollar losing its reserve currency to another fiat currency. The issue is, will people lose faith in the in fiat currencies and will accelerate? And how much will that happen? And that's where a lot of things going on. And I think the platinum coin is very important for that narrative. And we'll see what happens. I mean, I don't know. I mean, I just said there, I gave, I tossed out, sadly for your audience, Scott, I tossed out a bunch of unknowns. But if you have a strong belief that

Yellen is going to step aside after another few weeks of calmness in the banks. And there's going to be a new secretary of treasury who might be more sympathetic. I was just going to say, oh, we all know that that's what happens. I don't even know if that would be, I think for crypto, that'd probably be good. Oh, help us. I have absolutely no idea. Get him out of where he is now. Just move him from where he is. He can go be president at this point.

It might help us. i don't know i mean it's yeah i mean i i i yeah you've rendered me speechless i don't know what to say about that other than the way that that it is a very big deal and it's something that bears a lot of watching but i i gotta follow up with one thing i know at the end here but i have time you go ahead, that's a key statement that is win win in the macro for Bitcoin is this is I look at it. If you're a superior being or an alien or someone from the future, you ask yourself, OK, well, they figured out how to fly. They figured out fission and figuring out fusion that they figure out global money. You know, that's that's a touch of a touch of a button like they can email yeah they're getting there and there's only one it's bitcoin i mean i i'm sorry but ethereum helps make dollars

happen other things happen but there's only one that's just like digital gold and it's so easy and it's like that's a key difference during the great depression everybody was still on the gold standard and that didn't work out so well but the bitcoin i mean it's like safety namas in his book we're going towards a bitcoin standard i just don't think it's going to be easy or or be too quick guys it is 10 31 yeah i don't know if dave did you have something you were just saying you were agreeing yeah well first of all i want to say a special note both mike and dave that this has uh while even in the midst of the bear market as as things are down, this has become by far a, my favorite, but also our most popular, uh, stream of the week, uh, which I think is a testament to

consistency and just to your popularity and probably to the fact that our audiences, I would imagine on average, 20 to 30 years older than most YouTubers audiences, but it is great that, uh, to, to see how many people show up and then really how many people watch it and in in hindsight and afterwards uh dave also i consider it a successful stream anytime someone invokes a quote from my favorite movie maybe of all time the princess bride right you fell victim to uh classic blunders never uh get involved in land war in asia and less known as uh never go in against the Sicilian when death is on the line. Absolutely.

Perfect. Everyone. I don't know if we told you I'm going to be gone next Monday. Sadly. So we are, as I talk about consistency, I'm taking one week off. Sorry guys,

but otherwise everyone. Yeah, go ahead. Dave. No, I was going to say this following Monday, I will be traveling. Not a hundred percent. Sure. Somewhere in the say, the following Monday, I will be traveling. I'm not 100% sure.

Somewhere in the Middle East, I may or may not be available. You're going to do this with your phone in front of a temple somewhere or something. Maybe. And then tomorrow, I have to tell everybody, of course, continuing sort of the momentum with spaces. Mike, Dave, of course, always welcome. I'm going to have Mike Novogratz, who we've been chasing for about two years, and Chris Giancarlo, who is the former CFTC chairman. So that should be a hell of a conversation with the two of them about regulation. And if you don't know, Chris Giancarlo is actually working on a central bank digital

currency now that he claims will be fully private. So it should be a very, very interesting conversation. We will see. I hope you'll all be there. Mike it should be a very, very interesting conversation. We will see. I hope you'll all be there. Mike, Dave, once again, thank you guys so much. Thanks, Scott. Thanks, everyone. Let's go.