The Wolf Of All Streets - Fed Decision Imminent - Bull Or Bear? | Macro Monday With Mike McGlone & Dave Weisberger

Episode Date: April 25, 2023

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Bitcoin has seen some somewhat predictable retracement, a bit of a correction over the weekend. But all eyes now are really on the Fed meeting next week. I believe it's on May 3rd. And parsing all the data that's likely coming out this week to try to guess and decide what the Fed might do next week. Now, we try not to dive too deeply into the minutia and to zoom out here. But we are, as always, going to discuss everything that's going on with the macro with myself and Mike McGlone and Dave Weisberger. Let's go. What is up, everybody? I'm Scott Melker, Let's go. And then it changed to 10.30 a.m. Eastern Standard Time. And now we are obviously here at 9.33 a.m. Eastern Standard Time.

So we apologize if you did not get the notification and didn't know what time. But hopefully everybody will now figure it out that we didn't just magically change our live stream time by roughly seven hours and that I still exist in Florida, United States of America. So, guys, a lot going on this week. Obviously, I think the talk certainly of the community has been the retracement in Bitcoin, the larger retracement in altcoins. But that's not generally the core of what we discuss here on a Monday. We talk about macro and we have a big Fed decision coming up get a break on mike and dave dave you are in that time zone right now yep in sunny tel aviv and i mean really sunny yeah i think yes then we can blame you for the time for the time uh for the time problem which is dave's fault dave did it

guys no he didn't really we've hopefully got you upside down over there and confused as to as to what time it's going on mike welcome man i know you're uh still in my my time zone so listen yeah let's dive right in uh there's an article in bloomberg fed's next rate move may crystallize with coming data right and we're talking about u.s reports this week on growth prices wages eurozone gdp boj governor's debut decision mike does any of this matter? Is the Fed going to do what they're going to do? What are they looking at right now in advance of this meeting? And does it really matter? I think the only thing that's going to stop them from raising their 92% that they go 25 in the May 3rd meeting is a pretty sharp correction in the stock market.

I still think that's the main problem that people are not figuring out yet. Even the debt crisis might not get resolved until the stock market makes it get resolved. It's just how these things are right now. So I got to meet with Dave Altag of the Atlanta Fed last week. And I think he was surprised that when I told him, do you realize that the producer price index, it's only been around 75 years. It's falling at the fastest pace in the history of that index. And he kind of gave me a ham. He was very good.

I really thought he was nuanced in the meeting, but he did point out they thought they handled this banking crisis well. It didn't say it, but my implication I get from it is, oh, because the stock market and the markets did okay with the response. So they didn't do much. It was the treasury that did it. But the key things I'm pointing out right now is I have to warn our Vist listeners, need a little bit of a disclaimer, because my job is just to be a trader. I mean, I used to sit in those phones. I was a trader and I spent my whole time trying to help people mitigate risk and make money. We didn't have a view about anything except to try to make money my view right now is i'm bearish almost everything bitcoin ethereum stock market except for long bonds and gold and i have to say why because same kind of same

narrative we bounce to really good levels in a sense like getting in cryptos and doing all my resources the worst is over and i look at that as a trader when you've got money, you meant and you sense everybody thinks the worst is over. Yet there's a significant fundamental reasons for the worst not to be over. I haven't even started the recession. The Fed's still tightening and cryptos are still they bounced. Then you want to structure positions accordingly. So I think this 30,000 level in Bitcoin, 22,000 level and Ethereum are pretty serious. And when I can say things like a fact that hedge fund positions, managed money net positions and bonds, tens and five-year futures, this was my brethren.

This is why I started this. Shortest ever. Yes. And when you can say that, and there's only one case and example that was close was 2018. It was right around bond yields 10 euros peaked around three percent and then dropped to next to zero i look at that it was like in that environment you want to be selling stock market buying treasuries buying

whatever they're short i'm glad you knew that definitely that's and and buying things like gold you don't want to be long any risk assets now yes it could be wrong in a short time maybe just hedging but this is an example of how i think technology has changed i remember in the mornings when in the trading pitch first thing you'd go in the morning to get the sheets and you check out what positions were and what open interest did and stuff now it's all electronic you know instantly now this this data is once a week but to me it's just how it's migrating so fast i see that kind of data and i see what happened recently at Crude Oil. It bounced for a good reason. OPEC, it just squeezed the shorts going back to bear market.

Copper going back to bear market. And the sense I'm getting is most people are saying, oh, I'll bet a dip. I'm like, these are significant bear markets and commodities. You're supposed to sell rallies. And everything is teetering to me on the stock market. And cryptos might be pointing out you're supposed to be doing that short term. Now, yes, you've heard this narrative from me before. It takes a while.

I remember 2007 was a really tough year for me. I was trading them. But this is the way I see everything at the moment now. And the key thing I want to mention, leaving you with, is this. I think we're on the cusp of a significant deflationary cliff. And the only thing that's holding it up is the stock market. It has to stay higher or things like crude oil is going to just drop to 40. I don't see what stops it other than things I can't predict like wars. I just want to, Dave, I know you're going to jump in and go deep into that. But in 2018,

though, that all happened, but it was relatively quick, and then the Fed pivoted hard. That's the difference. The Fed will never do that again. I mean, I think for the rest of our – well, maybe I wouldn't say our lifetimes, but for the rest of this narrative, Dave remembers post-87 crash. We couldn't ever get into a steepener because everybody knew what happened during that crash. The narrative is going to be, okay, the Fed needs to ease. Economy is tipping over. Inflation is tilting towards inflation. And the Fed is going to, we're going to all, there'll be the major consensus out there. Well, they can't ease with the ease they have

in the past because of inflation they created last time. So to me, that to me is the bearst scenario that markets are starting to price for. It's pricing for 50 basis points for, actually by December, we're pricing for 4.5% and rates are going to go up about 5% in next week or two weeks. And to me, that's just not going to happen until markets force them to. It's the new world that people who have been buying dips in the stock market forever are not accustomed to yet, I don't think. Have at it, Dave. You're good. Yep, there you go.

No, you're good. That was my bad. You were ready. There's a lot in there to unpack. I'm going to start with the right-hand, left-hand analogy I've often talked about. If you look at the spread between overnight and three-month T-bills, it is rather amusing. It's an interesting curve. Mike can pull it up on the Bloomberg, to be honest. I'm on vacation. As I said, I'm in Tel Aviv, so I'm not like looking at it like a hawk. But you know, having read the excellent cryptos macro newsletter

from my friend Noel, you know, she points this out, I think it's fascinating. And effectively, what you have is a market who is sensing trouble of brewing with the debt ceiling, and people are afraid to take risk out on the curve, et cetera, et cetera. I think that's kind of a silly reason. I think a more obvious one is people think that the Fed's hands may get forced and they may think that there's risk at the debt ceiling for a couple of outcomes. I've said this before. I'm going to say it again. And after this Fed meeting, let's keep in mind two things. First, 5% interest rates are not harmful to risk assets in the history of risk assets. It merely feels harmful in the history of risk assets compared to 0% interest rates, which we had for a long time. That is important. Now that said, earnings flows, discounted cash flow models, things that us dinosaurs like Mike and I remember, will obviously have a stock price PE valuation rather different at 5% than at 0%.

But assets where you don't have E, you don't have cash flows. The real question is, what's it worth? And let's not forget, and we all know that I'm not a Bitcoin maxi, but I do believe that there's Bitcoin in the rest of crypto. And while they are incredibly correlated still, at some point they de-correlate. The Bitcoin narrative, I think, will ultimately end up being more like the gold narrative and not like the technology narrative. But I think that the technology narrative is more like the emerging pre-earnings technology narrative. And so what I mean by that is this. We've seen Argentina's central bank pausing the ability to act for two days. This is not good for people who believe in fiat money. This is an excellent advertisement for Bitcoin. At the same time, the demand drivers for Bitcoin are really people who are afraid of trust in the system. Let us not forget how small the market is. It would take one significant investor to take Bitcoin not just back up past 30, but back up to the old trading range, the one that I keep calling for, which is the 38 to 42 range,

not the 28 to 32 range. Literally, there's just not enough of it floating. We are at all-time highs in every other metric in terms of long-term holders, in terms of hash rate, et cetera. And yeah, Bitcoin corrected. Okay, so the 28 to 32, now it's 27, whatever. I mean, these are someone who I used to read a lot, a newsletter writer used to call them squiggles. The truth is we are still well

above any of the crisis lows. And the fact is, is there's still more speculation. So people got leverage alongside on this move and got washed out. I've said this a million times on this stream, Scott. You know, people who play with leverage in this market with an 80 vol asset almost deserve what's happening to them at this point. Hopefully they had tight stops and they lost small pieces of their position. But the fact is that happens all the time. My point, however, is that there's lots of things going on the macro side. I mentioned the overnight to three-month spread, which is just incredibly positively steep, despite the 10-year to three-month spread not looking like that. We also have shortages of dollars around the world.

And there's good arguments to be made that while the Fed will probably hike again, and maybe they'll only slowly cut rates when and if markets start to tank because they're worried about the political ramifications, or they're worried about the wealth effect or whatever they worry about. The fact of the matter is that they're adding liquidity at the same time. There is still an enormous amount of Fed liquidity on tap for banks that have problems and people know that. And the commercial real estate market since the last time we talked, which which was a few weeks ago, it has worsened dramatically under the covers. Now they're private, you don't get to see it. But the fact is office occupancy

is now projected to stay at these low levels. And that's definitely something that people at the Fed have their eyes on. So will they increase liquidity by one measure while increasing nominal rates in order to continue to put the consumer price genie back in the bottle? Yeah, that's possible. The reality is, however, if you're watching liquidity, that's what matters. The nominal rate is what matters. It's the amount of money sloshing around the system. And so that's sort of my thought process. My thought process is, and I said it last time, so this isn't going to surprise anyone, that we're probably range bound for a while until we get to a direction. One more point with a shout out to Mike's colleague, Joe Wiesenfall, aka the stalwart. The fact is, the Democrats now are starting to

leak to the left wing media that they're not happy with the lack of negotiation. So maybe we will get a resolution to this crisis. But if we don't, then the only real trick up the sleeve of the administration is to print the platinum coin. I still think it's a ridiculously unlikely event unless Secretary Yellen steps down. Don't laugh. If Secretary Yellen steps down and he puts in somebody who is pro that, it will happen because that takes away all the Republican leverage. And this is a game of chicken. And sometimes one party, when they play a game of chicken, sticks the two by four. We've all seen Flashdance. You stick the two by four in and say, OK, guys, you're going to swerve off the road.

It is not a likely scenario, but it is an enormously tail. It's an enormous tail risk to people's short risk assets. Let's just put it that way, particularly ones that are hyper correlated to lack of trust in fiat currency. So I want to keep people, since this is the last meeting before we'll know whether that happens, it's definitely something to pay out to. Basically, what I just said boils down to be careful out there, people. You have a lot of potential volatility events in both directions on the horizon. I don't know which one will happen. I wonder how many of our listeners and

watchers have seen Flashdance, because that would give us a very good idea of just what generation we're speaking to here. I saw it as a fixture of my childhood, for sure. You talked about, by the way, Fed liquidity. Interestingly, obviously, we saw this is the balance sheet I just did six months. Obviously, we saw the balance sheet sort of dropping dramatically through this quantitative tightening, whatever you want to call it, cycle. Here's the banking quote-unquote crisis, if that's what we want to call it. Obviously, a massive bump, but it is now dropping back down. So I guess it begs the question then, if they're tightening and this continues to drop, meaning there's no more bank failures or banks needing to borrow,

then could we effectively be back into fully tightening without sort of that push and pull of doing both in different places? I mean, Mike, what do you think? Do you think that we're just going to see this drop back down? That was a temporary thing? Or maybe we get more bank wobbles and they have to inject more liquidity into the system. You're muted, Mike. You're muted. Sorry about that.

I think the March bank issues are very much trees in the macro forest. What was the main reason this happened? Rates went up so fast and people didn't hedge properly and the key point is rates are still going up yes they're fixing each tree but the forest is burning um and i think that's the the macro is overwhelming the fact that the federal reserve is still tightening yes they might stop soon and the lead the the rules of long and variable lags are just getting started. And then there's also going to always be opportunities, markets that lag that. So to me, some of that stuff is which watch the money that's leaving banks.

It's just cannot expect a credit contraction without that. You kind of not expect a pretty significant pressure on the economy when you see that, in particular, the Fed tightening. The key thing is the foundation for all this is where were risk assets before all this started? Remember, the stock market was one of the most expensive ever in many other measures. So I look at what's happening now as part of that slow-moving trend. I see significant deflation in commodities, significant deflation in PPI, all the leading indicators, and the Fed's still tightening. And the bank contractions is part of it. Now, you look at things, okay, where's that going to matter? Let's look at housing, new homes under construction, peaking from the highest level ever. Data's only 50 years on that one.

Home sales, mortgage applications. I mean, this is clearly deflationary trends. And you look at the key thing that my colleague Ana Wong pointed out this morning was ECI and personal consumption expenditures will remain stick. Those are the main inflation measures the Fed looks at, but that's the problem. They're still focusing on those things. So I look at it that this is things that I pointed out in 2007 and it's worse because back then you actually had a stock market that wasn't as lofty compared to 10 years ago. So Mike, can I ask you a question? Yes, sir. Given that you basically have called the Fed, I mean, you can pick whatever adjective you want, but let's just say less than optimally

managed or kind of like walking around, looking, you know, walking backwards on the boardwalk, not seeing the, if anyone who goes to Wildwood, the tram car coming, you know, basically walking backwards, looking at lagging indicators and ignoring all the leading indicators. How did you have a conversation with a Fed governor without effectively calling them dumb? I'm just curious because it's obvious what you think. So I pointed out some of the key facts and he pointed out and he also, it was very cordial. He's a very nice guy and what you'd expect, but he pointed out the key things that they look at all this kind of stuff I expected. And that is, oh, well all these data is okay it hasn't really hit the fan yet which means it's going to all the metrics they typically look at but the one thing that really struck me was when he said that

like i mentioned that he said he thinks we handled the banking crisis well we still showed his point was we focused we showed that we focused on the macro despite these banking issues i mean what do you not get and so we still tightened. And I think that's going to go back in history. I think a year from now, this is, I mean, what's our jobs? Our job is to look forward. Now, you do it with real money. I just say it.

It's easier now because I don't have to run. I don't have to push the buy or sell button anymore. And it's just those things that you've noticed your whole life and watched and said, okay, this is the opportunity. Now, if I'm wrong, we've already a lot of this priced in. We've had cryptos have had a good bounce. Stock markets already had a decent bounce. Commodities already starting plunging. So maybe they're buying up to you. But if I'm wrong, a lot of it's priced in. It's the optionality of what you look at here

when you're running the money. I look at the optionality here is that this trickles down into all the lessons of history kicking in. And that is the fed see his quote for me was when i pointed that out that fact to me says there are some people at the fed that agree with you and then he left it there that they've gone too far that was my headline last week fed's gone too far here's why um and even like but our economists like anna warren pointed out it's these lagging measures of inflation that they're still focused on. I think they're so missing the the leading measures of markets. And but they have one thing on their side still.

They would have stopped Titan if the stock market was down 10 percent this year. But that's the problem. That to me is. But you realize how ass backwards that is. Of course. Basically, the stock market is just assuming that the Fed put is still active and therefore saying we're not giving you the until this shit really does hit the fan in the real economy. So that's part of it. Well, that's part of it. That's pretty interesting.

But that's what I started trickling about it a year ago, talking about the greatest reset of our lifetimes. And I just writing about it more and more until I get something really dissuade me from that view. And that's part of the view. It's classic human nature. Smartest people on the planet. You get 100 of them together and they'll think the same way, unfortunately, because they all have the same data. Great. But then people are running real money.

Boom. It's just what's happening. It's classic human nature, I see. If we get the 25 bps hike, which I think, like you said, 90 something percent chance next week, and then they just pause for two, three, four meetings. How does that play into that if we see no more hiking? So what's going to happen, according to my economist, Anna Wong, is by July, we're going to start having contractatory economic data. The U.S. is going to tilt towards a recession. And they were back in end of Q4 before. They're pushing it forward, making crisis part of it,

because you can't just look at that credit contraction and expect the economy to expand. So that's when it's going to start trickling down. And then I think at some point, you're going to start seeing nonfarm payrolls trickle down into negative. But it's the slow-moving part. And it's what Dave pointed out, is the market just assumes the Fed's going to come and save us. And they're not. And they only will when it gets really bad. If the rules of economic history and the Fed,

every single little dip in the last few years of those of us like, okay, it's down 20%, Fed's going to ease, I got to buy. Those days, people have not, it's human nature, haven't adjusted to it yet, but they will. want to make one one point you know because you you broke the difference between gold and the stock market and and then and lump bitcoin in with the stock market i actually think it will not work like that uh i i want to make it very clear so bitcoin uh a year ago was trading in the 50s. It was below the 69 peak. But before, I think we're still before Luna collapsed. Nothing that happened, I'm going to make a controversial statement. Well, not that controversial in the crypto community, but very controversial in the macro community. Nothing that happened in 2022 had anything to do

with Bitcoin's value proposition at all. And in fact, if you look at the divergence, the growth of the network, growth of holders and all of the macro stuff going on with Bitcoin. In fact, if you look at it, it's the spring, the divergence between the price action. It's significant now of course what did happen was the people who held bitcoin and quote believed in it got flushed out of all their wealth by a bunch of other things that happened and because of course they you know people get get greedy right you know fear and greed you believe in bitcoin but you say well you know bitcoin's cool but it's an 80 vol asset i really want to get 150 vol asset i want to get i want to be looking to make 100 times my money.

And if you go on crypto Twitter, you can see this ad nauseum. The fact of the matter is nothing changed the value profit. Nothing has hurt the underlying metrics of Bitcoin. And in fact, the macro as applies to that is significantly, you know, that incredible news, whether it's the Hong Kong news, whether it's what's going on in Dubai, whether it's MICA passing, whether it's the UK going for a consultation, whether it's Argentina's bank, as we discussed and all that. So I think there's a real chance for a de-linking to happen. I am not bullish. I want to be really clear, not bullish on the

traditional stock market. I think, you know, tech, which is less sensitive to rates, who knows, people may start viewing tech stocks as a safe haven. I mean, we've seen all sorts of weird crap happen in our lifetime, Mike. But the fact is that deflation in the sense of prices that people can't afford, housing and physical goods, pretty much, I think you're right. I think the shit is going to hit the fan and that's a fascinating scenario because where was bitcoin born it was born with global financial crisis and it was born you know in that and and i on record i think that we had our second seminal event uh with this particular banking crisis that this time they nipped in the bud i mean they took

out the bazooka right they put 4 put $4.4 trillion available to banks. And so people said, okay, I'm not going to go short bank stocks, right? I'm not going to go sell and pull my money out. I think that's a big difference. I think it's worth characterizing that. Now, once again, I am not talking about 2,000 crypto assets here.

I'm talking about Bitcoin and potentially Ethereum if people look at it as a long-term play. And we haven't talked about Shanghai, but the data bears out my thesis from the last time we talked, which is that it's de-risked. So more likely that people would stake net inflows, which is exactly what I thought would happen. And it did happen. Yeah. Yeah. I mean, the largest outflow was Kraken, who had a forced outflow because of, obviously, their situation with the SEC and staking as a service. 70% of the outflows for that first two days or whatever was Kraken. Now we're seeing net inflows and only increasing.

So hard to debate there, obviously, that you're wrong. I do like the idea that Bitcoin could decouple. I think it's certainly a small enough market that it could do anything. I mean, I've always sort of argued that Bitcoin is a largely uncorrelated asset, but I do think it's worth discussing, Dave. I agree with you on the second seminal event being the banking crisis, but Bitcoin did go down when the banks failed, and it only went up when the liquidity was announced, right? So a lot of people have pointed out that Bitcoin travels with the liquidity and not necessarily the news.

So how do we parse that? Because Thursday, Friday, Saturday, Bitcoin performed poorly. Sunday, the Fed announcement hit and boom, Bitcoin went crazy. So that to me, I'm having a little trouble sorting that. Well, I mean, let's just look at math. I mean, more or less, Bitcoin went from 22 to 30. Okay, rough numbers, so it's whatever. So a 50% retracement of that very fast move is not remotely surprising.

And we haven't quite gotten to 50%. We're more like, you know, between 35 and 40. But it's not crazy to see a retracement of a really fast move and still maintain the structure of the market. The fact is, it's still trading as a very technical market. But the other things that I was seeing is the ratio of spot trading the liquidity to futures, which is pretty high right now compared to

historical averages. Now, historical averages got kind of screwed up because FTX, as soon as FTX died, there was much less derivative trading. So you ended up with a higher spot. But if you kind of try to take that noise out, according to the blocks data, at least, you know, spot trading seems to be at a higher percentage than usual, which indicates there's been a lot of washing out. I don't think the washing out is complete. And what you're talking about, my case is spot buying, not futures buying. The futures buying was trying to anticipate it. Some of the follow through didn't happen. They got washed out. Not terribly surprising. But the real question is, and I think it's exactly what would happen if Mike is right. I think there's a fairly reasonable chance that he is. And we see, you know, he clinically states

it as contractionary economic numbers. What that means is shit hits fan. Unemployment starts to go up. People stop hiring. All the parts of the real economy start looking ugly. Yeah. I mean, the Fed's going to react to that. Now, are they going to react to that with lowering rates? I think we just lost Dave there for a second with a little freeze. I can follow up on that one really quick. I think it's a good time to follow up because I think I completely agree. Bitcoin is going to decouple from the stock market and trade more gold and long mines.

The problem is every risk asset that went down last year is up this year. Bitcoin is just a leader. That makes sense. Okay, great. Got it. What we need to see is stocks down, Bitcoin up. I fully expect we're going to see stocks down, bonds up, and gold up. Maybe not initially for gold, but that's the trade I think is going to be enduring down bonds up and gold up maybe not initially and for gold but that's the trade i think is going to be enduring for the rest of the year and might be enduring for 10 years for five years it's just the way the cycles usually work we're way overdue for the boomers one thing out mike i just i just want to point out one thing yeah just one one really quick thing i not only are you right but if you look at the financial crisis, gold and everything went down for three months.

And it took three full months for it to be profitable. So please, people, do not, any of your listeners, don't believe that I'm talking about immediately. I'm talking about a, you know, when the Titanic goes down, that within months, not days, not weeks, but months, I think you could start seeing Bitcoin trade more like the lifeboat or actually perform well like gold did in the aftermath of 2008. That's all I'm saying. I'm sorry to interrupt, but I'm going to have to leave. So I wanted to make that point. So that's the key point. It's trend versus trade. The market still believes that the stock market trend is up. I think that's due for decoupling. The Fed stated it.

Chairman David Aptek said, he said, we expect unemployment to go up and inflation go down. Now, it's virtually impossible to have unemployment trial from this level without a recession. It's just the way history has always worked. When you have the lowest unemployment in six years. It always happened a few times. And then it's that sensation I think people are forgetting. And of course, he fully says we're on track for a soft landing. Priced in. Boom. Great. Everybody's priced in the soft landing. Where's your optionality? That we don't get a soft landing, that we get a normal reciprocal cycle from the biggest pump in liquidity that's dumping ever. Now, Bitcoin was such a big part

of that. Cryptos were such a big part. And we both agree, 22,000, 23,000 cryptos is ridiculous. A lot of those have to just get purged. Ethereum, probably do okay. Bitcoin should be the best one. But here's a fact. On a one-year basis, gold's up about 5%. Stock market's down about 5%. Bitcoin's down about 30%. Commodity is down about 30%, 20%. That's a trend. And I think that's going to continue. Here's the key inflection point. Once we wake up one morning, it's going to happen.

You see, if I'm wrong, but at some point we have to see the stock market breaks. We have to see how Bitcoin responds. And I think the key thing that might happen is Bitcoin can lead that. Cryptos can lead that because they're the most big speculative assets in the world. They play a trade on weekends. A lot of times they just lead. And then at some point, breakdown. So it was nice to see that the bank indices break down and Bitcoin break up. But now we're at that stage. I just get this every place I go, like NFT, Miami NFTs. Oh's an nft um winter like and you go to bitcoin cryptos oh it's a crypto winter i'm like no it's an everything winter that's bounced this was the key thing

i need to point out to people who only trade bitcoin and then there's people who never trade bitcoin and trade equities is everything has been together with the fed and that's the key thing the fed is still they're fighting the Fed if you're too bullish here. I'm just hoping that if they actually just raise one more time and then they pause, that people will sort of view that as not fighting the Fed anymore. But maybe that's wishful thinking. That would be good. But the thing is, if they signal that, what's that going to do? We all know it's going to be that shortcoming rally. Everybody's going to say, oh, hopium, great. It's over.

Fed's done tightening. Don't have to fight the Fed anymore. They're going to start easing. That's the opportunity. I mean, every single time we've seen this happen, and from the 29 crash to when markets first started heading lower and when Lehman had issues in 2008, markets plunged. They go up.

They give you a chance. They screw all the shorts, and then they go to a significant trend. And to me, that's the stage right now. I just look at through histories, we're at that stage now where you're supposed to test the optionality of the trend. And that is my sense, like I said, when everybody say that the worst is over after we have, to me, it was just a minor correction in the stock market, historically, 20%, 25%, nothing. For those of us who've studied the history and who've been around actually losing money in these things. And for cryptos, it's normal. The key thing, good news, is Bitcoin had its 80% correction.

That's great. But it doesn't mean it can't go back and test 20, 15, 19. It doesn't mean Ethereum. My goal and my target in Ethereum this year was going to trade between $1,000 and $ 2,000 and then at some point break out higher. It just bumped up to 2,000 and it's backing off. But for good fundamental reasons, that's why I think to me every day that goes by, that 10 is the Fed still tightening and how's the stock market going to react? Yeah. I mean, I've shared this chart a million times, but it's worth just mentioning one more time. I mean, this is basically yield curve inversion, obviously, is blue. And then red is when the Fed pivots, or it's just effectively Fed funds rate.

And then obviously black is the market. And the market has gone down every single time after the Fed has pivoted, and we've not had the Fed pivot yet. Right? Yeah. That's what you're talking about here. You can see that the red is still continuing up. We have not had the Fed has pivoted and we've not had the Fed pivot yet. Right? Yeah. That's what you're talking about here. But you can see that the red is still continuing up. We have not had the Fed pivot. If the Fed pivots, which would be basically seeing this red drop like this,

then you get this big sort of black correction. Doesn't mean it'll happen again, but, you know. Well, I enjoy the narrative that people say, okay, the recession is coming. The Fed might stop tightening and the worst is over. Okay, well, good luck. That's your optionality to put on positions because it's just assumed it's priced in. That was a key thing I enjoyed about crude oil last year. And people would say, no, you're wrong.

It's going to go to 150. I'm like, excuse me, but it's already priced in, and's, you know, that this is going to be a bull market. So you got to take the optionality in that trade, which means you do the opposite. So that's why I see this whole space is every time I hear it, that the worst is over. I have to, it tweaks that contrarian nature as a trader and as a guy who spent all his time helping clients make money. I'm like, okay, well, then it's probably priced in. So what's next? Yeah, I think we all are

consensus that we don't feel necessarily the worst is over. I think where maybe we slightly debate is the worst over for Bitcoin, right, Dave? I mean, that's kind of what you were talking about before. I mean, look, this correction that has people very startled, new bear market going to 10,000, the narratives I'm seeing. Today, we have a tap of the 50MA, and that's the first retest of that since the break over here in the banking crisis. I'm not saying that necessarily means we stop there, but you anticipate a retest of the 50MA at some point. It's just a simple correction and mean reversion, right? I mean, that's not unusual. Dave, can you hear us?

I don't know if he's frozen. Dave, so I'll respond to that real quick. I look at, so everything I look at when I come in this morning and analyze, I look at, you look at, so what do you want to pull a trigger on? And my thought is people buying dips into Bitcoin, like, okay, the trigger I think is worthwhile is structuring long positions in US treasury long bonds because they're so short. And I see a resumption of a significant bull market. At some point, getting through that trade, getting through recession, and then using, maybe, you know,

I always think ahead and then, of course, you get stopped out and you move on and then using some of that and how that works out to overweight Bitcoin. But it depends. Bitcoin to me is one of those things. I agree with you. It's going to come out ahead. But I see right now as I look at everything is what you probably want to be looking at is what everybody's short.

And that's US Treasury bonds. It might be resuming one of the biggest bull markets in history. Hey, I would love to get a whole bunch of money back from Voyager with Bitcoin up here and then see it go to 10 or 12 thousand dollars. If you're able to buy back my entire position. But I don't think that's gonna happen necessarily but the funny thing is is i think there's a lot of people sort of sharing that sentiment who are caught in the contagion of of 2022 dave i can see you waving maybe we'll hear you you can try just got some weak internet i think over there i doubt that yeah i think i'm gonna have to go it feels like the internet is i think so too so anyway take care we'll talk soon awesome thanks dave we appreciate the effort uh we know it's always fun to set up a stream on vacation and hotel internet is never good enough for streaming if people were wondering literally

uh inevitable that this happens every single time so mike i guess then we can dig into do you think that there's any specific metrics right now that you would be watching? We kind of touched this on the beginning, not necessarily this week. I listed off a bunch of them at the beginning. I think the Fed's going to do what the Fed's going to do because they're not going to make, I don't think, a wild swing decision based on something they see this week. But is there any metric that you think could drastically change what they're seeing outside of a massive stock crash, which is what you've sort of said? Yeah, it's got to be something from, um,

like happening earlier banking, I think stuff that's, I think that I, that's not unpredictable and that's, um, the banking issue. That's the thing that it's, it's what's the consensus it's over. It's okay. So maybe something trickling back there that would make it um that would really make a statement i think um but bottom line is um how markets respond now we have durable goods orders um coming in on 26th um you know that's usually i remember trading treasuries that would rip my face off sometimes. Durables, they would rip you off, just come on. We want to also see the trend in continuing claims, initial claims.

GDP annualized coming out, and that sometimes is so revised, it's not a big deal. So I think it's the initial things, the things that have really been affecting the market already. Everybody's watching the stock market, it won't go down. Okay, get it. It's just bulletproof. Get it. It's wonderful. It can stay that way, but it's the potential for the banking crisis to resume. This is gold, right? You mentioned that you think gold and long bonds. Mike Novogratz, when I had him on Spaces, said if gold can convincingly get above 2,000, which you can see it's continually being rejected there, it goes to 3,000. Do you agree with that? 50% move in gold?

That's nothing compared to the last time gold was in a similar pattern. It was right around 2008. It started 2008 around 850. It ended 2011 around 1900. 1920. So, yeah, that was. Well, it topped at 1920. So, yeah.

There you go. Sounds like you were involved. Yeah. So, I see similar nuances. I see potential two, three Xs, but 3,000 in the next round level. But the key thing I think for this to happen is what is really pressured gold in the last 10 years is the US stock market outperforming the world. Now, this is a lesson I learned from my colleague, Gina Martin-Adams, our equity strategist. You measure that versus S&P 500 versus MSCI XUS.

Straight up, it looks to me just like the stock market did in 1929, if you look on a chart. Hovering fluctuates forever and then goes straight up and starts tilting down. You don't want to be long US stocks in an environment. So that environment, I mean, you don't want to be long gold in that environment, but it's tilting the other way. And it's got a good fundamental reason to do it. Not only structural, the boomers are all retiring and they got a chance to buy two-year notes right now at 4.15%.

And right before the banking crisis, it was 5%. Still pretty attractive. In two years, you're going to get almost 9%. Let's say 8%, guaranteed. So to me, that is what is really pressured gold. But this is a stage I think we're going to go to right now. This is what I'm anticipating is I love, and I've been publishing on this a lot lately, I love how crypto people call gold boomerock and completely dismiss it. I think gold's going to continue doing what it's been doing for a while. The last year,

it's outperforming Bitcoin. And I think that's going to do it for a while to kind of just remind us that this asset is being bought by central banks at the greatest pace since 1967 or something like that. It might have been 57, but you kind of got to go with that real money

because they can just print money and buy gold. They're doing it and they're buying gold. So you got to go with that asset. Yes, it's been, it's kind of making it difficult at the moment.

Trade's 1980 and it's just bumping theming above 2000. But what it needs is that break in the stock market. That's why I hate to say it. Everything keeps tilting on the USX market. If it stays stable, then and it keeps going back up again, despite the Fed tightening, then why do you want gold when the US stock market outperforms everything? it's the potential for that big decoupling. So also key part of that Scott was the U S dollar was very highly correlated with goal with, with stocks. The last 10 years, stocks outperform in U S you know,

it's all U S U S. And I'm not anti U S, but I'm just looking for reversion in the, one of the biggest trades in history. And that was at least for a decade where the only place to be was U.S. stock market. And then you look at forwards, U.S. forward tightening. The U.S. is expected to pause soon and we still have tightening coming out of Europe, but Europe seems to be doing OK. So maybe that's part of the dollar trade. I was looking for the article, but did you by any chance see from the Central Bank russia that they're effectively exploring bitcoin mining or will be

bitcoin mining for uh imports and exports and we've now seen russia become the second largest country after the united states in bitcoin hash rate i wish i had the uh right here i think i actually got it right here let me i found it sorry guys for the delay it's off the cuff but uh here you go russia plans to mine crypto for cross-border deals, says central bank. So this is the central bank saying it. And this is not saying they're going to use it. This is saying they're going to mine it. Right. And we've seen that Russian hash rate has gone up exceptionally over the past few months. Like I said, now the second largest. And they're still banning retail from transacting in Bitcoin, but saying that the central bank will do this. Is this a significant move in the narrative that Bitcoin can be digital

gold? Because what made me think of this is when you said these central banks are hoarding gold at levels we haven't seen before. Russia, arguably the largest of those. Well, now they're considering doing that with Bitcoin as well. Well, I'm glad you went there because I completely agree with Saifedean Amas' book, The Bitcoin Standard, where central banks are inevitably going to have to start accumulating Bitcoin like they do gold. Now, when I first read it, I think it was 2018. I'm like, no way. But it's one thing I love about this space. Every day, like you're smiling, but every day it goes by, you have to be a rational person like it's just it's like tether every day it goes by it proves it's just bulletproof i mean okay that's a different story but bitcoin to me is going there i completely agree at some point there's going to

be central banks are going to be holding it's going to be coming here's a current trajectory question is you have to is this going to end go bitcoin is well on pace becoming global digital collateral in a world going digital. And it has diminishing supply. And of course, we have these nuances in the US. But why do I fill up my tax forms I have to put in there if I'm involved with cryptos? That shows how significant it is. And we're going through that stage where all electricity is going to kill you.

And trains go too fast for human beings. So I completely agree with that. But I have to think, and I fully expect if you, maybe, I don't know when it gets, 100,000 is going to be on the radar. But right now, we are in a pretty significant period where we have to see how we get through this recession, have to see if we're going to have some point you get that decoupling inflection where stocks can go down and risk assets can go down and Bitcoin can trickle there. And as I pointed out, on a one-year basis, Bitcoin's down 30%, stock market's down about 5%. It's still, yeah, this year it's done okay.

But I'm just, I think it's too early days. I mean, if you even, I talk about it all the time, if you even just look at the halving cycle, right? People are talking about new all-time highs before we even get to a halving that's never happened and would be unprecedented. Even a move now back to the lows and then we come out of it a year from now, 18 months from now, six months after the halving would fit the cycle. So there's nothing you're saying here that's crazy at all, right? So as we were speaking, the Bloomberg TV wants me to comment on that comment. You probably saw the headline, oh, Bitcoin, because of halving, is going to $50,000.

I don't disagree with that, but it's going to have to fight that overwhelming force of the almost certainty of a recession and how it reacts. So that's basically indicating that either stock market's not going to go down, the Fed's going to ease, and or Bitcoin's going to have a significant decoupling, or everything is going to just be fine. We're going to go back to those good old days of liquidity. Everything goes up. I completely agree with the halving. It's supply going down, price must go to overtime unless demand is going down. But it's this confluence of the election, recession. You've got this war. I mean, there's so much kicking in with that halving next year. It's going to be a great environment.

And you want to be, I think, responsibly buying Bitcoin. But as Dave mentioned, if you're leveraged, which was my environment, 20 to 1 typically, and you're leveraged at 30, you might get stopped out at 19, 17. And then it's going to go to 100. But in the meantime, this is the key thing. I just can't, as a strategist, I can't keep my eye off of what's happening here. And that's like I said, when I saw record shorts and T-bonds, I said, okay, well, that's where you should be putting overweight. So people talk to 60-40 portfolio, maybe it's 60- 59, 41 for Bitcoin. I fully think it should be the other way right now.

40, 60 or 40, 59, 1, meaning way overweight bonds. Yeah. I mean, interesting. So you're saying the fact that there's, and I mentioned earlier, so overweight shorting treasuries means that you should get into treasuries. Exactly. So that's the way we're- Counter-trading the overwhelming bearish sentiment on treasuries because it's going to go the other way. So it's called managed money net positions. It's from the CFTC, comes out once a week. For people like me in futures, it's back of the hand. It's one of those things that for people like you in cryptos, you dig into the on-chain data and stuff, you know that a lot better, but it's basically hedge funds, leverage money.

It's people and futures are the most leveraged markets. I mean, like I said, typically it's 20 to one. You can't get your leverage. And what took down long-term capital? They were 101. A lot of it was, but these hedge funds are the shortest ever. And that's 30 years, 10 years and five years. They're all from the trading pit in Chicago. They're net short. So they probably have things against that. There's good reasons. There's trades for it, but it just- They're hedging. They're not, yeah. They're just not like their entire fund isn't just short treasuries, right? People should realize that. It's typically a sign you don't want to be selling treasuries there. And oftentimes, and last time this happened, it was a great opportunity to buy. 10-year note yields around

three and they dropped to one. So it means I think that the price, some of the leverage things, the prices went up two or three Xs. Yeah. Jeff here says, I'm way overweight bonds because I bought a ton of TLT. Well, so, okay. A lot of people bought that on the way down, and it got way over, it was the worst bear market in history. But here's the key thing about bond market. Yields have been declining. Prices have been going up for 40 years. I started in trading pits in the 80s. It was just starting to accelerate.

We had this massive blip in that trend. Prices, yields popped up. And now I'm putting in the Fed, you know, tightened aggressively. Now I'm pointing out those leading indicators for deflationary accelerating the downside, which means that enduring trend had a bit of a blip. It's probably heading back down. I saw that in gold last year. Gold has been going up forever.

It blipped. It's going back up. Crude oil has been going down forever. It blipped. And the bear market's going back down. Now, Bitcoin, at some point, it's going to go back up. But that's the key thing I think that people are missing is we're heading towards a significant deflationary

recession. I can point to all the metrics. Just look at natural gas. It's down the same price as 1990. And the Fed's still tightening. And the census even fed Governor from the Atlantic Fed, Dave Altag, said, oh, we're pretty comfortable heading towards a soft landing. I don't know what part of the most aggressive tightening and the biggest liquidity in the world going away is going to lead to a soft landing. So what are the people, listen, I go on Twitter spaces this morning and there was a somewhat renowned analyst saying that he believes still that inflation will rise massively in the coming months and years that the Fed has not done enough. While you and I sit here looking at things saying in six months to 12 months, we're talking about deflation.

So I'd love to introduce that person to Jeff Booth in The Price of Tomorrow and just look what Tesla is doing lately. Tesla, you ask. I love this. My colleague in a condo, just typical Wall Street guys down in Miami, just bought a Tesla. He goes, all the guys in the office, that's Tesla. I asked my wife, what car do you want? Tesla. It's just, they're crushing it. And they're crushing it with rapidly advancing technology and death, Jeff Booth points that out. I show it in commodities all the time. Why is the price of natural gas, the number one measure of heat, electricity, and fertilizer, the same price as

it first traded in 1990? Imagine if you said that about the stock market. Well, people in Europe are actually saying that. Stock markets haven't been up for Japan. It's still below that peak from 1990. So I look at that as I say, good luck. It's missing where we got to this inflation. Now, some of us lived through that inflation in the 70s. Now, I was a kid then, but remember distinctly, there was wars, there was poor policy, and then boomers were just crushing it. We had inflation for one reason. We had the biggest pump in liquidity ever. And I'd encourage anybody who calls for more inflation to read the book also, to read the book Boom and Bust. Quinn is one of the authors. He pointed out all the dumps in history come in the back of pumps

on liquidity. And we are in the process. The key thing is it's the trajectories, Scott. We're still dumping the liquidity. And like I point out, PPI is falling at the greatest pace ever. And people will say, oh, it's not that important. Like, okay, well, it's the leader. So it's just what people, it's what human nature does and forgets about the facts of looking forward, like Dave was mentioning earlier. Listen, I have the halving cycles pulled up here. I happen to be looking at it because I want to make sure that I was accurate after our conversation. Each time that we've had a bottom,

and we only, listen, it's not enough to call it a trend after two and we're effectively in the third one where this is being charted. But we bottomed here in 2015 in January, 200 bucks. Don't you wish you were there, Mike? But my son was. That's when he first introduced me to it. I was like, yeah, I still need internet money. That's right. So it took

until August. It chopped sideways and it revisited that low right here. Okay. There you go. And so in having two, yeah, we went way up, which is kind of what it looks like here. But then we had the major crash. Yes, it was COVID. But if you just believe that charts are charts, I mean, it got back down to 3,800 when the low had been 3,200. Okay. So slightly higher low, but it took, yeah, that was March 20 and the bottom was December 18. So you're talking about, you know, 16 months later, right? So you would expect even in just that, that we should come back down and revisit somewhere in the area of 17, 18,000 at some time between now and having. So what the lesson we also learn in markets and those of us who used to have

hair, you still do is markets will go the direction of the most pain. So as you were saying that a chart I'm pulling up right now is I just had to, you don't have to see, I can talk about it. There's a good example of you have to use past performance indicative of future past future returns, right? Well, one thing that's happening right now, it's never happened before is a 50 week moving average on Bitcoin is below the a hundred to 200 week. People call that a death cross.

So about the time it crosses, probably want to put the low as you have to make it as difficult as possible. But that's indicative how things have changed. One thing is Bitcoin's in the middle of the cash and carry trade now. Remember when those futures were launched? We talked about this is this is going to just open up the cash and carry trade where people can buy Bitcoin, hedge against the futures. It's going to crush the volatility. It's in the mainstream now. So don't expect it to appreciate like it has in the past. Obviously, that's not a very profound statement,

but I will point out the technicals on the weeklies. It's never happened before. That's just how these halving cycles we have to extrapolate for the difference in the future. And that's why I look at for next year's, like I said, is Fed's tightening, market's heading towards recession, Bitcoin's, and that means risk assets typically go down, and cryptos are among the riskiest of assets. Bitcoin has advantage of being the least risky of the cryptos.

I love it. So you guys might've seen that my face froze extremely awkwardly there. So I'm hoping, I think we're going to go because I'm starting to have some technical issues I need to resolve over here. Mike, thank you so much. So speaking of Jeff Booth, I've got him tomorrow on Spaces. So you got to come join. And I don't know if you've heard the premise,

but he, after my last round table conversation with him, which had a few, you know, ETH and altcoin guys, you know, he's so calm and collected no matter what. He emailed me and he said, Scott, call me. I want to tell you why your premise is wrong. He's like, I know you're a Bitcoiner, but I want to tell you why your premise is wrong. And I said, okay. And it kind of kept getting delayed. We were trying to connect. And so I said, let's just do it on Twitter spaces. So everyone can listen. I'll be there. I'll take the beating.

We invited a few more Bitcoiners and I'm just going to sit there and let them convince me why it should be Bitcoin only, especially Jeff. So it should be a really interesting conversation. But that's part of the reason your program, what you do is so important. We have to be willing to listen to other opinions, particularly when they most know when they disagree with you. So we can all come to consensus. And that's part. I'm interested in hearing why he says that. And there's few better people to make you to say to completely disagree you and make you feel good about it. Yeah, absolutely. And I think, you know, and then I obviously when I tweeted that was going to happen, I got all these people saying you need someone to be on the other side of the debate.

It's not a debate. It's friendly conversation. We talk about everything. Everybody doesn't have to be represented in every conversation. Thank you, guys. And I will be at least loosely representing. Mike, awesome. Thank you. Sorry we had the technical issues and everything there, but really great conversation. See you guys tomorrow at Space's 11 a.m. Eastern

Standard Time. Bye. Let's go.