The Wolf Of All Streets - Live: FED Conference | Rate Pause with Nouriel Roubini | Crypto Town Hall

Starting point is 00:00:00 Yo, yo, yo, what's up everyone? Ryan, you're with us, so you've got to do your interview now. When does your interview start? I'm here. I'm just going to jump off in the beginning. I'm going to interview you, say that, and then I'm going to hop back on again. Because we have a marathon space today. I think we're going to be live for like six or seven hours or something like that. Yeah, man. I think it's the first major marathon space we do at the Crypto Town Hall.

Starting point is 00:00:20 We've done some long ones, like four hours, but I think this is the first major marathon one. Scott, you got your coffee? Yeah, I'm good to go. Before Ryan started. We started at 8 a.m. and ran until 2 or 3 p.m., so we did do six hours. I did it. I forgot about that. Ryan, do you want to accept the call to invite? Just so we have room on the space, on the panel.

Starting point is 00:00:43 Okay, I've accepted, so I'm going be i'm here but i'm not here for the first probably gonna i know it yeah yeah you're probably gonna drop um all right man so i'll get the panel organized scott and how's my audio first just give me give me an okay that audio is accepted based on your sound good how about me cool man yeah you always sound good all right so so let's kick it off with first let's do a market update i know you're a technical analyst go deeper give us like you always hesitate from speculating i don't know why um speculate tell us what you expect to happen tell us what how bullish or bearish you are tell us what the charts say go deep this time yeah to be honest with you the reason that uh you feel that way is because there hasn't been anything

Starting point is 00:01:19 as far as bitcoin in my mind to analyze for quite a long time here. And I think it's important to realize if you're trading or even investing that there's times when you just sit on your hands and the market doesn't give you anything and you just wait. And so I've been watching Bitcoin on higher timeframes. We broke above the key level to me, which was 25,212 back in March. Almost now, actually three months ago, yesterday, I think, or so is when we did it. That was the first macro higher high that we'd had since the 69,000 top. So for anybody who doesn't understand when looking at the chart, a bearish market structure at the basic level is when you have lower lows and lower highs in sequence. And we've had that since 69,000,

Starting point is 00:02:01 the market would make a little pump, not make a higher high, drop down lower, pump kind of like a bouncing ball down, right? And so when we broke above that 25,212 level, that was the first time we had had a higher high in market structure, which means that the bearish market structure is broken. Doesn't necessarily mean that someone would say that a new bull market, it just means you're in a new trend and that if you continue to go down, it would be a new bearish trend. We haven't even dropped back down and hit 2512. And I've been talking about since that day that it broke above, I've been saying, listen, there's nothing to do here. We'll probably go back and test 25,212. Now we did get about 25,003 something. And if

Starting point is 00:02:39 you're watching markets in general, you know that when everyone's watching a level, a level is not a line, it's an area. So maybe that was enough. We got front run and bounces there. But for me, it's just kind of this market is boring and go touch grass. And that's the reason that I haven't made any wild predictions. You know, I think if we can... So you only watch Bitcoin, you don't say it's boring because outside of Bitcoin, there hasn't been anything but boring. Yeah. Well, yeah, that is true. So So but, you know, making wild predictions while you have all these fundamental events, I think that it seems like for a while, and I said it above that, when we broke that, altcoins are probably going to suffer. You know, if Bitcoin is looking good, and we think it's going to continue up, I do think that

Starting point is 00:03:20 actually will eventually continue up after we absorb some of this news into the end of the year. I think that all coins will do the old stay the same value in dollars and get absolutely destroyed by Bitcoin thing, which is what we've been seeing here for quite a while. I'm not the type to jump in and try to trade coins like BNB and Matic and such while all these crazy events are going on because I don't feel like I have an edge when you can feel like things are bottoming and then you get a Robinhood announcement and things drop 25% more overnight. And listen, there was a time in my life when I was day trading aggressively and I would have been all over those events. Not so much now. So for me, it's just like I want to watch, absorb what's going to happen here with the SEC,

Starting point is 00:04:05 who they're going to obviously sue next, because I don't believe they're done for a second and then figure it out. But for now, I think Bitcoin looks totally fine. It's in a new kind of bullish trend and not that much to worry about. I think we're going to dive really deep into stocks and the rest of the market probably later. So probably stop there when talking about it. But I mean, for now, Peter Brandt actually tweeted, maybe I can find it and pin it. But the last four days, I mean, Bitcoin has just been abysmally sideways and in a small range.

Starting point is 00:04:36 So there's kind of not- That's, hold on, sorry, sorry. Isn't that a bullish, because we've seen a lot of bad news in the last few weeks. So if it's sideways during bad news, isn't that a signal that we might have exactly yeah so i think for bitcoin that's what i'm saying that's why like right now my focus would be on bitcoin because a i live in the united states there's nowhere that i can effectively short this market right people don't realize

Starting point is 00:04:59 they're like why don't you short them tell me where to do it right um where i'm not gonna get in trouble in some way, shape, or form. So unless you're holding something and you're trying to sell to buy lower, which is the most dangerous thing you can do, certainly as an investor, but as a trader, you might want to. For me, it's like I'm constantly looking for entries for longs, and I'm just not comfortable that I have enough information on this market at this exact moment to do that. But to your point, the fact that Bitcoin is still in that bullish trend has not even broken back down below a key

Starting point is 00:05:28 level with all of this nonsense, really encouraging to me. I just kind of look at this like the normal four-year cycle. For anyone who doesn't understand, Bitcoin has the halving effectively every four years, new supply or the difficulty to mine crypto, Bitcoin cuts in half. So what you basically have is a dynamic for anyone who understands basic economics that you have supply reducing. So even equivalent demand, slightly lower demand or higher demand makes price go up. Well, at the end of these cycles, we're waiting for the halving in about a year. You tend to get these very, very long, boring periods where things kind of float down, float up. And you could have literally fallen on your head, been in a coma, ignored every FOMC, CPI, Fed announcement,

Starting point is 00:06:12 the world melting down, nuclear explosions in Ukraine or whatever's coming and looked at a chart of that four year halving cycle and we'd be in the exact same spot as we have in every single other cycle. So if you want a bold prediction, it's the most boring one ever. Super fucking sideways for the next year, maybe up 10 grand, down five grand and going sideways. And then we wait. And in 16, 18 months, we're a few months after the halving. So you're saying, so when is that? Is that a year and a half from now? So the halving will be next April to May, May-ish. So 11 months. And then usually it takes, you know, people view it as this big fundamental event, but nothing happens on that day, right?

Starting point is 00:06:51 It takes a few months for obviously that dynamic to kick in. So, you know, mid next summer to early next fall in 2024, I have a feeling we'll be, you know, talking about $40,000, $50,000, $60,,000 Bitcoin and we'll be laughing that it was so obvious and so easy in hindsight. Okay. A couple of questions before we go to the agenda and the great panel that we have in this coming up. The question that I have is regarding the four-year cycle and waiting for the halving. Do we have enough history? Bitcoin is still relatively new as an asset class. Is there enough history for us to depend on that halving cycle? I don't think there's enough history to depend on it per se,

Starting point is 00:07:33 but you have to use the information that you have, and it has been consistent for the last two. And like I said, if you look where we are right now, it's in the third cycle, and it looks effectively exactly the same. I mean, you look at the weekly chart, the bottoms were when RSI on the weekly hit oversold, which has only happened three times in history. And then you have these sideways consolidation periods. Maybe we go back and visit the lows. I will say in the previous two cycles, from bottom to the next halving, price came very close to double bottoming and making that second

Starting point is 00:08:01 low. Obviously, the last time that happened was March 2020 with COVID, and we saw a drop of Bitcoin from like 10,000 to 3,800 in a matter of weeks. But the low before that had 31, something like that. So I do think we're just going to chop around sideways for a very long time. But that could change. It could change at any moment. But right now, if it ain't broke, don't try to fix it. I think you try to just follow the trend. Add one note there. Yeah, and I think it's also like this self-fulfilling prophecy, right? Because I don't know anybody right now that's not saying, yeah, of course, the happening, it's going to go up.

Starting point is 00:08:35 That's kind of the narrative, right? So it just creates this self-fulfilling prophecy. Everyone kind of buys at the same time. And regardless of the fundamentals, this prophecy kind of happens. And you just defined technical analysis, right? The only reason it's worth looking at charts is self-fulfilling prophecies because a whole bunch of people are looking at the same thing and it becomes self-fulfilling. So I agree with him a hundred percent, but Mario, more importantly, can we talk about the fact that, uh, I don't know, I went to sleep last night.

Starting point is 00:09:00 I hadn't really checked. We had like a amazing conversation with Warren Davidsonson yesterday but it was only an hour long we didn't sit there and compound people listening for uh six hours like we have in the past and i woke up today and it had 1.5 million listens yeah man you can these discussions are important ones to have but on the on the on the other side we got the listens and but do you really expect that to lead to results? Do you expect his efforts to lead us anywhere? No, no, no, no, no. Absolutely not.

Starting point is 00:09:31 I'm just saying, I mean, it's funny. The first thing I did was I looked up most popular show, CNN, Anderson Cooper, and it's like 1.2 million on a really good day. And somehow we come together on Twitter and get 1.5 million people to listen to an interview with the congressman. I just think it's astounding what's happening here. Not trying to even like float our own boat, because I think it grows organically. It's a function of all the people who are thirsty for this news. And of course, this heavy news cycle. But the fact that we can have a congressman propose a law, and then the next next day we've got him here on twitter spaces sharing with this community why he's doing it in his thoughts it's something that's so important to us it's just

Starting point is 00:10:11 really uh it just really made a makes a big difference i think for me for drive and why we show up and do this every day i mean i'm already six hours into my work day here and we're getting ready for a six hour spaces you know and there's now there's no reason for Gensler not to show up yeah he's got to show up well the reason for him not to show up is because I've been leading the fire Gary Gensler charge uh long before this hashtag I also uh tweet at uh Elizabeth Warren a lot and invite her on but I don't think she's coming uh but I I do think that we should have Gary Gensler and that if he was acting in good faith he would be willing to come here and I think we would actually all be constructive and polite and try to hear his side of the story, which is something that we try very hard to do here. Even as dismissive as we can be, there's been a lot of guests that we've had come on who are aggressively on the other side.

Starting point is 00:10:59 What's his name? John Ray. What's the, you know, Stark? Quite a few of them. John Reed. John Reed Stark, I think. John Reed Stark. I'm like, yeah, I'm trying to think of a Game of Thrones reference. And, you know, they come on and everybody attacks them. And then I say, listen, everybody, calm down. Like, let's listen.

Starting point is 00:11:16 This guy understands the other side. And it does give you some perspective on whether you agree with what's happening or not. Maybe there is a fundamental reason that the SEC is viewing things in a certain way or what's happening. I still don't think that Gary Gensler is actually in good faith, but I would love to have that conversation with him if he would be willing to show up. But I think just more than anything, I find it astounding that we could have that many people listening. Now to your next point, and I want to actually ask Bruce about this as well, but to your next question, will it matter? No, I don't think it'll matter because nothing gets passed now.

Starting point is 00:11:51 It could literally become the most popular bill in Congress, get passed, and then it goes to a Democrat-heavy Senate and to the president to sign. I mean, do we really think that's going to happen? No, because Gary Gensler works for them, right? And the SEC has been structured this way for a very long time. But still, I mean, it needs to be done. It's the right thing to do to have the conversation. And I think it's bold that they're bringing it up, even if it's just for political points. Yeah, man. And I want to dig into the Binance story as well. But before that, this one will go to the panel, just to give the panel an idea what we're going to discuss next. But Scott, last question for you is the biggest takeaways

Starting point is 00:12:28 from yesterday's discussion for the audience that couldn't make it yesterday, and then we'll dig into the agenda. I think the biggest takeaway from that part of the conversation certainly is that there's a view that the SEC is acting in bad faith, that Gary Gensler has used his position to become an activist outside of what are likely the valid laws in Congress. But we did actually push on Ward David and say, hey, I asked him this question, how much of this is Congress's fault? And he said actually quite a bit of it, because they need to be the one to pass the laws that give the regulators the bounds and rails in which to operate and which to regulate. So I think that there's a lot of fault in all parts of the government that was admitted. But the idea here that he's proposing in the SEC Stabilization Act

Starting point is 00:13:15 is effectively that right now you have Gary Gensler as the commissioner, and then you have this as the head, and then you have this series of commissioners underneath, like Hester Peirce and others who are actually quite vocal that they don't like what the SEC is doing, and they are supportive of freedom and all these things. And those people don't have a voice. So effectively, the act just flips that, right? The Gary Gensler role becomes subservient to the panel, right? Much like a Supreme Court or something like that on top. And so there's more consensus and you get more of the voices that are operating on both sides. And that's basically what he's proposing. I think the fire Gary Gensler part is just good for virality and PR, but the reconfiguring the SEC to be a more reasonable organization, I think makes quite a

Starting point is 00:14:00 lot of sense. And I've already floated Bruce Fenton's name for head of the SEC, right? Didn't we talk about that, Bruce? You're going to go lead us? I will do it if given the job. I'm not sure if all the Biden family... You're going to be like Maximus in Gladiator. You come in and give the power back to the people. I have a feeling if Biden's handlers look through my tweets, there might be one or two that might make them feel that I'm not quite on their team. So we may have to wait for a new president, but I'm game. Yeah, certainly. But I mean, what do you make of the conversation that we had yesterday? You were obviously here. And to Mario's question, is it meaningful? Is it another press move? Do you think it can actually happen? Do you think enough people can get behind it? The bill is hard, but I think it's very meaningful that a member of Congress is talking about this and putting forth the bill and coming on here and talking about it. by everybody, including the Biden administration and Gensler himself. I mean, the sad thing is

Starting point is 00:15:06 that very early on, I was naive in thinking, oh, these people need to be educated. And there's a lot of people in Washington, D.C. who spent a lot of effort. They're like, oh, we'll educate these people. What's apparent now to me is that, and I've talked to a lot of people who knew Gensler back at CFTC and everything. He has a reputation of being somebody who is a very good executor. He will do what his boss says. And that's what he did at CFTC. That's what he's doing now.

Starting point is 00:15:34 So he clearly, to me, has marching orders to destroy, in my opinion, this whole industry, probably including Bitcoin to the extent that they can, which is difficult in the U.S., and trying to roll out a... Off-ramps. Yeah, but the answer to that is on and off-ramps, right? So you can't destroy Bitcoin, but you can make it so unappealing for Americans to even try to own it

Starting point is 00:15:54 or to be able to get in and out of it that they just don't buy it. Sorry, Bruce, I was jumping in, but I mean, isn't that the way that they can effectively yeah i think you got a i think you got a cold bruce can you yeah yeah yeah i can hear you yeah the um scott went out for a second uh can you hear me okay yeah i can hear you i was just saying i think that they can attack the on and off ramps which is what they're doing with exchanges that's the way you kneecap bitcoin without killing yeah they can they can attack quite a bit and people

Starting point is 00:16:23 shouldn't underestimate that especially the meme of kind of like, oh, YOLO, Bitcoin can't be stopped. Bring it. I think that's a very bad thing. I agree that Bitcoin can't be stopped globally. I think even with its might, the U.S. can't stop it. But people shouldn't underestimate just how many tools the U.S. has. The U.S. has vast global influence with things like OFAC. I mean, the U.S. could just say this is forbidden. We're not dealing with anybody who has this asset. And that essentially kills it in the United States and significantly harms it globally. And you'd have, you know, Fidelity and Sailor and MicroStrategy and everybody exiting. You know, I hope and don't think that'll happen, but don't underestimate the long arm and the power of the United States

Starting point is 00:17:04 government, for sure. That's interesting, though, because the narrative that we've been talking about here quite a bit, and I think we even discussed it yesterday, then, is that, yes, maybe that gets the desired result onshore, but it drives a more offshore adoption, but certainly more offshore adoption in the Chinas and Russias of the the world where we're already seeing, you know, we talked about spare bank yesterday in Russia starting to allow their customers, the biggest bank in the world, or at least it was before the sanctions, allowing their customers to buy and sell Bitcoin. But also the Central Bank of Russia a few months ago announced that they'll be mining.

Starting point is 00:17:42 We could see Bitcoin, you know, we could see them go down this path of tyrannical insanity and continue to cut down. Remember, these are the same clowns that 18 months ago were trying to basically regulate Bitcoin miners and wallets. So don't put anything, you know, don't think that there's anything

Starting point is 00:18:00 too tyrannical that they won't do. But we could go down the United States, and I hope and don't think we will, but we could go down a road that essentially just crushes this whole thing for a couple of years. And then we could see a huge bull run driven by China and Russia, especially China. You could see Bitcoin go up to 100,000 and another 100 alts bloom. And then the United States would do exactly what every other country who's banned this, including Russia and China, they'll come back and capitulate and say, oh, I guess we can't ban this. It's a global phenomenon. Tyrants in centralized offices and governments have never had to deal with a global asset before. In their ego, the Genslers and the Yellens of the world think that

Starting point is 00:18:39 they can just control the whole world because they have the power of the of the boots and the stormtroopers over Americans. But they can't. They can only kill us and stop us and put us in jail in our own borders they can't stop a global phenomenon especially if you have countries like china who are pushing it and that is something that uh the tyrants running money in the world have never faced before they've never faced this kind of competition where you have global money that's accepted in dozens and dozens of countries. They've never had competition and they're not suited for it. So they think that they can pull these tools. And it's a lot like that meme where it shows the gate in the middle of nowhere in an empty field. There's no fence around it. It says, do not enter. That's been a meme that's been used a lot, describing governments trying to ban

Starting point is 00:19:22 Bitcoin. That's the way it is. They've never dealt with this kind of competition before. So I'm looking forward to them getting a powerful. And to your point, for people who don't think that these governments can flip flop, how many times have we seen China ban and reopen in this market? And it's very clear that after the ban, which we thought would stick, many thought would stick, not we, many thought would stick forever of only a couple years ago, clearly they're seeing the United States's stance and just playing the

Starting point is 00:19:49 opposite. Yeah, exactly. Exactly. I think, you know, I mean, it's, you know, China learned the lesson, I think, and a lot of the smaller countries early on, I think Thailand banned it, and a few others. And, you know, this is just, you can't stop it. I mean, even with all the power, and I don't underestimate the US at all, you know, the US is very, very, very powerful with this kind of thing, particularly for Americans. But, you know, it's a big world now. There's VPNs. And, you know, the China-US game theory is particularly interesting, because, you know, China has been thinking about currency and playing these kind of games for decades. And Bitcoin coming along kind of changes their strategy. So

Starting point is 00:20:31 I think it's super exciting. I hope we don't end up with kind of a full scale ban, but something has to change. Gensler has to leave or some kind of shake up with Warren or something. Unfortunately, we may just have to push it on through until the next election. Yeah. I mean, we talk about the SEC of the United States as if it's the end-all be-all, but it's obviously not a regulation. We have regulators in every country in the world that are approaching this asset class from a different view. Dean, I saw you just popped up. Obviously, before we go to Dean, just for everyone here for the finance space, for the FOMC meeting, we'll be kicking this off shortly. In about half an hour, I see a lot of our finance guests in the audience. So just a heads up there, but go ahead, Scott.

Starting point is 00:21:14 Sure. I was going to say we have Dean here, who is the CEO of WonderFi in Canada. And the Canadian regulator is taking a different tax sort of towards this industry. And you guys, I believe, from our previous conversations, are fully regulated, have been through that process and are able to allow people to have access to these assets. So what's your take from Canada on all of this that we're seeing in the United States? Yeah, it's interesting. I think there's a lot of parallels. And thanks again for having me on. But Canada went through this process, I'd say, dating back to 2019. I'm sure most of you guys are familiar with Quadriga. Quadriga was Canadian based and the largest Canadian crypto exchange at the time. And, you know, the blowback from that certainly put a ton of egg in the regulator's face here.

Starting point is 00:21:59 In response, we saw, you know, them quickly put together frameworks on how to regulate crypto trading platforms as a starting point. And sort of through collaboration with industry, we're able to put together a proposed, or I guess, regulatory framework for crypto trading platforms that took effect in 2021. Bitbuy, which is the company owned and operated by WonderFi was the first crypto trading marketplace registered in Canada. And in November of last year, we also received a staking license as well. So I think, you know, in Canada, you've seen, I guess, you know, a similar reaction to some of the unforeseen events that transpired in the U.S. with some of the larger players in last year. And so, you know, I think it was a strong starting point to put a framework in place for, you know, exchanges, really the heart of all this activity. And, you know, more recently, opening up the universe to include staking. So I think

Starting point is 00:22:57 Canadian regulators have done a good job at putting up, you know, guardrails. Nothing is ever going to be perfect with regulators, certainly not the first go. But they've sort of looked at ways in which they can improve and ways in which they can expand the scope of regulated products. So I think... Go ahead, sorry. Yeah, you go ahead. But I was going to say Canada kind of had this massive blow up with Quadriga and then went sort of on an aggressive tack, not as much so as the United States, and then came back to a more reasonable place. But I'll tell you what I view the difference as, and we have breaking news on it or news on it

Starting point is 00:23:33 today. They didn't have SBF, right? Sam Bankman-Fried didn't go and meet with the head of Canadian regulators and all the legislators and take cute pictures and work on regulation. And so I think we're seeing this massive overcorrection here because Sam effectively fucked us for the next three or four years. And you guys may have seen Sam Bankman-Fried, the indicted founder of bankrupt cryptocurrency exchange FTX, wants a US judge to throw out criminal charges brought against him following his extradition from the Bahamas. I mean, he's literally sitting in his mom's basement smoking crack right now, or his lawyers are. I mean, that is absolutely insane. It won't happen. But I really think that that's the difference here. Gensler hadn't had SBF on his calendar. We might be having a very different conversation.

Starting point is 00:24:15 Yeah. I don't think that's, I think that's a fair statement. You know, I think, you know, sort of a heavy handed approach the US has taken is certainly more noticeable and heavier handed than what the Canadian regulators did. And I think you look at whether it's FTX or some of the other platforms, I think that's certainly, you know, partially the reasoning behind that. So I think you're absolutely right. Scott, have you looked at the news with Binance, a lot of the FUD spreading in the last 24 hours? I mean, the news I saw with Binance effectively, and I talked about that with John Deaton and Eleanor on YouTube this morning, was that once again, we're seeing the United States judicial system actually be sensible and push back a bit against the SEC, not grant them the asset freeze and allow Binance to control those assets. So that may still happen down the road. But for now, I think it's taken as good news for Binance, certainly Binance US. I assume that's the news you're talking about.

Starting point is 00:25:12 It is, yeah, it is. And there's also the FUD about CZ selling... Which is CZ? He's disputed. Have you looked at both stories of the FUD story? Yeah, I don't know the truth behind it, and I can dig in, but I can tell you that seemingly, and I like on-chain analysis, I think it's interesting, but dude, it's not fact. And I feel like 75% of the time that we have these breaking news about coins moving and stuff,

Starting point is 00:25:37 it becomes an absolute nothing burger. I'm not saying that's the case this time and can be easily disproven or shown that they were internal wallets. There's a million things where these happen. I've been trying to dig into it and I can't see anything conclusive except for a bunch of wallets moving things. I will tell you guys, for anyone who's wondering, the charge or the accusation effectively is that Binance is selling Bitcoin en masse to buy BNB to defend the price of BNB so it doesn't drop and we don't have an FTT situation where there's a mass liquidation event of BNB, it completely crashes and destroys Binance, right? This again, to me, is the, oh, Binance is the same as FTX argument that I think

Starting point is 00:26:18 has been unproven thus far. So I don't see it myself happening also i i have to believe that if binance was selling that much bitcoin to buy that much bnb we would see that in the charts like why is bitcoin having the most boring low volume ever for the last four days if finance one of the biggest holders of bitcoin in the world is massively selling it so i can't see the evidence of it uh i would think we would have a yeah sorry you dropped out for a second anyone on the panel has looked at both sides of the story there's a few tweets i won't go through them now but does anyone share any concerns bill dean bruce or brian any concerns on on binance's insolvency or possibly you know the rumors about binance's insolvency because i'm

Starting point is 00:27:01 in the same boat as scott i just don't think chain analysis is enough to kind of support those rumors, but I think questions are also valid. Go ahead, Phil. No, I don't really have anything to add on the Binance rumors. I mean, I haven't seen any evidence that they don't maintain 100% reserves in kinds, which is exactly what they should be doing as a

Starting point is 00:27:25 exchange slash order book. And if we see evidence to the contrary, then we should hammer on that. But I haven't seen it, nor do I think I have any reason to believe that they would be effective at hiding that given how large they are. I think there's nothing wrong with supporting the BNB price, I suppose, but I don't think that they would need to do that to keep the company from being insolvent. I think those are two different things. Correct. And that's where people are conflating it with FTX. As people saw it, FTX was defending it because if FTT went down, it was going to expose the massive hole in their balance sheet and fraud. Right. And I think Alameda was using FTT as collateral with a lot of market makers, which obviously, if the price of FTT collapsed, then that would be a big problem for all those loans.

Starting point is 00:28:18 And to my knowledge, Binance is not in that business at all. And I could be wrong. I really don't. And I have zero inside information. But yeah, the other thing I was going to say is responding to your comment about Bitcoin price from earlier, we obviously work with a lot of mining pools in our international business. And I can tell you that those mining pools continue to sell aggressively, right? Because that's what their clients want when they win Bitcoin for the most part is they don't hold. And not all of them, but we've clearly reached an equilibrium right now. And I think this is a very different situation from where we were before the last run-up because before we had the grayscale ARB trade, I guess you could kind of say to some degree now the grayscale ARB fraud given Genesis and DCG and I guess BlockFi's role in

Starting point is 00:29:06 that, but we don't have that right now. And so 25K actually seems to be the quote unquote real price where 25 to 30K seems to be the real price right now. And what's interesting to me is that with the happening, it's not necessarily the buying that becomes a self-fulfilling prophecy. It's the fact that the mining pools will be selling less because they'll be winning less. And that actually changes the denominator significantly in terms of potential energy on the sales side. And that is extremely bullish to me versus, you know, kind of the unsustainable type of trades that were going on during the last run up. So I'm very encouraged by a lot of the crap getting removed from the system. And, you know, we'll see how that plays out. But, you know, there'll be a few narratives that I think drive Ethereum. We'll see what they are. I think AI and the resurgence of DeFi will be likely candidates. But I think those two factors combined with the likely liquidity pump that we're going to see, which I've talked about on your stage here a few times, I think are pretty bullish signs for

Starting point is 00:30:19 Bitcoin. So just to be clear for the audience, when he's talking about Bitcoin miners, they mine Bitcoin and then they can either decide to hold it or, as he said, they're right now probably net sellers. So that implies when he talks about equilibrium, there's also quite a bit of organic demand to offset that supply that's being sold onto the market, giving us this equilibrium of price. And that's not always the case. If there was no demand, we would see price going down pretty aggressively because the miners are huge sellers in the market. And what's more interesting, that's absolutely right. And what's more interesting is retail is debt. And so somebody's buying, right? To establish- Huge wallets. We've seen it. We've seen that it's largely whale wallets. I mean, the same amount of money, quote unquote, in crypto is buying. And that you can see on chain. Yep. That's right. So we're seeing a lot of family offices, institutional investors taking up that slack, but not retail. And so what that means is that from a contrarian perspective, retail is completely off the bus.

Starting point is 00:31:16 And when a group is completely off the bus, there's only one way to go. Well, two ways. One is you can stay where you are, which almost never happens in markets, or people start getting back on the bus. And so I do suspect that over the next 18 months, somebody mentioned 18 months earlier, I think maybe it was you. Yeah. Yeah. That I do think retail is going to get back on the bus and it's going to be driven by, I know I'm a broken record here, but overall increases in liquidity to support the fact that we are going to have most likely a V-shaped recession. And all of it, again, supports the bull case that I keep hammering.

Starting point is 00:31:55 I agree with you. It'll be driven by liquidity. But the simple way of saying that is that those same people who are apathetic or think that Bitcoin is a scam or got burnt and sold it are going to buy again when price is at a certain level and they FOMO back in. Or new group, for sure. Yeah, either way. That's right. But it's going to take basically price going up to drive people in to drive price up, which is the way the market thrives and falls. And yes, I think in this case, retail will come last. They used to lead, but right now they're not leading, which is super interesting. I think that this case, retail will come last. They used to lead, but right now they're not leading,

Starting point is 00:32:28 which is super interesting. I think that's what's creating this equilibrium. And it's going to take, if you want to get to 50K, it's definitely going to take retail coming back in. And I think what's interesting is the longer it takes, the more likely the next run-up is going to be sustainable. What turns miners from net sellers into net buyers? Not having, well, okay. So there's two aspects to miner selling. The first is participants in the pools and the participants in the pools by and large, they're happy to take profits at this level and that's fine. And then there's the actual miners that own their own equipment and are in this for the long term. They actually don't want to sell. They want the tax advantages of not selling. They'll actually happily borrow against their Bitcoin if they can or just hold it and if

Starting point is 00:33:21 necessary, sell some to grow. But they need the price to be higher in order to sustain themselves at scale so that they can sell less to sustain their business. And so there's two different groups in that mining world that you have to consider when you were trying to figure that out. The pool participants will generally keep selling forever. Now, the good news there is that the pool participants are going to get smaller and smaller output via the next halvening and the halvening after that, but the miners simply need a higher price in order to sell less. And you can see, we just pinned a tweet above,

Starting point is 00:33:57 Justin, Bitcoin supply on exchanges falls to five-year low. Bullish. Okay. So the narrative there for anyone who doesn't understand, once again, it's just a very simple supply-demand dynamic. If there's very few coins on exchanges to be sold, it means that any spike in demand, obviously, is going to send price through thinner order books, and price will be able to move up higher. But we could also say that there's a massive loss of supply on exchanges because there's just bad news everywhere. There's a lot of people who rightfully or wrongfully are moving everything into self-custody, even since FTX, Celsius, Voyager. But now off of even to some degree Coinbase, people are going to be forced effectively off of Binance US and a lot of people are moving off Binance. So that's going to naturally reduce the supply. Yeah, I think two things. One,

Starting point is 00:34:56 Bitcoin can come back onto exchanges very quickly, like in minutes, right? Literally in minutes, because that's the way it works. But I think the more important right now is retail sentiment is just debt. Whether it's whales moving into wallets, cold storage or whatever, the retail sentiment is just non-existent. Everybody's apathetic on the retail side. So that's the most bullish part of this to me. Not that the Bitcoin has come off of exchanges per se, because that can change in a heartbeat. I think retail sentiment being dead is bullish because now there's only one way to go. Yeah, if they're all gone, they can't go. I'm not a trader.

Starting point is 00:35:30 I'm not a technical analyst. Based on everything I've said, everything points to a bottom, excluding any Black Swan events. And even Black Swan events, there's not much left. I've been saying that. Yeah, I think we've all – I know Bill has, I have, you have been saying that. I mean, to me, FTX was the bottom where I just can't imagine. And listen, it could arise if there was some, and I think very, very low chance of some massive event with Grayscale or one of these that caused a forced selling. But who are the forced sellers in the market right now?

Starting point is 00:36:03 How can you take with us from 25 below 15? I mean, you're talking about a massive amount of supply. What did you say, Bill? What did you say has to blow up? I said if Biden blew up... That's just the exact same situation. That's like literally the last Black Swan

Starting point is 00:36:19 event. Is Biden blowing up or less concerning is any action towards Tether. But otherwise, let me say something that makes Bruce happy. Bruce, did you see the news there? It just announced about 10 minutes ago Bill Gates is meeting Xi Jinping.

Starting point is 00:36:36 That's the first meeting that the team is about to tweet it out and that's the first meeting that Xi Jinping has with a private entrepreneur from the US according to media articles. So, I don't know if he met Xi Jinping or others within the Chinese government, so the CCP. I haven't checked that.

Starting point is 00:36:58 So, I'm just referring to what the media article says, but it kind of goes back to the point that influence money is shifting east. Now, that could be a bigger debate, a bigger macro debate and i know jay would love to destroy me here and we're going to get into macro very shortly but bruce it it kind of indicates towards the that increased influence in the east could be a light at the end of the tunnel that we're seeing now with with the us's uh well at least the sec's action against Binance and Coinbase and crypto in general? Well, it doesn't make me happy because they're a bunch of statist, authoritarian

Starting point is 00:37:30 bootstrappers also. They're horribly statist and authoritarian. I mean, they're even worse than we are. They're communists. You know, communists are bad. You know, we used to call them commies, and for good reason. They're horrible.

Starting point is 00:37:48 It's a horrible ideology of, you know, collectivism and tyranny and state force and authoritarian control. So, you know, the nanny state authoritarians like Xi Jinping and everybody else in China are no worse, are no better than the nanny state authoritarians here. It's a bunch of Bernie Sanders, Elizabeth Warren, Xi Jinping type of, you know, nanny Karens who want to get up in everybody's business and, you know, oh, you can't trade that coin. You got to do this here. You need this form. I mean, China even banned video games. You know, what a bunch of insane authoritarians. That's not how the world works. People, the world is complex and people must have the ability to pursue their own way of doing things. You can't have centralized controllers sitting there in, you know, fancy

Starting point is 00:38:39 offices that they paid for with stolen money sitting there dictating, you know, how everybody runs their life. I mean, who would think that these people are this smart? You know, they're not that smart. The crowd is what's smart. You know, we don't need any of these clowns. So the China model is a failure, too. What I worry about is the United States becoming more like China in embracing these horribly anti-human, anti-human rights, terrible economic policies that lead to ruin. There's a great book called The Road to Serfdom, which many people have read, which talks about exactly this. We are on the road to serfdom. And heavy-handed state authoritarian control just makes us into dark and bleak state, not something that we should be pursuing. I mean, the Dubai model is

Starting point is 00:39:21 maybe a little bit better because they don't have that heavy-handed authoritarianism. They're not perfect, but I think that everything is just going to flow to where there's the most freedom, wherever that is. And Scott, I don't know when you want to shift to the FOMC discussion because I've got a few questions for Jay on that. But anything else? You invited Jay to destroy you, and so I just want Jay to… Jay doesn't see the influence. Actually, Jay, I'm not going to put words in your mouth, but are you not concerned,

Starting point is 00:39:48 but do you see influence money? We saw Elon meet the CCP. We saw Vivek Ramaswamy come on our space. And he wants, if he becomes president, which obviously the polls say it's unlikely, he wants to introduce a bill that bans US businesses from doing business in China and vice versa. So considering that sentiment

Starting point is 00:40:04 that goes against globalization or internationalization, how do you think that will impact the US economy? How do you think that will impact the global economy? Jay, you with us? Don't tell me you're not listening, man. He's probably tuned out because we're talking about- He heard Bitcoin and he went to sleep. Yeah, I've essentially made his argument.

Starting point is 00:40:23 He doesn't hate crypto. He's been talking about the regulatory crackdown we've seen. He's been talking about this for a while. Now, he's more bullish on Bitcoin. I'm putting words in his mouth since he's not here and he can correct me later on. He's more bullish on Bitcoin, not very bullish on altcoins,

Starting point is 00:40:36 concerned about the regulatory crackdown, but I think we've seen the worst of it. So I just don't think... And then if we see a pivot now, and that can be the next question I have, Scott, if we do see a pivot, and I know you and Ryan disagreed on whether a pause is a pivot or not, but if we do see a pivot or a pause, that's bullish for risk assets. Dude, listen, I tweeted earlier, I will die on the pause is not a pivot hill.

Starting point is 00:40:58 I know Rand's not here to defend it, but a pause is not a pivot because a pause, they can hike again. Once they pivot pivot they're not hiking again a pause you could just pause for two three four months and then they could start hiking again based on the data a pause is not a pivot historically or in reality we could talk about that more uh with jay once it once he gets back here uh i think it really is interesting i would have loved jay's perspective on the the east but it is very very clear here i think that uh crypto is moving do you believe do you believe in the narrative

Starting point is 00:41:31 that if if we see if hong kong is you know everything goes well in that sandbox uh that chinese sandbox everything goes well do you think the next bull run will be led by china or do you think this is just everyone getting too excited and trying to find hope when there is absolutely do no no i absolutely do and if you even just take a look and we've talked about this before volumes of even just crypto trading and speculation in asia are astoundingly higher than the united states i mean south korea itself uh does heavier volumes and has been behind a lot of these moves, just traders there that trade in huge size and with heavy leverage. And so I think that we're not going to have clarity in the United States. If we have a bull run in the next couple

Starting point is 00:42:15 of years, which I think we will, largely people in the United States probably won't have access to the assets that are leading that to some degree. But if you see massive altcoin moves or stuff, and those are all delisted in the United States, then how can we possibly be leading that charge? So I think that offshore in general, and certainly the East is where the next bull run is going to come from. But I think that that's not unfamiliar territory. We've had moves led by Asia many times.

Starting point is 00:42:41 I want a bit of a take. Umbrella, if you want to come up for a bit, give us a bit of a take on altcoins. Let me see if it's there. Mickey, I want to get your thoughts as well. You've been in our finance spaces for the last few months. Your thoughts on that shift we're seeing to the east. Again, is that being overhyped? Bill Gates meeting Xi Jinping, Elon being in China a couple of weeks ago, and the narrative shifting to anti-China, which shows that possibly the US is concerned. Hey, did you say me? Sorry,

Starting point is 00:43:06 just about that. Yeah, all good, all good. Did you see the question? And your audio isn't great, but did you hear the question? Your thoughts on the narrative of the money, the power, the influence shifting to the East? Just on crypto, I hope you guys can hear me. Just on crypto alone. Yeah, your audio isn't great, but we can hear you. And crypto in general, because we're going to shift to the

Starting point is 00:43:23 FOMC discussion. Mr. Rubini's joining us in a bit uh in about i think 20 30 minutes um so you can talk about crypto as well as the general financial will uh the finance sector happy to jump in on china after mickey hey jay you're back we're just we're just making fun of you that you're not here uh but i'm glad you're back go ahead mickey Miki, and I'm going to take it. Miki Nishinauikin I think the argument against crypto in the US for the last few years is like, hey, where's product market fit here? What is the real benefit? It's not really clear, but that's not true of Asia. I think the product market fit in China is extremely clear.

Starting point is 00:43:57 Get access to US dollars. The dollar and dollarization on crypto is by far the product that works best. That's clear product-market fit. I agree that you're going to see volumes coming from Asia because that's where demand per dollar is. And it allows people in China to get access to US dollars where they can't otherwise. There's tons of capital controls in China, right? You can't take...

Starting point is 00:44:20 Mickey, I'm going to cut you short, but your point is a really good point. So I'll let you wrap it up just because your audio is really bad, but you're really focusing on the product market being more relevant in the East and China than in the West and the US and Europe. But I think that's a different topic. I actually agree with Mickey there. And I think that I've said countless times that stable coins are the killer app of crypto, right? Bitcoin is a killer app in itself. But for everything else, stable coins are the killer app because people all over the world want access to dollars. But I don't necessarily think that that access to dollars is what drives

Starting point is 00:44:53 a quote unquote bull run because that implies it's a huge move in price. So I think it's, for being honest, it's going to be wherever the speculators are the heaviest and wherever the FOMO is the heaviest, it's going to lead price to actually go up. I think on the adoption side, Mickey's absolutely right that we'll continue to see more adoption of stable coins in places outside the United States where they need them, which by the way, the United States should support because that is dollarization, not de-dollarization. And actually companies like Tether are massive buyers of the United States. Just one other quick point. I hope my audio is a little bit better.

Starting point is 00:45:27 Much better. Listen, now that I'm a subscriber to Mario, my audio is better. I'm more handsome. I look better. My fashion is better. My dancing is better. But I think there's another point. I think the point there about use.

Starting point is 00:45:40 There's also just like there's news now and it's been a trend for the last year. Just huge capital outflows from China and intellectual outflows from China, right? People are leaving China at a huge rate. I think that the influence that China had based on its access to consumers' markets is shrinking more and more, particularly with this trade war. But I do think, you know, crypto represents a huge opportunity for Asia, right? It's just the ability to get access to markets that are usually blocked from trading, access to different capital markets. That's a huge business opportunity for crypto builders. And I really hope to see that environment getting built out over the next three

Starting point is 00:46:17 or four years, because it's a tremendous opportunity to help these people get access to different capital markets, different equities markets. So I hope to see that be built up. Let me ask Scott, do you mind if I ask Jay a question? It's been a while, we haven't spoken. I'd be highly offended. No, yeah, go for it. Jay, first on the narrative of money influence, business shifting to China, shifting to the East, that's number one.

Starting point is 00:46:42 And number two, your thoughts on the crackdown we've seen over the last week on crypto? Oh, sure thing. On the first question, I think it is one, it's inevitable that as other parts of the globe catch up to the developed world, that a larger percentage of GDP will shift to other areas of the world. I mean, you look at the speed of growth in India, for example, you look at its demographics, its population is growing at such a

Starting point is 00:47:11 rate, they're going to have some infrastructure issues. But, you know, there are structural changes around demographics and birth rates that happen globally. But I would say that out of the developed markets, when you look at institutions and you actually look at demographics, the U.S. is actually set up in the most fortunate situation simply based on institutions and demographics and the net present value of future tax revenue from the best institutions right now in the world. Now, things will change over time. But one of the things that I think is misunderstood is that the dollar is going to lose its importance overnight. I think that if anything, it will be a 20-year type process. But even then, you might see its use fall to fall to 40 or fall to 45 it's not a it's not very clear you know every single country that people refer to every large country you know has its own debt issues china has its own debt issues around local property um developers that are essentially financed by local governments in a huge kind of Ponzi debt scheme.

Starting point is 00:48:25 You know, the U.S. has huge, you know, Medicare, Social Security debt, along with, you know, 100 plus percent debt to GDP. You know, the U.K. has a very major issue in a similar vein, and so does Europe. And Japan is the worst of them all. So I like to look at the dollar and I like to frame it as the best of the worst. You know, it's You look at it and you have to just think rationally, what are you going to use instead that is liquid, that's easily transactable, that people actually want to use as a store of value, at least in the short term. And with interest rates today at 5%, the interesting thing to note is everyone's talking about, at least they were until it was

Starting point is 00:49:06 debunked, the BRICS and in the Yuan, et cetera. But you look at what their Chinese are putting their own money. The Chinese have capital controls. And to some extent, even India is starting to restrict their taxing money that's leaving the country because they know that if we enter a global recession, more and more money is going to go towards the dollar. And we've seen that Chinese investors are actually shifting a lot of their assets into US dollar deposits. In fact, JP Morgan and BlackRock are both... There's a ton of demand. They actually set up a hundred and... Banks set up 144 wealth management products, they're called, in foreign currencies. Most of those products are in dollars for wealthy chinese to take dollars not going anywhere yeah yeah i think this this the debate

Starting point is 00:49:49 of the yeah i think and i think most of us agree here a general we've had debates on this in the in the finance spaces but i think most people agree at least in the short to medium term the dollar isn't going anywhere i want to get your quick thoughts as well on the crypto panelists on the crypto side uh it will keep you a couple of minutes because i know that that john reed and ram are up on stage as well uh but yeah we'd love to get your thoughts like we've seen the crackdown now um do you we were making the argument earlier not sure if you heard it that we've seen the worst and and fundamentally looking at bitcoin's bitcoin's price response it's been relatively steady pretty boring volume is down um and we just pinned a tweet above that we're at a five year what was it five year yeah five year low in bitcoin supply supply and exchanges exactly

Starting point is 00:50:30 um so considering that these facts you know i know you're not invested in bitcoin but i don't think you are but bullish bearish and what's your what's your thoughts on everything sure i mean you know people point to this having that's coming up as a catalyst, but I like to look at catalysts. I'm an event-driven guy. We look at names that are undervalued and there's a reason to own them. Either there's a buyout happening or a spin or a split or an accelerated buyback or an increased dividend or a JV or a partnership or new revenue. I like to look at companies from a fundamental perspective. You know, you can think of me like a boomer. I was actually pretty early in Bitcoin back in 2013, because, you know, on the banking hedge fund side, that was the only thing you didn't have compliance requirements with, right? Because everything else had a 30 day hold requirement. I'm not very involved in a huge way today, but what I will say is that it's very hard to time the bottom because, you know, I think a lot of bad news might be priced in to a number of asset classes, but you know, it's unclear whether the DOJ is going to go

Starting point is 00:51:38 after, uh, Binance or any type of criminal activity. Um, and if you've read any of the disclosures, you know, the SEC has a civil lawsuit. The DOJ can actually file a criminal charges if there is any hint of impropriety or using customer funds for proprietary trading. And, you know, it's one of the issues you have in financial services that was

Starting point is 00:52:05 fixed many years ago by setting up firms like Bank of New York Mellon and State Street to essentially operate as fiduciaries. When you invest in a fund, you have an agent. You don't actually give your money to the hedge fund manager. They put it in a trust. They put it in a secondary institution. The custody, it's called a custodian that custodies the money on, on your behalf. So you can avoid the Bernie Madoff type situation. You don't really have that in the crypto space. And I think you can develop it and it would, it would take a lot of the fear and it would help the regulatory process as well. And like, you guys are all entrepreneurs, like setting up a business like that is an annuity business. So I think, you know, there,

Starting point is 00:52:49 there's that risk on the Binance side. And, you know, I think Binance is just, I remember they just up and left Canada when Canada said, or challenged them. So I think that there's still a chance that, you know, Binance might have to leave the U.S. if the DOJ does pursue it. And then it'll just be a multi-year battle. But that's not a guaranteed thing. And then on Coinbase, you know, Coinbase has been under a lot of heat, right? I think there are like 19 cryptocurrencies that were judged to be securities. And then there's this whole staking is, you know, 30, 40% of revenue. And, you know, people are worried about after FTX, I mean, this guy really

Starting point is 00:53:30 hurt the industry, um, with his indiscretions. Um, there's a situation where institutions are leaving this space, right? Out of some fidelity, you know, you're not going to see a new hedge. I used to talk to hedge funds in 2019-20 that were jumping around the industry. Go ahead. So I was going to mention, there's just some quick breaking news I want to mention just for the panel and the audience. It just came out of the IMF 11 minutes ago. And if you don't mind, Jay, I just want to ask you a question right after that's relevant to the breaking news story, and then we'll come back to the discussion.

Starting point is 00:54:03 I'll read out exactly what was said. It's 2020 net capital outflows from emerging markets seen at $173 billion compared to $522 billion of outflows in 2022. That's not IMF, that's the IIF. It also says that the US, they see a soft landing for the US, and the US economy will avoid a recession in 2023 and inflation is seen falling to 3.1%. Based on this news, and I want to ask the question that we're waiting, that we're

Starting point is 00:54:32 going to be discussing and debating over the next couple of hours with Nouriel Roubini and other panelists is, could we see a pivot? And what does that mean for the markets? Maybe we'll go to Ram and then obviously, Joe, I want your thoughts for that. Go ahead, Bob. What do you mean by a pivot necessarily? fed pivot it's a pause yeah i think i think would and and i'm happy for anyone else to to to chime in but i think what we're seeing today is more of a potential pause so i put up a poll here if you go into you know several hundred people have have put in their opinions on a Fed meeting poll, but there's four outcomes, right? You know, there's no opinion involved in the outcomes. You know, number one, they could pause permanently. Okay. And that would

Starting point is 00:55:17 potentially be positive for the market. Now, I don't think Powell would say that in this meeting at all, or he wouldn't even hint at it. But that's a possibility. The second possibility is that they pause. And because core inflation has been a little bit stickier, and they're worried about, you know, he wants to preserve his legacy. Powell doesn't want to be Arthur Burns. He wants to be remembered like a Volcker. They might pause and then do another hike in July. How much that matters, another 25 bps may not break anything, but the effective rates where they are is going to slow down the economy over the next six to 12 months. Number three, what else could they do? They could hike by 25 basis points.

Starting point is 00:55:57 Now that would be difficult because the treasury, not the Fed, but the treasury is issuing about a trillion of debt over the next three to six months. I think 300 billion of bills this month alone. It just wouldn't make sense to charge to basically for the Fed to charge the treasury extra, you know, instead of giving them an extra month or two, right. Just to get those bills into circulation. And then the fourth outcome is obviously that they cut. And we just don't think that's going to happen because of how strong the labor market is in fact we were saying this earlier in the year where the market had priced in 12 cuts and four cuts by the end of the year and one cut in july by the way and this was as early as april so i think that the interesting thing to watch is actually going to be the SEP and the dot plot.

Starting point is 00:56:47 And you might actually see, like the market is now only pricing in one cut this year, which is more reasonable, but you might actually see the SEP go a little bit higher. Hey, Mario, Jay, really quick. Mario, before we get really deep in the weeds on the macro side, and Jay, I'm sorry to interrupt, but I know we are going to be talking FOMC and exactly those topics to death. I do want to mention this one story above that's somewhat breaking news throughout today, which is pinned in the nest. The largest Korean Bitcoin lending service, Happy Delio, which is Delio, D-E-L-I-O, has halted withdrawals along with one of the largest Korea yield services, Haru Invest. Delio supposedly utilizes 41 740 bitcoin one billion dollars worth so if you dig into this guys which is it's kind of blowing my mind i'm doing it in real time

Starting point is 00:57:32 so forgive me if i have any slight inaccuracies but it looks like this uh company uh haru is effectively a 12 yield service much like a celsius any of these. So apparently when we were talking about the speculatory and degenerate aspects of the Korean market in crypto, well, they didn't learn any lessons from us. And it seems like we might have yet another contagion here in another major market. Again, a service that's offering 12% yield. They paused, I guess, withdrawals, which caused a service that utilizes them and works with them to pause withdrawals. There's apparently, we're digging into it right now,

Starting point is 00:58:08 but some other intertwined things here that one of them is an investor in the other, but it seems like we might have another major contagion type event going on in South Korea here with a lot of Bitcoin on the line. And let me ask a quick question. Yeah, Jay, I'll give you the mic in a bit, but I wanted to ask a quick question. Jay, I'll give you the mic in a bit.

Starting point is 00:58:30 But I wanted to ask one more question regarding just the FOMC meeting. Before that, for the panel, when Nouriel Roubini joins in about 10 minutes, we agreed that the co-hosts, so me, Scott and Ryan, will be asking the questions, mainly Scott leading the questions. Not sure if we can get panel questions afterwards. But yeah, we'll be muting everybody and then we'll go back to the panel right after we finish with Rubini. Is that correct, Scott? I think that's correct.

Starting point is 00:58:51 I think Ran might lead quite a bit of that FOMC. But yes, the three of us, it's very strict rules that everybody else has to remain somewhat silent. So we will respect that, obviously. Yeah, let's go back to the discussion. Ram, I want to go to you. Can you hear me? Yeah, I hear you. Go ahead, obviously. Yeah, let's go back to the discussion. Rahm, I want to go to you. Can you hear me?

Starting point is 00:59:06 Yeah, I hear you. Go ahead, Mario. Yeah, so just the same question again. You know, the FOMC meeting is coming up. So, you know, the basic question is, what do you expect to see? How do you think the markets will respond? Some quick thoughts.

Starting point is 00:59:19 Crypto and finance. We're going to move slowly from crypto towards macro. Okay, let me zoom out a bit. I'd say my view over the last six to nine months is that we'll see rates higher for longer. That was non-consensus. Now it's become consensus. It puts me in a funny spot because I don't like peeing consensus. The Fed, as you know, has a dual mandate, unemployment versus inflation trade-off.

Starting point is 00:59:43 In today's reality, that's shifted. It really is one mandate, which inflation trade-off. In today's reality, that shift, it really is one mandate, which is restore their credibility. And the reason why that's important is because confidence in the Fed is actually a lever to shape inflation expectations. If consumers and businesses expect inflation, then that starts getting baked into prices and contracts. So I don't expect we'll see any pivot this year. You still have unemployment rates that you haven't seen since 1969, which obviously ushered in a decade of higher than average inflation rate. You're seeing improvement on the good side, but not on the services side. And it's going to be a challenging setup because at the same time, you have a drawdown in the banking sector in terms of deposits,

Starting point is 01:00:33 as well as the issuance of about $1.5 trillion in debt, which is a liquidity drain for the system. So in the past, the Fed could have its cake and eat it too. There was softening in the economy. The Fed could lower rates and that would generate stimulus. But now the Fed has hard constraints. It's making trade offs. And those are very uncomfortable, high cost trade offs. It can't have its cake and eat it too. You're seeing that obviously expressed through the tremors we have, it seems like once a quarter now, around the banking sector as well. So I don't expect any change in this FOMC meeting. And just for the audience as well, I know we have a big crypto audience. This is the crypto town hall as we move to macro.

Starting point is 01:01:20 And how the FOMC will affect crypto, if see a 50 basis point um a cut we'll see a sorry increase we'll see a major downfall 25 basis points we'll see a downfall zero basis points we'll see a pump and a cut a 25 bit cut we'll see a super pump um just got that now from the team um scott what are you what do you think man that today, what do I think is going to happen with regard to crypto or FOMC? FOMC, crypto, and macro. I think we're going to see a pause. I think we'll still get some hawkish language to keep equilibrium there. I think that probably they'll talk about being data-driven in the future.

Starting point is 01:02:03 I think that we should not be talking about a pivot. Sorry, Ran, if you're there. Pause and pivot are not the same thing in my mind because a pause leaves the floor open for future hiking. And a pivot, once they pivot, man, they're not going to. Let me give you some forecasts, and I want to get your forecast. City forecast a 25-bip hike. Goldman Sachs, a pause. Societe

Starting point is 01:02:25 Generale a pause as well. What do you anticipate, Scott? 90-something percent pause. 90-something percent pause. And how do you think crypto will react? Would you expect a pump as we saw based on the... I think it's baked in, to be

Starting point is 01:02:42 quite frank. First of all, whatever the market does, first will probably be wrong. It'll float back in the right direction afterwards. We see that quite a bit, which is why if you specifically look at certain cryptos after these kind of announcements and meetings, you get what we call the Darth Maul candles, which is a big wick up, big wick down, and settling somewhere in the middle. But listen, I think when everyone is expecting something and they get it, why would the market particularly react, right? So I know that it'll likely bounce around. But right now, I think that crypto has to be looked through through a different lens, right? You might get some immediate reaction,

Starting point is 01:03:19 but I think there's far too much happening in that market to be really concerned with. What do you think? So Nareel is joining us in five minutes. What do you think he'll say when you get to ask him at the end your thoughts on Bitcoin? Do I have to?

Starting point is 01:03:33 Can Ran ask him? I just want to know who we're throwing in front of the bus. Let's throw Ran. He's not here. Let's throw Ran. I'll speak on that one. I think he'll be bearish on Bitcoin. I think he would expect a deflationary impulse as well. Let's see. I think we should expect an inflationary impulse as well.

Starting point is 01:03:56 I mean, deflationary impulse as well. I agree with him. I mean, we've seen PPI fall off a cliff at a rate never seen before in history. Commodity prices. We'll get into all of it but yeah so so so do you know if you know as nuriel did say that there will certainly be a recession he thinks inflation will remain persistent because mainly because of the geopolitical tensions that we're seeing um and um yeah it'd be interesting to get his take on the whole de-dollarization argument as well um i want to ask him how much Pepe coin he owns. Can I do that? Yeah, if you would never want him again on the show, then yeah.

Starting point is 01:04:28 And how much PNB he owns too. Oh yeah, it would be good to get his... No, don't ask him about Binance. No, don't ask him about that. But yeah, he'll be joining us in four minutes. I'm going to send him the invite now. But let's continue with the discussion as we prepare for Mr. Rubini. Bill, your thoughts

Starting point is 01:04:44 on what we're going to see today and how do you think the market will respond? I don't think the market will respond at all to the pause. I think the big question will be what does he say about strains in the banking system? Do they continue the – well, I'll just say it's a lie that there's no strains in the banking system, which has been the narrative, which is clearly untrue. And the fact that, you know, many banks are basically insolvent and they've caused the problem and, you know, what are they doing about it? I think that will be, his response is there to those questions. We'll probably, and your comments will potentially move the market. But I think Scott's right.

Starting point is 01:05:27 I think the pause is priced in, anything but that. I think he's going to say that they reserve the right to look at future rate hikes if inflation continues to rear its head, which is clearly nonsense at this point. I mean, PMI is in free fall, inflation's in free fall, and I don't think that's going to change anytime soon. So any deviation from that, I think, is going to move the markets. But I suspect it's going to be more of the same just without a rate hike. So I've just sent out the invite to Scott, by the way.

Starting point is 01:06:09 We have to ask Muriel if he owns any Bitcoin still. When he and I did the infamous Milken panel together, I think Bitcoin was trading at about I think it was $2,500 or $3,000. And he was basically just, it was awful2,500 or $3,000. And he was basically just,

Starting point is 01:06:27 it was awful how he was trashing Bitcoin as garbage and a scam. And I'd love to hear his take on that now since I think he's been proven wrong. So hopefully you will ask him that or maybe allow me to ask. Bill has volunteered to step in front of the bus, but we are contractually obligated. I love how Bill has such a nice, calm voice.

Starting point is 01:06:48 Bill's the right one to do it. I have no problem asking any question that I think is appropriate, if you'll let me. Yeah, I think we'll probably ask him initially for the broad strokes and then see what happens from there. I think we're trying to bring him up probably as we speak. So just waiting for that to happen, looking for him in the audience as well. And I think, guys, obviously we're talking about FOMC here, what's likely to happen, and we're going to have many, many hours to do so in advance of

Starting point is 01:07:23 that news coming out in two and a half, three hours. And we're committed to have many, many hours to do so in advance of that news coming out in two and a half, three hours. And we're committed to being here that entire time. I mean, Mario, anything you want to share before we get Nouriel up? No, man. I'm pretty bullish on crypto. I don't think it could get any worse than that. I think we're in for a long bear market. I tend to be the bullish one when it comes to macro.

Starting point is 01:07:44 I'm on the same camp as jay um and regarding the the banking crisis not sure what to make out of this it seems to have eased up now i'm not seeing that much flood anymore but then again as you know the quiet before the storm are we seeing much i haven't been in the finance spaces jay uh and ram have we are we seeing much um concerns within the within the banking sector when it comes to commercial real estate? Sure. I mean, we still have $1.5 trillion of commercial real estate debt maturities happening over the next two years. A lot of these loans were amend and pretend. A lot of the loans are within CMBS and there's not a lot of disclosure and special servicers control the game.

Starting point is 01:08:27 For those of you who are not as close to the market, obviously in commercial real estate, there's several types of properties, right? Office is one example that's under a lot of stress, especially in San Francisco, downtown LA. For example, you have class B offices, big office towers that are selling for 20, 30% a face. And if you're a bank and you originate a loan at 60 LTV, you're either trying to sell those risky loans right now, and some banks are selling those loans, or you're in a position where you're going to take an actual 50% loss if they're selling at prices that low.

Starting point is 01:09:00 And why are they selling at prices that low? Because their capacity utilization is only 50 to 70%. So these buildings are 30% plus empty. And at the same time, their property taxes are going up and they're mostly a floating rate debt based on Libra and SOFR, which went from zero to 5%. So if you're borrowing at L plus 200, your cost of capital almost tripled. So that's kind of the quick synopsis of what's happening in commercial real estate. You know, is it going to be an- Jake, can you put that in layman's terms for all the people who don't know what a layman's terms mean? Sure. So people borrowed money during a 15-year zero interest rate environment to buy office properties that were not well-maintained.

Starting point is 01:09:39 And during the work from home, especially during COVID, there is already an overbuild of these commercial properties in major cities in the US. There's population flight out of those cities. And what's happening now is with flex schedules, with work from home, you have these buildings that can't afford to pay rent as their lease is expired. Just like you have a lease for an apartment, these buildings have five, seven, 10-year leases. As those leases expire, they don't have revenue to offset rising interest rates. And that's causing a squeeze at these real estate developers and the property owners like the Blackstones of the world, the PIMCOs of the world,

Starting point is 01:10:21 the Brookfields of the world. These huge multi-billion dollar managers are walking away from properties. Why? Well, one, they're getting redemptions. Starwood got 5% redemptions this quarter, so did Blackstone on their real estate fund, and they need to meet those redemptions. Actually, Starwood yesterday announced that they're selling 2,000 residential properties. Imagine that. Hasn't Blackstone had pauses on redemptions for quite a while in at least one of their funds? Yeah. So these funds can put up gates just like hedge funds do. What it actually does is it's counterintuitive. It actually accelerates the forward outlook for redemption. So let's say you're invested in a fund with Bill Ackman.

Starting point is 01:11:03 And Bill Ackman says, we're worried about the economy. He starts crying. And he says, I'm going to lock you up for five years because I want to charge you fees for five years. And I don't want to sell all these securities at a loss. That is viewed very badly by the LP community. What ends up happening is the moment those two years or five years are up, you're going to take all your money out. So in the near term, it might give you some revenue from fees, but it's a horrible thing to do to investors. And what is likely to happen is they're likely going to allow more redemptions over time, but they're going to have to sell properties. And they're selling properties in a market where there's no bid for a lot of these properties at the same price that they bought them because

Starting point is 01:11:43 interest rate costs are so different from where they were even two years ago. So that's kind of the issue. Now, the industry is a $20 trillion industry with $6 trillion of identifiable debt. A lot of the debt is at regional banks. There are 4,500 regional banks. Most of them are not publicly traded. So there's some banks that have 10, 20, even 30% exposure that will likely need to take some haircuts, but it's going to be like a slow moving train wreck. It's not something that explodes overnight, but every day I'm seeing new buildings default. So there's a mall in California that just $600 million loan that- They walked away. Yeah, they just walked away. night, but every day I'm seeing new buildings default. So there's a mall in California that just a $600 million loan that-

Starting point is 01:12:28 It walked away. Yeah, they just walked away. That's right. Yeah. So- So do you think that we're not seeing that crash yet just because of, as you said, there's just no bid, so it's kind of frozen? Yeah, it's like the real estate market. So I did some work with a friend of mine who's in CRE private equity. And when you look at this market, only like 2% of the market transacts every year, right? It's very illiquid. That's why I was bearish on resi real estate. And we were short in 2006, 2007, 2008, but things took a long time to

Starting point is 01:13:01 play out. And commercial real estate is even more slow moving. You think about that. If only 1% to 2% of properties turn over every year, it'll take a while for this to play out. you know they don't actually sell it right away first they try to see okay can we cut costs and we can we make rent and then they'll they'll try to wait for the market to get better book better before they puke it out so you see you need to see a lot of inventory build up um for it to to shock the system and that that takes some time whenever you just to add on jay's point if you anyone ever seen office deals i mean you know four or five years ago, we're looking at some, and basically they hand you this giant spreadsheet with two very big assumptions. The first is, hey, we're going to assume money is going to be cheap or free forever. Two, we are going to assume people are going to be in offices forever. And once you, and if you model that out, oh, this bank is, this building is worth $300 million as a result of that.

Starting point is 01:14:04 But like those two assumptions, those key assumptions in these financial models that they give you were completely wrong. And this process of re-evaluating the value of these buildings, not just these buildings, everything, everything you can invest money in ever had basically for the last 10, 15 years had those two assumptions. And now we're in the process of repricing everything and office buildings being sort of the canary in the coal mine here because, you know, no one's going back. Very few people are going back to the office the same way they were before. So what would be the signal that we're reaching that tipping point? Is it a percentage of vacancy? Is it certain with sales? Is it the redemptions in these funds? I mean, how would we know that? Oh, shit, this is the moment? It's the inventory that Jay's talking about. Because right now,

Starting point is 01:14:47 everyone's trying to figure things out. They're like, okay, we can figure it out. I mean, look, people are going back to the office now, aren't they? Aren't people going to go back to the office? Didn't Microsoft say this? And Facebook? Aren't people going back to the office? So we're going to try to hold on to these assets. They're going to try to sell the debt. And another company is going to buy it and thinking they're really smart. We bought this debt because we're so smart because we know how to turn this $300 million office building into a viable investment here. So we have to let that process happen. And we're just at the beginning of that process.

Starting point is 01:15:14 And, you know, so much is based on that, based on the footfall of office is how all the other commercial real estate is valued, right? Because now they have this, you know, a shopping center with restaurants and stuff that's based on that. And that football is going to be gone. So all that has to get re-rated as well. So we're going to go through a big cycle of re-rating all this property. Could the economy bail that out? Since you guys talk about it sort of like a slow-moving train wreck and it's taking a really long time. If things

Starting point is 01:15:38 improve everywhere else, could it effectively become a nothing burger with time? I don't know. It's possible, but I don't think so. I think the way offices are going to be structured going forward will be more like motherships. I don't think you're going to see the amount of office workers coming back in as we did before. And even if you have a 20-30% drop in vacancies,

Starting point is 01:16:02 I'm sorry, drop in, if you have an increase of vacancies 20-30%, these models die. They just don't work. So it sounds like Jay and Mickey, both of you think this is somewhat inevitable. I think so, plus the cost of capital is not going down anytime soon.

Starting point is 01:16:17 It's just not. A couple years, high cost of capital, low vacancies, the entire model changes. The value of the building changes know, high cost of capital, low vacancies, the entire model changes, right? The value of the building changes significantly and the market price goes down a lot. So, and this is a trend, this is not just COVID, right? Like, you know, even four or five years ago, more and more people were working from home. It was, you know, there was more and more vacancies in offices. It's not like this is, you know, just COVID, you know,

Starting point is 01:16:40 accelerated a trend of more and more people being remote and less of a need to have these giant, these giant offices full of people, right? I mean, we're talking about pong. The general economy, just to answer your question. I mean, it can't really fix the issue. What you actually need is for corporations to force people back into the office. And right now, I think in New York, we're at 50%. Certain parts of the US.s were were higher um but also it's not just that if the people that are going into back into the office you know with their they want to go into the class a they want to go into the better buildings right with all the millennial treats and kitchenettes and all those things and technology and ability to you know for for people to get good access to to broadband and and put mount big screens on the walls like the older buildings with you know the dimly lit

Starting point is 01:17:33 you know structures um and the less ventilated you know less pretty buildings like they're always going to be they're all toast right and it's just a matter of time will some of them get repurposed for lofts yeah but that process is going to take decades right so it is it is a big big problem and it's not just offices it's retail right they're look at all the empty storefronts we still have it's it's retail and it's also like transitional multifamily projects. There's like a 3,500 apartment complex that defaulted in Texas because they never finished building it. So they're projects that are being built and the cost of interest is so high, even though they're multifamily, oh, it's supposed to be safe. There's a huge millennial demographic that wants to rent. I mean, that's not unlimited, right? So if you don't finish your project, you're going to sell it at a big discount. Makes sense. So everyone, Noriel Rubini has joined us. Honor to have you here and thank you for joining.

Starting point is 01:18:33 I think obviously the topic today is FOMC in general, but I would love to hear, Noriel, the broad strokes on where you think things are heading. I think we all understand that these individual FOMC meetings maybe are not that impactful, but the broader picture is what we should be looking at. Yeah, I think, Swat, just to add to that, I think especially today

Starting point is 01:18:52 on a day where a lot of people are saying, I know you're disagreeing, but this is potentially a pivot. You know, the Fed going from raising in the fastest rate that they've ever raised in history going to pausing. A lot of people are saying this is like the day of a pivot, basically.

Starting point is 01:19:07 I'm interested to see what Norell thinks of that. Yes. Thank you, everyone. It's great being here and be able to join this conversation. Well, I'll start with the global economy. There has been a very sharp slowdown of economic growth this year. If you look at the Eurozone, actually, it's already in a technical recession as growth has been negative both in the fourth quarter of last year and the first quarter of this year.

Starting point is 01:19:38 Things don't look much better for the rest of the year. The UK is even worse. We are in outright stipulation with inflation very high and effectively a recession. The data out of China are coming quite disappointing. That's why they're doing more monitoring fiscal stimulus. They thought that the reopen is gonna lead to strong growth. That's not happening. And you know you have about 60 plus emerging market poor economies that have severe debt servicing problems. They're going to default on their debts or have to restructure them. That's why both the IMF and the World Bank estimate that this year

Starting point is 01:20:19 growth is going to be really mediocre, well below potential. And potentially there is even a tail risk of a global recession. The data out of the United States have been a little bit of a mixed bag. There is still an ongoing debate on whether the U.S. is going to achieve a soft landing, meaning going back to 2% inflation without any recession, whether it'll be a softish landing, meaning a short and shallow recession, or whether something more severe were to happen, a more severe recession, and so on. And I would say that there are gathering headwinds on the U.S. economy. First of all, the Fed had to keep on tightening interest rates.

Starting point is 01:21:11 They're going to take a pause right now. But my view is that this is going to be just a pause, that the inflationary pressure underlying is still meaningful, that the Fed probably will have to start doing another couple of hikes later on this year, maybe as early as July, maybe in September. Why do I say that? Headline inflation might be down only to 4%, but core is at 5.3, well above what is the target of the Fed. Wage inflation is still quite robust, around 5%.

Starting point is 01:21:47 And the labor market is tight. You have the lowest unemployment rate. You have aging of population. You have restriction to migration. You have a fall in labor force participation rate that has started to rise, but not back to pre-COVID level. You have the great resignation and you have even the beginning of kind of labor strife. And most of the economy's services not good. I mean, services, labor costs are more important. You know, commodity prices

Starting point is 01:22:18 have had a little bit of a correction this year because of concerns about the global recession and weakness of China. But the reality is that the fundamental of commodities is that we are in a super cycle for commodities, in part is because we have underinvested into not just natural gas and oil because we're bashing fossil fuel producers and we're not producing as much of renewable. There's also massive underinvestment into green metals and industrial metals because of regulatory constraints and also a variety of climate factors that restrict the production of food and fertilizer. And the geopolitics, whether it's the brutal Russian invasion of Ukraine, whether it's

Starting point is 01:23:06 cold war between US and China getting colder, whether it's the risk that this year or next year Israel is going to strike Iran as Iran is becoming a nuclear threshold state. I think there are risks that are going to lead to upside risk to commodities. So if wage inflation is going to remain in the five range, if commodity prices are more of an upside rather than downside, the ECB is not done yet. The Fed is not done yet. Nominal rates are rising. Real rates are rising. We've had the problems, of course, of the banking system that lead to a credit crunch among the regional banks that, as you know, lend a lot to households, SMEs, and to commercial real estate. And we have the excesses that were just discussed, both in commercial real estate and in residential. So I think that the Fed is

Starting point is 01:23:59 facing a bit of a mission impossible because they face not only a dilemma having to maintain price stability and also growth stability, meaning avoiding hard landing, but they have a third goal, financial stability. So you need price stability, you need growth stability about the hard landing, and you need financial stability. And I think that the trade-off is going to appear is that either you raise the rate enough to bring inflation to 2%, but then you have to go to a Fed funds rate close to 6%, and that pushes the economy into a hard landing. And then you create financial stresses on banks and highly leveraged institutions in

Starting point is 01:24:41 the economy. And they have a negative feedback between the real economy and the financial system. The more is the economic contraction, the more there are defaults, the more there is financial instability, and the more there is financial instability, there is more than an economic contraction given the credit crunch.

Starting point is 01:24:59 So either you raise rates and you fight inflation and you cause an economic and financial crash, or more likely you wimp out, you blink, and you decide that you don't want to raise rates to fight inflation. But if you do that, there is a risk of a de-anchoring of inflation and inflation expectation. There is a wage-price spiral that continues, and then you end up again into high inflation. So my baseline is still a hard landing. there is a wage price spiral that continues and then you end up again into high inflation so so that my baseline is still a hard landing yes but i mean i i hear you i'm looking at at the inflation data that we got yesterday the cpi inflation data now granted core inflation was

Starting point is 01:25:36 still a bit sticky but if you look at the course if you look at the cpi the cpi had its biggest percentage drop it had its 11th successive drop. You've got CPI currently year on year at 4%. The Cleveland Fed forecasts that next month it's going to go down to 3.2%, which is well on the way to the 2% target. You also have inflation coming down much faster than inflation actually went up which is which is i think a little bit encouraging when you when you look at all of this and you look at it on the background of how much the economy actually slowed and the current unemployment rate

Starting point is 01:26:20 or employment rate in the united states do you not have some kind of hope that maybe this is not going to be as hard a landing as you think? Do you not think that this might be – I looked at this data and I said, you know what? Given where the Fed started, when I say started, let's ignore the fact that the money was printed and the economy went crazy and they should have started much earlier. But if you look at it from when they started, it feels to me that they've probably done as good a job as they

Starting point is 01:26:50 possibly could have done. I take your point. My response to that will be along the following lines. First, as I pointed out, the fact that the labor market is so tight is a disadvantage for the Fed. It's not an advantage. And we have still an unemployment rate that is well below Naira. And wage growth, based on a bunch of measures, is 5%, not consistent with 2% inflation. Two, as I pointed out, in my view, a bunch of factors are going to imply upside to a variety of commodity prices, then it's going to be inflationary. But most importantly, whether the Fed can stop at the current level of rates or not, at the beginning of this year, their view was based on the SEP projection that core PCE at the end of this year will be 3%.

Starting point is 01:27:50 And if it was going to be 3%, that was consistent then with a path that leads them to something closer to 2.5% by next year and the of next year and then maybe 2% by 2025. However, throughout the year, they've revised upward every three months. There are forecasts of what core PC is going to be at the end of the year. First to 3.2, then to 3.5. And I'll make you a bet that when the new SDP projections are going to come out today, the number for core PC for the end of the year is going to be 3.8%. Now, if it is 3.8%, a Fed funds rate at 525 is not sufficient to bring you on a path that leads you to a core PC by by 2.5% at the end of next year and 2% by 2025.

Starting point is 01:28:50 So the idea of pausing at 5.25%, even considering the stresses in the banking system, was all conditional on a path for core PCE that was bringing close to 3% by the end of the year. So if I'm right, and there are revisions, by the way, of the Fed that are going to confirm that core PCE is 3.8% at the end of this year, then you cannot stop. You have to do at least another two hikes, maybe even go to 6%. And if you do another two hikes in an economy that is already weakening. And we've seen weakness in the PMI, some softening even in consumption, some beginning of softening of the labor market, and an economy in which even at current level of interest rates, we've seen stresses initially in the banking system. But as you know, there are highly leveraged institutions among households,

Starting point is 01:29:45 among corporates, leveraged loans, CLOs, junk bonds, fallen angels, those that are one step away from being downgraded from investing rate to below investing rate. All those things are going to imply a tightening of credit condition, not only among the banks, but also in the credit markets. To me, that becomes the tipping point for having an outright recession. Now, whether then the recession is short and shallow as opposed to most severe, it depends. A baseline would say, well, maybe only short and shallow. But if then there are some non-linear interaction between an economic contraction, increasing default rates and widening credit spreads, and that widening of credit spreads

Starting point is 01:30:32 causing a greater credit crunch that feeds into a worse recession, those non-linearity can lead you from a short and shallow recession to something more severe. You know, the empirical number just breaches the final point. The historical number suggests that when the unemployment rate goes up by 0.5%, you get an outright recession, meaning the unemployment rate goes up by 2 percentage points, not 0.5%. That has been always the case. And those nonlinearities might kick in, and you may end up into an outright recession.

Starting point is 01:31:03 You talked about the idea that they would blink and probably eventually pivot as the case. I think we know that they would need to severely break something for that to happen. Do you think that that's the stock market? Because a base case for a lot of analysts is that they will not pivot until they see stocks crash. Well, I think it will be not just the stock market, because actually the stock market has a limited impact on the economy, given that 50% of all equity is held by the top 1% of distribution of households and 80% held by the top 10%. I think that actually the Fed is much more concerned usually about what's going on in credit markets. If in the beginning of a recession you get high yield spreads going from 300 plus to

Starting point is 01:31:55 900 as that happened in previous episodes of a credit crunch, if you're starting to see CLOs and leveraged loan markets getting shut down, that tightening of credit condition and the risk that then more banks, as we know, are insolvent and they're going to go bust, that's going to be for them a bigger concern about what's going to happen to financial markets and to the real economy than just a stock market correction or even a bear market. So they're going to look at everything. What I'm saying is if we reach, and I might be wrong, we might have a soft landing or

Starting point is 01:32:33 we might have a softish landing. Of course, you have to assign probabilities to those. But I can see a scenario in which if inflation remains more sticky, if they go to a Fed funds rate of 575, another 50 basis points, let alone six, then you start to see economic stresses, financial stresses, stock market stresses, bond market, credit markets. They feed on each other. And then you end up into a bad equilibrium

Starting point is 01:33:01 and then they have to figure out whether they blink or not when inflation is still well above their target. And I think they're going to blink, but blinking is going to only buy them time. So Nural, I want to ask you a question. If you were Jerome Powell and you were sitting in Jerome Powell's feet now, as it is today, what would be your ideal action? Well, you know, in some sense, not just Jerome Powell, but also Christine Lagarde or Bailey and the BOE, they are them if you do and them if you don't. Because what has happened compared to the past, and I think that's the difference in this business cycle, is that in previous crises, first of all, the driver of economic downturn, like the global

Starting point is 01:33:50 financial crisis, was a demand shock and a credit crunch that led them to recession and deflation. And at debt levels that were much lower than today, yes, there was debt of households and banks, but you didn't have the corporate debt and other types of debts in the system. So given that demand shock and a credit crunch, it was easy to do massive monetary, fiscal, and credit stimulus to prevent the Great Recession from becoming a Great Depression and avoiding deflation. The difference today, and that's why it's more dangerous, is that in the last few years, we've been facing a variety of negative aggregate supply shocks. Initially, it was the impact of COVID on production, supply of labor, supply chains.

Starting point is 01:34:40 Then there was the impact of the brutal Russian invasion of Ukraine on commodity prices. And the third one was the zero COVID policy of China. So we had a situation which had slowdown of growth and inflation. And of course, loose monetary and credit policy fed also inflation. So we have negative aggregate supply shocks, but now we have also debt levels that are much higher than they were even after the global financial crisis. And that level not only in the public sector leading to potentially fiscal dominance, but also in the private sector leading to what the folks at the BIS call a debt trap. There's so much private and public debt that central banks try to raise rates to fight inflation, not only causing economic crash, but also a financial crash. So today, we have the worst of the 70s when we had negative aggregate supply shocks that are stagflationary. But in the 70s, debt levels were very low, private and public. So in advanced economies, we had stagflation, but not a debt crisis. While during the GFC, we had a debt problem, household mortgages and banks,

Starting point is 01:35:55 but we had a negative aggregate demand shock. So we could do massive monetary, fiscal, and credit easing. Today, instead, we have debt levels that are worse than after the GFC, and we have negative levels that are worse than after the GFC, and we have negative aggregate supply shock. And by the way, this aggregate negative supply shock, as I discuss in much more detail in my new book, Megatrends, are not just short-term, they're medium-long-term. I then define in the book at least 10 negative aggregate supply shocks that over time reduce

Starting point is 01:36:24 potential growth and increase cost of production. You have deglobalization and protectionism. You have going from offshoring to reshoring to friendshoring. You have aging of populations. You have a restriction to migration from south to north, from poor to rich that kept the lead on wage growth. You have this geopolitical depression that is vulcanizing and decoupling and fragmenting the world.

Starting point is 01:36:51 You have the impact of global climate change, both on energy prices and food prices. You have pandemics and COVID-19, for any reason, is not going to be the last one. This is stagflationary. You have cyber warfare. You have a backlash against income and wealth inequality. It's leading to fiscal policy, pro-labor, pro-union, pro-workers, pro-unemployed, partially employed, minorities, you name it. And you're now beginning of the dollarization as we have weaponized the U.S. dollar and leaving aside the risk of a disorderly fall in the value of the dollar, you're creating frictions in international payment system.

Starting point is 01:37:29 And those frictions are also speculationary. So you have 10 forces that are essentially reducing potential growth, increasing the cost of production on the supply side. And on the demand side, there is so much debt that you have to eventually monetize it because otherwise you're going to have an economic and financial crash. Those are really a different world. It's the end of the great moderation and the beginning of a new era of what I call the great stagflationary debt instability. Those are structural factors that are going to be at play for the next decade, leaving aside what the inflation is going to be in the next six months. So, Nouriel, let me ask you a quick question. Cause I know you're, you've got to jump in a

Starting point is 01:38:08 couple of minutes. I'm going to ask you about two things. I think one of them will be a pretty positive answer and one of them won't be. So I want to get your thoughts on crypto and Bitcoin in general, considering recent developments that we've seen over the past week. And then the second one, you like a bit more your thoughts on, know this is your first twitter space and um you know you've seen what elon's been doing with twitter your thoughts on elon's moves in twitter and twitter spaces in general you know the first one you know um i think everybody knows my views i've been a public skeptic about uh crypto in general and even about bitcoin in the specific for a long time. And I kept my skepticism, first of all, calling them currencies is a misnomer. Anybody who knows anything about

Starting point is 01:38:53 monetary theory knows that for something to be a currency has to be a unit of account, scalable means of payment, stable store of values. None of these four conditions applies for any crypto, let alone Bitcoin. So they're not currencies. There were 20,000 ICOs, 80% of them were scammed to begin with. Another 17% of them lost all of their value. They've gone to zero. So there are about 600 of them left. And since the peak of about a year or so ago, on average, they've lost even the top 10, depending on which one of them, between 60 to 80 to 90 percent of their value. People were saying Bitcoin is going to go to the moon, it's going to go to 100,000, 200,000, 400,000, a million. You know, it peaked at 69, then collapsed to 16,

Starting point is 01:39:51 now it's somewhere in the mid-20s. If you think that one is being a success, to me, who cares, really? Let alone all the other ones that have gone bust, let alone all the scams in crypto, let alone all the lending platforms that have gone bust, let alone all the scams in crypto, let alone all the lending platforms that have gone bust, let alone the fact that we're in the middle

Starting point is 01:40:09 of a massive regulatory crackdown against exchanges, against scams, against stuff that pretends not to be a security. It's a security. So I remain dirty. I respect that it does feel otherwise, but I'm bearish. I want to challenge you for a little bit otherwise. I'm embarrassed.

Starting point is 01:40:27 I want to challenge you for a little bit there. I want to challenge you for a little bit there because you and I have been going at this since 2016 and 2017. You mentioned that a lot of these currencies are scams. And to be honest, I agree with you. You mentioned that the lending platforms collapsed and i agree with you um but a lot of that is because of the regulators and the regulators inability to act in time to make sure that we could play with this new technology now i know that you've been vocally against bitcoin but do you not see the use of any blockchain technology do you not see like the value of of a decentralized monetary system you spoke about de-dollarization you spoke about

Starting point is 01:41:06 high inflation you spoke about all these problems with all of those things in mind do you not see that the the um the benefit to having a a i'm not even going to call it a currency because i mean you're going to fight me on currency but a store of value or a digital scarce asset that could be a store that could be used as a store of value or a digital scarce asset that could be used as a store of value. Let's put aside everything else. Let's put aside all the scams and the 10,000 other coins and the lending platforms. Let's just talk about one concept, which is a digital decentralized scarce asset that people could use as a store of value? First of all, I do not believe in decentralization for a number of reasons. There's a lot of talk about decentralized,

Starting point is 01:41:54 but the bootleg inconsistency trinity that says you cannot have something that is at the same time scalable, decentralized, and secure. And lots of stuff in the crypto space is not really decentralized. If decentralization is a way of avoiding regulation, taxes, MAL, KYC, human trafficking, terrorist financing, there'll be a crackdown on it. You know, people say you can transfer instantaneously crypto from New York to, I don't know, Seychelles in five seconds. And instead with SWIFT, it takes you two or three days. Why it takes you two or three days?

Starting point is 01:42:37 Because SWIFT has to do MLKOSC. The technology with SWIFT allows you to do it in two seconds like anything in crypto. You're not paying the compliance costs. And of of course you're saying there's an advantage. Once there is a regulatory crackdown and you have to pay those compliance costs, there's not going to be any advantage. There's a lot of talk about decentralization, but miners are centralized, developers are centralized, wealth is centralized, everything is centralized. In crypto, there's rhetoric about decentralization. And everything that has to do with blockchain, whether it's enterprise, DLT, or corporate blockchain, is blockchain in name only,

Starting point is 01:43:21 because 99% of those projects are with blockchains that are private, not public, centralized, not decentralized, permissioned, non-permissionless, and based on a small number of trusted validators that are validating the transaction rather than being trustless. So you can call it blockchain. To me, it's just a glorified spreadsheet. I use Google Docs. It's a permissioned database. Nobody calls it blockchain. It works totally fine, and it's permissioned.

Starting point is 01:43:53 So 99% of blockchain is blockchain in name only. And I remain of the view that even blockchain is a totally overhyped essentially technology. And I'll go back to Mario's question around spaces. is a totally overhyped, essentially, technology. And, Nouriel, let me... I'll go back to Mario's question around spaces. I know you've been following these spaces

Starting point is 01:44:12 and what Elon's been doing. Wondering what your view is on these spaces. Yeah, so, Nouriel, I'll just kind of word the question as well, give you a bit, because I know this is your first space. So what Elon's done with Twitter, obviously fighting censorship as much as he can, and then having Twitter spaces that are uncensored and covering stories. We've covered the Silicon Valley collapse, the FTX collapse, and geopolitical issues live here.

Starting point is 01:44:33 Would love your thoughts on your experience today, but spaces in general on Twitter under Elon. the First Amendment. And I believe in limiting censorship only when it's necessary and so on. And I'm all for spaces of any sort, not just on Twitter, where there is an open discussion, even of any ideas that are, how to say, controversial. But the reality is that since Elon has decided to reduce the amount of encore censorship, you have a whole bunch of people. I'm Jewish. There are neo-Nazis who are spewing the nastiest stuff, including physical threats. There are really a bunch of weirdos, how to say, white supremacists that are neo-Nazis that are talking about violence. There are lots of people that are really ugly that we have to think about the consequences

Starting point is 01:45:31 of allowing not only these people to speak, but as we know, in these social media echo chambers, lies and misinformation and threat can spread like wildfire. So to me, actually, the old Twitter, where they had a few thousand people that are in charge of moderating to make sure that lots of stuff is not legal. And by the way, there are thousands of bots by Russians, by North Koreans, by Iranians, by Chinese that are spreading this information and so on, having some regulation

Starting point is 01:46:07 might not be perfect, but I prefer that type of regulation to just a free fall where people that should not have this type of stage have that stage. And to me, it's really dangerous and it's really toxic. You might not agree with that, but that's my personal view. No, I think they're all valid points. I think the concept of uncensored media, uncensored communications is a new one and kind of decentralizing censorship, so allowing people to

Starting point is 01:46:35 point out. Obviously, that excludes bots, that excludes anything illegal, that excludes anti-Semitism. I agree with your stance on this. I hope your experience today and the discussion we've had today was enjoyable. Any final words for the audience before we end the interview?

Starting point is 01:46:51 And thank you for your time, Nouriel. No, nothing else to add. It's been a very enjoyable experience and I look forward to joining some of these dialogues in the future. Again, thank you. Thank you, Mr. Rubin. I really appreciate it. Thanks. Again, thank you. Thank you, Mr. Rubin. I really appreciate it.

Starting point is 01:47:05 Thanks. Ryan, your thoughts? I have one question for Nouriel if he's still here. And the reason why I have this discussion is because Scott and I always have this argument about de-dollarization and whether de-dollarization is actually real. And if there is de-dollarization, kind of like where is the de-dollarization going? Is it going to the Chinese currency? I mean, you mentioned it.

Starting point is 01:47:28 Do you believe that this de-dollarization is actually happening? Well, I've written an op-ed for the Financial Times earlier this year in which I've spoken about it. And in brief, you know, my view is we have lived since 1945 with a unipolar global currency regime where effectively the US dollar was most of the transactions, both as a unit of account, means of payment, and store of value at the global level. We tried to create a multipolar system by creating the SDR, the SDR plus with the RMB, but that didn't get us anywhere. But now there are some countries starting with China, but not just China, but also other revisionist powers like Russia, like North Korea, like Iran, Pakistan, that are challenging, of course, the economic, trading,

Starting point is 01:48:25 monetary, financial, currency, and political and geopolitical order that the US, Europe, and the West created after World War II. And in this geopolitical depression, of course, they also have to be worried about their assets being seized if there is a geopolitical confrontation. It happened with the Russian assets, for example, after their invasion of Ukraine. But there's a saying that says, if I owe you a billion, it's my problem. But if I owe you a trillion dollars of US treasuries. And if things were to escalate, say, on Taiwan, you cannot totally rule out that the US would freeze those assets the same way they froze the foreign reserves of Russia. And therefore, I think that what China is trying to do is to create a new bipolar global reserve currency system

Starting point is 01:49:22 where these friends and allies of China are going to increasingly want to rely less on the U.S. dollar and more on the RMB and related currencies, both as a unit of account, a means of payment, a store of value. Now, it's going to be easy for those rivals, the small group of real rivals,

Starting point is 01:49:43 China, Russia, North Korea, Iran, to get there. The question is whether they're going to convince also members of the global south, people in the Gulf, people in Brazil and Latin America, Indians of the world to go in that direction. I think that's going to be much more challenging. But where we're going to world is going to be divided. that's going to be much more challenging. But where we're going to world is going to be divided. It's going to be segmented. It's going to be fragmented. It's going to be decoupled on trade, on investment, on technology, on data and information and everything. And in this kind of a fragmented world, of course, a world divided is going to be also divided in

Starting point is 01:50:22 terms of global currency. So you'll have an area still around the US dollar and the euro, and another one around the RMB. So to me, de-dollarization is going to occur, but it's going to occur gradually, not overnight. But the world is not going to go in a direction where the alternative global currency regime is based on Bitcoin, on crypto. It's going to be still dollar and possibly the RMB. In brief. Mr. Rubini, really appreciate your time. I know we've gone over time, so I appreciate the extra 10 minutes you've stayed here.

Starting point is 01:50:55 Thank you. Welcome anytime. Thank you. Good being here. Bye-bye. Have a good day, sir. You too. Bye.

Starting point is 01:51:02 Brian. Even Janet Yellen said that she expects the de-dollarization over time which was a really surprising Scott Scott

Starting point is 01:51:10 the reason why the reason why I asked is because we had the discussion you said there is no de-dollarization that's why yeah

Starting point is 01:51:17 that Yellen the de-dollarization is inevitable I just think that the time frame is exceptionally longer than Bitcoiners and people seem to believe

Starting point is 01:51:24 and I don't understand where we're going if the dollar goes down. What do you think, Scott? What do you think of Yalyn's comments then? Because I know she's been worried about the dollarization so long. You know, I think that you can talk about the dollarization as the end of the dollar. The dollarization is a very, very slow trickle that's manageable. And I think the latter is probably what she's talking about. Yeah, but then again, why mention it now

Starting point is 01:51:49 if it's something in the horizon? Is that just to kind of ring the alarm bells of saying that action is needed now? I don't know, because he's 450 years old and nobody took away her mic. Guys, guys, just, I mean, before we carry on, I've got to just take my hat off to one of our speakers, Henrik, who came onto the spaces and actually came onto my show a couple of months ago.

Starting point is 01:52:09 And he said, you know what, prepare for an actual melt-up. And at the time, we kind of said, there's no melt-up. What are you talking about? Henrik, what was the word that you used? It wasn't a melt-up. Blow-off. Blow-off top. A blow-off.

Starting point is 01:52:21 Yeah. And I think that you've been 100% right. If I look at the NASDAq, the Nasdaq's up 40%, I think, this year. Which is, I mean, it's huge. And I think you came onto my show probably about three months ago and you said expect this. The Nasdaq was

Starting point is 01:52:35 an 11,000 when you came onto my show and you said we're going into a blow off top. We're going into a crazy blow off top. Right. How much more steep? Oh, lots more. Lots more. It it's just getting started nasdaq is just the first thruster so this is this is uh this you're going to see a normal rotation as you do so you have the leading nasdaq stock leading on and then you'll have it rotating into other stocks and the reason is as i said back then also we're getting into goldilocks zone inflation is coming down financial easing we have no sight of a recession and so so i did not understand back then why

Starting point is 01:53:11 people were so bearish and what you have now you have simply just to catch up and now people start to say oh wow the equity is actually going to rise and we're not having a recession and this is exactly what you know what was expected from from side. And still, I'm looking at the, we have this with SwissBlock and the Seabrook report where we have a macroeconomic model business cycle and no indication of a recession here. So people saying we're going to fall off a cliff here are going to have a real nasty surprise. I do think we're going to see a consolidation soon and we're going to have a pullback when we get to the all-time highs, will pull people out of the market but but we're going way above all-time highs here and uh you know what is it 23 000 on the nasdaq or something like that so i'm going to give you two data points here i'm going to give you two data points here now i see we also got gareth here and i know gareth's going to disagree with you or maybe he's not but the last time i spoke to him he was very very much

Starting point is 01:54:01 in disagreement to this but i'm giving you two data points. The first data point here is that the S&P 500 is up 13% this year. But the reasons why the S&P 500 is up 13% this year is because of 10 stocks. Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, Tesla, Broadcom,

Starting point is 01:54:21 AMD, Salesforce. And the rest of the NASDAQ, the rest of the S&P only account for 1.4% of the 13% that the S&P has risen. Now, what that says to me is that it's almost like when people go into Bitcoin and then once the Bitcoin rally is finished,

Starting point is 01:54:38 they go into the altcoins. They first go into the big caps because they think that they're safe. Once they're convinced of the momentum in the rally, then they go into the big caps because they think that they're safe. Once they're convinced of the momentum in the rally, then they go into the smaller caps, which in this case is the slightly smaller stocks, and then that actually drives the rest of the bull market. The other data point for me is I researched earlier,

Starting point is 01:54:57 I actually mentioned on my show, but I researched earlier what happens after a Fed pause. And if you look at the last couple of times when a Fed paused, so 1995, 2000, 2006, and 2018, on average, in the next 100 days, markets increased between 10 and 20%. In fact, the average is about 18% in the next 100 days after a Fed pause. So when I look at those two data points, I think I agree with you that I wasn't I didn't agree with you back then, but I think that now I may have to change my, I think now I'm fully

Starting point is 01:55:30 on board with Goldilocks. I wonder if Gareth... Yeah, no, so just quickly Henrik, just a heads up, I muted you just because you had a background noise. I have a feeling you're responding while you're muted. And then I'd love to get Gison's thoughts on that same question as well right after henry did you want to respond quickly to ran before we go to yeah sure so so so this is

Starting point is 01:55:51 exactly what was expected i mean this is about understanding business cycles and we were not in a situation where the business cycles were turning over and that's why when people just looking in markets and they just say oh now we have a negative day a week a month whatever they do not look at where we are in the business cycle when it comes to the real economy. The real economy is set by the labor market. And the labor market has not been, I mean, it looks fantastic at this point. It's very, very resilient. So that's why you do not have a recession.

Starting point is 01:56:16 That's why you do not see markets just crash. They do not just crash because people feel like it. So this is what's happening right now. And for now, we still have have it was 339 000 jobs coming out of last nfb numbers uh you know we have unemployment numbers that you know still very very low levels even though we still see the deterioration so this about we just because we cannot comprehend that we're going to go higher doesn't make it right and what we see right now is just that people are now starting to catch up just you all humble respect here, like what you're doing now, Rand, and saying, oh, now I

Starting point is 01:56:48 can see it. But this is where the structures actually speaks volumes. So we're going a lot higher here. There will be pullbacks. And of course, NASDAQ is getting overstretched. And about your point with the rotation that you have seven stocks or how many it is, that's the normal thing. Now you're an investor. Of course, you move into what you think is the most safe things first. And then as you said, slowly, slowly people start to turn it. And that's again where it's important to understand

Starting point is 01:57:13 at which point will the economy no longer support the stock market? And it does that for now and it will for the next foreseeable future, which is at least six months. All right. Gareth, the mic is yours the mic is hot i can feel i can feel i can feel your emotion all the way just no so so yeah i mean listen

Starting point is 01:57:35 we definitely are in this melt-up phase and there's no doubt about that i mean you know it doesn't matter if it's good news bad news or or neutral news the markets want to go higher the money from the sidelines. You're getting people to FOMO in, right? And anytime you see FOMOing in, that's always a red flag to me. It's the same as you saw in the crypto markets. It's the same as you saw in past business cycles, whether it was 07 or 1999 to 2000. Just a couple things to note on that is, in terms of jobs, I do want to see tomorrow's jobless claims number, the how many people filed for unemployment.

Starting point is 01:58:08 Because last week, we saw the biggest jump to 266,000 people filing for unemployment that we had seen in months, if not years, right? I mean, it's a huge, huge jump. Now, maybe it was an outlier. We'll know tomorrow. But I think that when you think about the rate of change of interest rates, that is shocking. other financial institutions. And in the bathroom, I overheard two people talking about how their bosses are finally starting to get on them about closing deals. They said, you know, like six months, a year ago, and the company was making so much money that you could basically be a slacker, and you'd get away with it. Now they're

Starting point is 01:58:59 coming in saying, Okay, well, who's the top performers? And who do we have to let go? And so there's this shift going on in the business cycle, in my opinion, that's starting to kind of take hold. And you're right, the jobs numbers right now have been incredibly strong. But the question is, when do they crack? When do they crack? What happens when the government sells $1 to $1.5 trillion in bonds and that sucks liquidity out of the system? We've seen liquidity coming into the system. You could argue that that's helped the stock market, just like when the Fed has been easing, that liquidity is going to get sucked out. Lastly, I'll say this, is that we've had an amazing rally in the NASDAQ. So if you look at the NASDAQ from the all-time high to the low in October, it was a 38% drop.

Starting point is 01:59:40 We've now rallied back 35%. So if you look at past business cycles, check this out. If we go to 2008, the NASDAQ had a drop of 25%. It rallied back 23% and then rolled over and we basically dropped another, man, I mean, you're talking about from peak to trough, another 55% there. If you go back to 2000 and if you go back to 1999, we had a 41% drop and a rally back of 42% before the markets collapsed. And we obviously saw another 66% down there. And lastly, I'll just throw this out, is that if you go back to 1929, the Great Depression, the markets initially collapsed with the 1929 crash, 49%. We rallied back 53% before then continuing down from that point.

Starting point is 02:00:29 Well, let me just calculate it out here. It looks like we went down another, hang on one second, looks like we collapsed all the way down to a low of 86% more of a drop. So my point is this, is that everyone's looking at this rally as, oh, wow, this is amazing. The NASDAQ has rallied almost 40% off of the lows. But if you look at past major business cycles, this is case in point, what happens every single time. It lures in the retail investor. It gets everyone thinking it's a bull market, and then the bottom gets pulled out. Think about at even 30 500 i couldn't i could i was the the most hated man at 30 500 saying it was coming down just like at 69 000 so it's it's

Starting point is 02:01:10 it's human mentality but are you looking at other markets nasdaq's just daikon's put in a new all time high nikki is shooting up higher nifty is up higher all of of Europe is putting in new highs. So there is more to the world than just the US here. And you're not going to tell me that we are actually going to see that the US will lead the world. Sorry, that the top in the NASDAQ, which NASDAQ was in November of 21, was going to be the top, whereas the FTSE 100, for instance, or any other,

Starting point is 02:01:47 the DAX or anything else, has put in a new high in April or May. So maybe what you're seeing, you're throwing a lot of numbers here. And I remember, I agree with you, we're going to see a major, major crisis. And I'm saying the biggest crash since 1929, but we are just not there yet. And markets do not fall off down just from the sky. What they need to see is a deteriorating economy. And you have that. You're saying claims are coming up.

Starting point is 02:02:12 Yes, but it's not just about one data point here. There's many data points. If you look at the number of open positions versus number of unemployed, you have a resiliently high number there. So you're simply not in that situation. The numbers you're talking about, the drops you're going to see in a bear market is when you're actually in the recession. Remember also what you had in 2008 when you had that move up in the market? Yes, that was because you were in a recession. So the understanding of when you're in a recession or not

Starting point is 02:02:42 is pivotal to actually understanding these markets here. And that's where you are. We are way off from that. And if you look at the yield spread, the yield spread are not indicating, yes, they are in the negative. And that means that we will get a recession, but it's not yet. We do not have it. You don't need a recession for the market to correct. I mean, China's market is down a year to date, and you can argue that they don't have a recession, but they have an economic slowdown. We can have growth between zero and 1%, and it can feel pretty terrible for a large percentage of the United States population. And there are a couple data points that you don't even really have to, again, it's just pure data, but there's a Redbook survey that

Starting point is 02:03:32 pulls 9,000 different merchandise and retail institutions in the United States, and sales are the lowest in six years. So I think we are in an environment where we are entering a recession in certain parts of the economy, whether it's manufacturing, which is very evident if you look at PMIs and diffusion indexes around the world, especially in Germany.

Starting point is 02:03:55 You are seeing a manufacturing recession globally. Just on Henry's point, and I want to also welcome Ross and Vinny on stage right after. On his point, about the crash. So maybe about the crash, like this is the highlights, like a crash is coming, the worst is 1929.

Starting point is 02:04:10 Gareth is saying there's going to be a massive crash as well. I don't actually agree with that point. No, no, no, wait, let me just clarify. All I'm drawing to is the past cycles and how cycles work. I actually don't think we're going to get into that type of atmosphere until the end of the decade, right? So you'll have the 100-year cycle with 1929 and so forth. don't think we're going to get into that type of atmosphere till the end of the decade, right? So you'll have the hundred year cycle with 1929 and so forth. But I do think that again, the price

Starting point is 02:04:30 action is emblematic of past cycles, whether they be small cycles. So whether it's a small cycle or a big cycle, it still behaves the same because humans are the ones that are buyers and sellers, right? So it's greed and fear, emotionally driven. So for me, I'm right now heavily short the S&P and the NASdaq at these levels because of that that same sort of prognosis with levels retraces um and so forth and looking for some sort of pullback will it be a great depression i don't think so okay in long term you seem more bullish henrik you know what's your time frame and you know gareth says like you know end of the decade if anything henrik where do you stand on this? And then we'll go to Jay and then obviously Ross and Vin.

Starting point is 02:05:05 No, but as I said, we have a business cycle model at SwissBlock and Seabrook Report that we have developed together. And if you go back 120 years in terms of data on that one, when you get a signal on that one, you actually have a recession within the next two to three quarters. It went negative just early, late, I would say 22. That means that by end of this year, we should be close to the recession. That's what I'm saying. So we are, let's say, like what we had in 2008, it could be that the stock market tops in around October and we could see the recession sets in around December. That is the call I have now.

Starting point is 02:05:43 And until then, you're going to see the market explode higher and that is because liquidity is coming in we see the chinese credit cycle has been moved you know turning up really strongly we see you know speculation of our new suggestions of new uh stimulus packages coming out of china and we uh we're going to see the the fed is going to pause now and then we also have the dollar is going to come right down, strong down. So I say you have a tremendous move ahead of us. This is going to be the one thing that is going to pull people in on the wrong side, which means to belong into the top. And then for many, many reasons, when the recession sets in, and this is where I agree with Mr. Rubini and others, that when this one sets in that's the final that's the big one and the reason is that we have come full cycle there is no more easy

Starting point is 02:06:31 lunches or a lunch here i mean the free lunch is over we cannot just do monetary policy this time around so you talk about the great recession that we've been discussing since the global financial crisis you know band-aids band-aids band-aids when are we going to see the true correction and that's the one you're concerned about would you have a time frame or any indicators on one what could lead to this when we speak one year from now everybody will be in no nobody will be doubt of that and the problem will be this time around that you cannot just you know print yourself out of it you cannot just do qe to do it because this time around you're actually going to trigger a stackflation. So I think this time around

Starting point is 02:07:08 you're going to see a deflationary bust which is going to come by a start by let's say end this year. Let's say very late this year into 24. And then at some point of course we're going to see all central banks of the world do their magic trick and then try to print themselves out of it. And they're going to trigger stackflation.

Starting point is 02:07:24 And the reason for stackflation is... But are they going to print themselves out of it and they're going to trigger stagflation. And the reason for stagflation is... But are they going to print? Of course. Why? Because when they look deflation, the monster in their face, they'd rather have inflation. And they will think that they can do it one more time than what they've done after Corona. So I can promise you

Starting point is 02:07:40 they will print. And when they start to see, you know, whatever is going to fall out, they're going to see when the economy is starting to roll over, I can promise you they're going to print again. So it's hard for me to understand. There are like a lot of different timelines that were mentioned there. You know, there are a couple

Starting point is 02:07:55 of things that you talked about as well. You know, about... So Jay is talking around, you can't hear him. I can bring you down and back up. So go ahead, Jay, and then I want to go to Ross, Kobasi, Vinny and Waheed all with us as one. Number two, when you think about what's happened in the US economy, it has been a lot stronger than people expected. Going into the first quarter of earnings season, earnings were supposed to be down 6.8% based on Wall Street estimates, and they were only down 2.1%. Now, in the second half of earnings season, earnings were actually worse than the first half. So it's likely that the second quarter could be worse. And one thing to note is that earnings are coming down at a faster rate than the sell side understands because every single CEO going into this year was confused. They didn't know that things were going to slow down at the rate that they were going to slow down. They didn't expect

Starting point is 02:09:02 a banking issue. And so a lot of them had hockey stick forecasts where every single Wall Street analyst outside of Morgan Stanley and B of A forecast earnings bottoming in the second quarter of the year. So that is to be seen. Now, are we going to have a recession this year? There's a chance that we don't, but growth could slow down. Growth at zero to 1% could feel like a recession, just like in China, growth at 4% feels like a recession. So in that type of environment, if you have 27 million people that are now going to have to pay their student loans for the first time, you have credit card debt at a trillion, you have auto debt at 1.8 trillion, people are trying to buy cars at 13%. There are banks like Comerica pulling out of mortgage

Starting point is 02:09:43 lending. There are several banks that have already pulled out of the auto lending market until the Fed actually changes the cost of capital, which we don't think they'll even do this year because of the tightness in the labor market. It's a chicken and the egg problem. If the Fed keeps rates this high, they're going to break other things in the market. We're seeing commercial real estate buildings default every single day, and that will pressure the banking system and it will cause less lending, which will slow down business spending and it will slow down retail spending. The Redbook data that I showed you above, retail sales are already at five-year lows and they're going lower in the second half of the year. So, you know, there are different parts of the economy because the U S is so focused on tech because you know, that the top 30% of, you know, the

Starting point is 02:10:30 basically seven stocks are up 55% this year and the equal weighted S and P is only up a couple percent. So it's really like the gentleman was saying earlier, seven stocks driving the rally. The Russell is basically, you know, underperformed the equal weighted S Russell is basically underperformed. The equal weighted S&P is underperformed. High yield credit, which represents a thousand companies, is basically flat. So it's important to understand when you're trying to look at these things and you're looking at technicals, what is actually driving what's going on? And you can't have a tight labor market and the economy seeing a very no lending or soft

Starting point is 02:11:09 lending and the Fed cutting rates in the same sentence. So people oftentimes conflate different timelines and they conflate different scenarios. Either we have an economic slowdown and the Fed cuts or we don't have an economic economic slowdown and rates stay high and that forces things to break in certain parts of the economy let me let me go quickly to vinnie before going to you ross vinnie i was just gonna bring in the crypto discussion here since this was a crypto show uh prior to pivoting to the fomc meeting um how will this impact crypto um and risk assets in general and what are your expectations over the next uh over in the meeting today

Starting point is 02:11:45 and over the next few months? Well, I'll take the best out of the equation. I think the Fed's going to hike 25 basis points. I don't think they want to signal that the hiking cycle is over. And I think that they were

Starting point is 02:12:02 in the last meeting, my read on Powell was that he left the door open and he was you know I don't do it if they hike interest rates the team just sent me this unrealized losses on bank balance sheets will get much bigger and they're already six times what they were in 2008 at the moment I don't think he cares and I'll send you through the chair I don't think he cares like any I'll send you through the chat. I don't think he cares. And he's shown that he hasn't cared.

Starting point is 02:12:27 I know inflation is a priority, but you're talking about... He's known for the past year, the hiking cycle that they went on. They knew this would happen. So it's not like he actually cares. And all that happens is the banks consolidate into JP Morgan or the top 5 or 10 banks.

Starting point is 02:12:43 So it doesn't destroy the sector. they just consolidate it somewhat. I think he's- And to Vinny's point, most banks don't own securities. The bottom 3,000 banks that are not publicly traded, they don't actually own securities. Jake, I'll let you finish off with Vinny because I know Waheed wants to, I think he wants to disagree with you, but I'll let you finish off. And link it to also crypto as well, if you don't mind Vinny before he jumps in and then we'll go to Ross. What does that mean for crypto?

Starting point is 02:13:09 Now, if they rise interest rates, we're seeing, and I was reading it out earlier, I want you to talk about crypto and the economy in general and the banking sector as well. But crypto, where's the expectation? Like we're going to see, if we see a hike of 25 basis points,

Starting point is 02:13:24 the market is not factoring that in. So we'll probably see crypto, stocks, everything. If you'd ask me, I'd say it's probably totally 45, 55% chance. I think it's probably going to be, it's almost a coin flip, but I'm going to take the side of them hiking. I think that what they're trying to do is drain liquidity from the market. I think households are still sitting with like 500 or 700 billion in cash They is you know power strike inflation down to 2% people not for two He needs to drop it 50% from where? Did space crash or Vinny dropped

Starting point is 02:14:03 Vinny they are you've got muted by the glitch go ahead Vinny. Yeah Vinny, are you there? Oh, you got muted by the glitch. Go ahead, Vinny. Go ahead. So what I was saying is Powell's target is 2%, not 4%. He has to get there. He's already indicated it's higher for longer. And I think he needs to go to a higher level anyway. And he wants real interest rates to be positive across the curve.

Starting point is 02:14:22 If you just listen to what Powell's been saying the whole time time there's no reason for him to stop right now and he would probably keep going one more hike maybe another one but like you can't pause the hike cycle then start hiking again the following month it's going to make them look bad and they've got a huge image problem anyway so the hike's going to happen in my opinion i think that drains the equity from the market which is what they're trying to do overall to keep inflation under wraps and getting down to two percent is going to be hard but he's not stopping at three he's not stopping at 3.5 he's not stopping at 2.5 maybe 2.5 to 2.9 he'd be like okay it's a two handle but he needs to get it down further so i think it's i'm bearish i'm i'm bearish right now and i think the oh the other thing i'll add is one of the speakers earlier

Starting point is 02:15:03 on mentioned that probably towards the end of the year we're going to start seeing this sort of crisis coming i agree with that timeline i think it's going to happen very very soon and the one other point i'll make is global debt to gdp right now is sitting at 360 something percent the last i checked that global debt to gdp that is insane guys that is insane and so as much as the US is just one part of the world it's the biggest part and a lot of the debt is priced in dollars and the interest rates move with dollars the governments can't afford

Starting point is 02:15:35 and the US raising rates puts pressure on other governments as well to raise rates too because of currency flows and yeah so let's watch the shit show waheed are you in the same boat and bill i'll see your hand up i'll go to you in a bit but wait i know you tried to jump in earlier you've been saying it for a while go ahead yeah look i'm

Starting point is 02:15:56 not going to keep repeating myself but i want to back up one of vinnie's points not actually disagree with them back them up um there's a lot of equity out there now, especially with the recent rally. So no one should say regional banks will be in trouble. Raise equity. J.P. Morgan, give them a surcharge. They gave them gift after gift after gift. Tens if not tens of billions of dollars created out of thin air by basically subsidizing

Starting point is 02:16:21 a purchase of another bank's losses. Make them raise equity. There's plenty of equity out there. Ross? Well, this has been quite a bear convention you've got going on here. I know, man. I'm hoping for someone to come in. Even the people that Vinny considered bullish are not really that bullish.

Starting point is 02:16:43 Even anyone that sounds bullish is like, yeah, things are going to get better in the short term it's like everybody forgot what happened last year everything everybody's talking about already happened it remember the markets move into the future so everything you're talking about has already happened we had that last year everything we had banks going out of business we had the market didn't happen last year that happened two months ago ross yeah but it's all been going on so now if you look out into the future the fed has put themselves in a pretty precarious position which i do agree because if they continue to raise rates they're going to destroy more banks and they're only hurting u.s

Starting point is 02:17:20 government so why the hell would they do with that? That doesn't make any sense. So yeah, I get they're totally clueless and basically a bunch of academics, but everybody knows, it was in the Wall Street Journal today, that the shelter number is bogus. The economy is now flat in my mind. There's a lot of underlying strength offset by layoffs and high rates, really choking down credit. But when you look at earnings, earnings were really good this quarter compared to estimates. And estimates are for a pretty bad quarter in Q2, which I think are off. And then when you look out into the next 12 months, you see earnings rising on the S&P. That's the estimates of many, many, you know, highly paid analysts. And I look at my own business and our numbers are going up, you know, going into the second half of the year and they've been going

Starting point is 02:18:10 down for six months. So when you really look at what's happening in the economy is we're in this like transition from this ridiculously inflationary environment that they created in 21 to now a really slow growth you know sort of flat inflationary environment and if the fed now has these tools to lower rates if they need to if the economy gets bad and at the same respect the economy is still plugging along a lot better than what anybody's saying and that's why the markets rally it's rally very simply because everybody's been wrong about- Hold on, hold on. I'm going to disagree with you. Whether you like it or not, the valuation is 18 and a half times forward earnings, and forward earnings estimates are going up. And so markets are going higher. And you guys can all pretend the bull market hasn't started, but it started. And we've made hundreds of millions of

Starting point is 02:19:04 dollars for our clients. So you guys can stay short as long as you want, but eventually you'll have to capitulate. Amen. Amen for us. So we actually don't need to be short. There are a lot of different ways to invest in this environment. I mean, there's a $1.3 trillion hybrid market where you can make 11% buying prefs. I mean, that's what we're doing. Totally. At 80 cents on the dollar, which by the way, if you're right and rates are cut, those prefs are going to go from 80 cents on the dollar, $20 price to 25.

Starting point is 02:19:33 You're going to make over a 35% return just buying hybrids without taking equity risk in companies that could roll over. Yeah, you can buy high yield or like BDCs and things like that that pay double digit yields and take no equity risk and make double digit returns right now. So this is a really prime environment to put money to work on any risk level because I can get 5% without even doing anything. You know what I mean? I can get 10% if I buy credit. I can get 6%, 7%,

Starting point is 02:20:02 8% really easily. And then I can get, I'm up 20% of my fund GK year to date. So you've got all kinds of places to put cash to work. But I think in general, we're at the end of the cycle. We all know we're at the end of the cycle and the Fed now has lots of room to create liquidity if they need to. And that's something we haven't had in 15 years. So I agree. Just we've just normalized what we did was we normalized a broken 15 year system post financial crisis where we had to stimulate and stimulate and stimulate to get all this debt and overhang out of America. And we finally got it out. And then Biden gave everybody all this free money and everybody went nuts. But if you look at people's spending behavior, it's changed. And this is something that no economists have gotten right. Zero percent, because they're not out at the clubs. They're not out at the parties. They're not out at the restaurants. They're not in Vegas. They're not in Europe right now. And everybody's going off and spending money. And that's what's actually happening in real life. Concerts are sold out.

Starting point is 02:21:08 Taylor Swift is charging $1,000. Ross, isn't that like the whole Zoom scenario where, yeah, it's happening because of an exogenous shock to the system. We don't know how long it's going to last. Zoom did extremely well because people were working from home, and now people are traveling because they're cooped up for three years. But airline prices in the last CPI, if you looked at the report, are actually falling for the first time in two years because there's certain, listen, travel is going to be

Starting point is 02:21:33 pretty strong for the next several months. But consumer spending, I mean, the graph I showed you above of the Redbook survey of consumer spending, at least when it comes to retail, is at the lowest it's been in five years. This is correct. This is correct because we've seen a shift from goods to services. People don't want lamps at Home Depot anymore. They don't want construction. What they want is Vegas and what they want is Europe and what they want are parties and restaurants. And it's just a reaction to COVID. So I don't want to own Zoom stock. I own MGM Resorts in one of my top holdings. I own Las Vegas sands resorts because we're going to see the same thing in asia now that they're coming out of covid i mean the

Starting point is 02:22:10 spending will go on for years i think it's tough to disagree it's tough to disagree with ross when you look at the markets and you see that you know the mgms and the and all the event brats and all those are basically hitting all-time highs and uh you look at things like Shopify, which is now at, I don't know, 50%, 40%. Yeah, I mean, it's at 40% of where it was at the peak of the pandemic. Vinny, I'm going to disagree with you on whether the Fed is going to continue hiking today. I don't see a way that the Fed continues to keep on hiking. Last week, we had the big jobless numbers. Yesterday, we had the biggest drop in inflation

Starting point is 02:22:56 that we've had in the 11 months since inflation started dropping. Today, we had a massive drop in the PPI. Inflation is under control. You've got a year-on-year inflation at 4%. The Cleveland Fed forecasting at 3.2% in the next reading. I can't see a way that the Fed doesn't pause now, take a break, take a breather, allow for stability, and then maybe continue. and and vinnie let me add one thing to what rand said larry fink just said a minute ago ai is something we're not discussing ai may

Starting point is 02:23:29 be the tech that brings down inflation so even if you're you're skeptical of inflation dropping um you know something to take into consideration seriously is ai because it's gonna gaining the narrative i'm deep in the ai world right now i can tell you for what i'm seeing what ai is going to do is it's going to replace a lot of jobs for sure. So what happens in this cycle is as companies are laying off workers, canceling contracts, a lot of these jobs are not going to come back if we go into high unemployment and the Fed tries to cut rates. When the Fed tries to cut rates in the next cycle

Starting point is 02:23:59 to try and stimulate the economy because they've caused the recession or depression or whatever, the jobs that were laid off first are the ones that are going to be replaced by AI. And every company is looking into this right now. I know companies that have laid off people

Starting point is 02:24:10 because they're using AI, canceled contracts with contractors, etc. It's going to create, when we go into the down cycle and unemployment goes back up, you're not going to be able to stimulate the economy

Starting point is 02:24:20 because these jobs are going to be replaced. AI is the... I think that I agree with you 100%. I think we're going to get a I think it's going to happen slowly and then it's going to happen really quickly. I don't think you want to be like an MBA student right now because the jobs that are

Starting point is 02:24:33 going to be lost are actually white-collar jobs. These are jobs of... No, no, no. Yes, white-collar, but think about copywriters. There are lots of copywriters. Support staff who work from home across the country these people are being replaced by by ai driven chatbots and and email systems you have email you now have customer support via email where you're you're actually

Starting point is 02:24:56 speaking to an ai agent we're talking like millions of jobs in the economy that are basically customer support low-level jobs. Guys, there's a difference between cyclical trends and secular trends, and this is a secular trend. This is a long, long time. It takes years to implement for this. So what we're talking about is a deflationary... No, that's not true. It does. That's not true, Henrik. It does.

Starting point is 02:25:18 No, no, no. In a crisis where companies have to cut costs because of falling revenues, it will happen quickly. Yes. But listen, what you have right now is what you said also before. You had a huge amount of debt around the world. That is what is causing the deflationary pressure. That's why, actually, I would also say that at no point we have had a problem with inflation.

Starting point is 02:25:41 I know it spiked to 9.1% in.s and even higher in the europe but the thing is that you know with the kind of debt we have around the world the deflationary pressure is there it's omnipresent all the time because you have exactly that you know if you have a big debt yourself you will not spend as much money so that is the problem what is going to bring the world and the aging population and aging what's going to bring this world into the next growth cycle is first of all uh yeah it will be a blockchain which is going to create trade around the world and then it will be ai machine learning robotics and the like which is going to bring up productivity but these are secular trends and these are not something that happens within the next few months or year or two years even so what we're talking about here is that why is the inflation coming down now? It is because what we had earlier on, the spike we had,

Starting point is 02:26:30 was not because of money printing, because then Japan should have had inflation soaring long ago. It is because we had a mismatch, an imbalance between supply and demand. And now that has been coming down. Inflation is lagging the business cycle. The business cycle was turning up really strongly because of all the stimulus. And then now you're starting to see that the business cycle is turning over slowly. And inflation is going to come down very, very strongly as well, as I said all along.

Starting point is 02:26:57 And now we're down to, as you once said, 4%. But that's only here in the numbers that we see. They are lagging. Actually, I can see that there is somebody from Truflation here, and I love the work of them. They actually point out the subcomponents of the inflation rate, and the real inflation rate in the US right now is lower. And this is what the Fed also understands, that the lagging indicator of inflation is

Starting point is 02:27:22 not what you can steer the economy off. You're not just going to sit and say, is inflation 4%? Oh, we need to bring it to 2%, and then we hike. That's simply too simplistic a view. So we are in a situation here where the Fed is now probably done. They are starting to see the deterioration also in certain areas of the economy, and they do not want to crash the economy. And why should they go even higher?

Starting point is 02:27:42 I mean, this is about they need to hike because they need to fight inflation. Well, inflation is dropping really, really fast. 4.9 to 4%. That's fast. And they are starting now to say, and they even said that last time, we are in this inflationary environment. And that's exactly what we are. So they are already now starting to think, okay, we need soft landing does not just mean we need to hike to get inflation under control. They have that way under control already. Now it's about making sure that we also get, as they would call it, a soft landing, which I absolutely do not believe. I agree.

Starting point is 02:28:18 Vinny, I don't see a way that the Fed doesn't pause today. And to be honest, I actually think that I disagree with the market. I don't think we get another rate hike this year, to be honest. 100%. 100%. I think the Fed's just looking for an excuse to pause. They know they've gone too far. They've sunk all the banks in California, pretty much.

Starting point is 02:28:37 And the last thing they need is more financial stress. But a quarter point isn't going to change inflation. We all know that. So it doesn't make any sense. Why do they raise rates last time and even after what happened with the First Republic and Silicon Valley Bank? Why did they?

Starting point is 02:28:53 Because I think they were dead set on getting to what they said they were going to do so that they would have some credibility after they completely blew inflation with the transitory thing. So he says- We're agreeing it's not about- 25%. So we're agreeing it's not about doing what's right, it's doing what's in their

Starting point is 02:29:14 best interest for their image, right? No, it's not just their image, it's their credibility. And so remember, the Fed has to have a credible position in the economy or else all hell could break loose. And so, you know, I'm not a fan of Powell's Fed in any way. But I do think as the academics set out to, you know, set a rate at a certain level, they've done this. You know, 5% happens to be what they teach you at Econ 101 is like the neutral rate. You know, so this isn't like genius work from the fed by any means but i think once again they wanted to have their credibility and

Starting point is 02:29:50 now they have their excuse to pause and and that's what i think we'll see with hawkish language with hawkish language yeah i must say i i fully understand the market's base case already. Yeah, Ran, I want to ask you a question. So bringing it back to crypto as well was the answer, but what do you expect to see over the next year or two? And we heard, I think it was Gareth that say that by the end of the decade, that's when we're going to see the Great Recession or Depression or the Great Correction or whatever you want to call it.

Starting point is 02:30:29 But do you expect something worse to come in earlier i'm not expecting it i think these are just business cycles you go through good cycles and you go through bad but is it still a cycle and we've been delaying the the the we're looking at the amount of debt in the economy and looking what what's happened since 2008 can you still call it just another cycle? Yeah. I mean, it's been going since 2008, but that means it's been going for what? 17 to 16,

Starting point is 02:30:50 15 years. I mean, what it's, it's just a continuation of a cycle. I think we're going to get used to living with, with all this debt. I'd like to believe at some point there's going to be de-dollarization, but I mean,

Starting point is 02:31:01 I think I'm on Scott's side here where I think the dollarization takes a lot longer than, than, than we, then then we we can we can imagine it's gonna take years and years and years you know and right now there's no way to de-dollarize let's just start there's no way to de-dollarize to I want to do all right where am I going to well when am I going to the Chinese yuan to be honest as much as I don't like as much as I don't like the dollar, I dislike the Chinese Yuan a little bit more. But Ran, in terms of the recession later on, let's just look at the data. We got a yield inversion now.

Starting point is 02:31:35 So that is a trigger for a recession. It's been that for so many years, that going back. And we also always see that when you have the bottom of that yielded version, when it goes to the lowest point, it takes around a year or a little more before the recession gets here. And that bottom was in February of this year. That puts us in for a recession, which should start around February of next year, which is also the timeline I have. So this about just calling off the recession at this point here, I think that's a huge mistake.

Starting point is 02:32:08 And especially because we have the leading indicators, if you look at that, they are in a very, very strong decline, which tells us that the coincident indicators, which is job market and the like, is going to see a rather steep decline as well. It's just not here yet, but it's going to come. And this is where I think we are just dismissing data, which is right in front of us. The bottom of the yield inversion from that time on, and it takes a year, 13 months, 14 months, then the recession sets in. And that's

Starting point is 02:32:38 if you go back in time, you can see the last five, six, seven times, that is what we have. So right now we are in the zone of Goldilocks where we are seeing inflation coming down and recession is not right there. And everybody's starting to say they're struggling. Are we in a secular up market or down market? I'm saying we are in that quiet phase before the storm really hits us. And if you look at some of the charts from a structural perspective, we got like emerging markets, we got a huge rally coming, and I want to emphasize that, a huge rally coming, also in the Hang Seng and emerging markets in China and elsewhere.

Starting point is 02:33:10 But when we get to those tops of that, that is the point where we're going to see the recession sets in. So 2024 is going to be really bad. Until then, 2023, enjoy it. It's going to be nice. Yeah, I mean, I want to agree with you. I want to agree with you. Until then, 2023, enjoy it. It's going to be nice. Yeah, I mean,

Starting point is 02:33:25 I want to agree with you. I want to agree with you. I just, I don't see what crashes this market so badly. I think the only thing that can crash the market is very, very, very high debt by the US. To me, that's the scariest factor here is the high debt that the US has to pay. You're talking about

Starting point is 02:33:42 crazy, crazy numbers. You're talking about $30 trillion on an average, if they start renewing it, around 4%, 5%. What crashed the market in 2008? Consumer debt or real estate debt. No, it was a banking debt deleveraging caused by toxic debt and poor underwriting. The US government debt is not what's going to cause a recession. It's going to be a business cycle, some idiosyncratic event, some big financial institution blowing up. It's not going to be because of that in the near future. Agreed.

Starting point is 02:34:16 You can't compare the situation today, the financial crisis, where you had just massive, massive levels of fraud in the system, where all the collateral debt of the banks was actually bad. In our case, all the collateral debts of the banks are fine. It's really more the issue of the banks themselves and the way they manage themselves and their risk. But the Fed certainly has put a lot of financial institutions into shaky ground, and hence why I think the Fed is done, because they don't need more banks going under. That's for sure. Yeah, I'd just like to jump in real quick and just talk about business cycles. And I think it's, personally, I don't view it as being a normal business cycle.

Starting point is 02:34:54 I think ever since the gold standard got taken away and then you had the Fed with the mandates, you've seen the Fed slowly tinker every recession to try to get the economy back on track, right? And what they've had to do every time is tinker more and more to the point where after 2009, they had to flood so much liquidity into the system. COVID came, they did even more. They started to lower rates, obviously, to zero. And what to me it does is it inflates the cycle. It elongates the bull cycle.

Starting point is 02:35:24 And just like a drug addict, right? I mean, if you really want to stay up for three days straight, you can stay up for three days straight and take plenty of drugs to do that. But you know what? There's a downside to that. You eventually have to pay the piper. And I think that's where I'm more nervous about it. If you look at the tinkering they did after the dot-com collapse, which then led up to

Starting point is 02:35:42 the real estate bubble and the financial collapse in 09, then you look at what they did after. It's even bigger. The stimulus that they came in with was bigger than we have ever seen in our lifetimes or probably ever. And so you have to think at some point there is something that has to be corrected in that, the downside move. Yeah, I'm just inviting the new panelists. Sorry, guys, I was just on mute. Kabeisi, you've been pretty quiet, man. Oh, there you go. Now you put your hand up. I want to get your thoughts. You've been covering

Starting point is 02:36:11 the Silicon Valley Banker Labs with us for a while. You've heard different perspectives there. Most people are leaning to the bear side, at least in the medium term. Where do you stand? Yeah, I mean, we were bearish last year. We've been bullish you know basically the majority of this year starting in february and this whole run um i mean i think look there's a million

Starting point is 02:36:33 reasons to to be bearish but the reality is the market isn't reacting to it um and and and the bank collapses clearly were the first thing that the Fed broke, and they know that, which is why we're still calling for no more rate hikes this year at all. And I think even Ross mentioned it. You can't look at what's happening right now in the news and the headlines and say, the market needs to fall because of that. Markets are forward-looking. They're not even looking at what's happening in the next three months.

Starting point is 02:37:02 We're looking into 2024 now. And it's clear that inflation is coming down quickly. And I just don't see any reason for the Fed to raise rates further at all. And take these probabilities that you see with a grain of salt. I mean, I just made a tweet about this year. Four weeks ago, markets were pricing in four rate cuts by the end of this year and no more rate hikes. And then last week, it was two rate hikes and no rate cuts. Now it's something in the middle. So nothing is definitive right now. And I think it's clear that inflation is coming down quickly. The Fed does not want to break anything further. And even if they did do some surprise 25 basis point rate hike, I mean,

Starting point is 02:37:45 we're talking about 25 basis points for something that's probably going to be undone later this year anyways. But as far as the market, I mean, you know, we were bearish when there was a time to be bearish, but I just don't see, you might have a pullback here and there for a few percent, but I don't see any big crash happening anytime soon. And I still think that the October 2022 low was the low for now. I don't think that low is going to happening anytime soon. And I still think that the October 2022 low was the low for now. I don't think that low is going to break anytime soon. Let me read out what the chief investment officer

Starting point is 02:38:12 at J.P. Morgan's Investments Management said. And I want to get your thoughts on it, Kobasi. If we are right, and we've seen the last Fed rate hike and the market starts pricing in rate cuts and they start cutting rates, then those cash returns will start to evaporate. You will have locked in not only carry,

Starting point is 02:38:28 but also how to get some capital appreciation. I'd love to get your thoughts on this, Kibasi. So, yeah, I mean, look, I think the Fed as a whole, right, they know that they're looking at lagging data. And that's clear, right? That's why these tools like Truflation and these other things that people have mentioned are important. But they also know that they already have broken something. So I don't think that they they view anything more.

Starting point is 02:38:57 You know, inflation is still their top priority and they want to save face. And there's you know, there's this whole problem with the unrealized losses that you brought up and but i also think they know that they i mean we've been we've had the fastest rising interest rates in history for the last two years so they know that what they've done so far has been severe and i i just don't see a case for even even one more rate hike this year i think is going to be very hard hard to see happen so i mean like i said i i mean i i think it's now's the time to be bullish i mean we've obviously been in a hot run um and you could see a few percent pullback here and there just a natural market pullback but i don't see you know the bear case really uh proliferate i mean when the music's on you're going to be daunting bro and i think that's right yeah

Starting point is 02:39:46 i'm with this guy friend this guy yeah 100 100 yeah yeah and you can't anyone that's been investing for years knows that fighting a trend in the long run is never profitable right the trend the trend has clearly been up and even if the pain trade is up and you have to you know you're long but you're you're seeing all these headlines and and all these tweets and you're worried that oh we're gonna crash because of the next big catastrophic event well the the trend hasn't changed i mean it's been up the entire year and i think that continues yeah okay go ahead right now go to the trend is your friend until the end of the trend. I think that's it.

Starting point is 02:40:25 Gareth, are you still not changing your outlook? Who are you asking, Kibasi? Because I want to go to... Oh, Gareth. Go ahead, Gareth. Oh, sorry. Yeah, I was just going to say no. I mean, my outlook is still that by the end of this year, we will be in a recession.

Starting point is 02:40:39 And I do think the markets are in the process of putting in a short-term top here. I still don't believe that the October lows will hold through 2024. So I still think there's further downside. To me, this would be one of the weakest cycles to the downside, considering the massive rate of increase in interest rates that we've seen in every other factor that I'm seeing it. I know we brought up consumer spending earlier, but I think it's important to recognize that consumer spending was massive from savings right after COVID. It's now switched to credit cards, right? So you have this rotation. Yes, the consumer is spending, but now they're building up debt, which eventually we know is unsustainable. At some point, they're going to have to stop spending.

Starting point is 02:41:19 Caleb, can you do me a favor, Caleb? Can you hear me? Yeah, yeah, I can. What's up? Yeah, look, man, I haven't been in the finance space since Silicon Valley Bank. I don't wake up early enough. And you've been really active with Danish. Can you tell me what's happened? Tell the audience, really. I'm not asking for myself. Tell the audience what's happened since then.

Starting point is 02:41:35 Because in those spaces, everyone was talking about the banking sector and their balance sheets. I did mention something earlier, a statistic earlier. I'll mention it again. And I'll mention the source as well. The source is Wolf Street. And I'll read out what they said. If the Fed raises rates today, unrealized losses on bank balance sheets will get bigger. They are already six times what they were in 2008. But yet no one is talking about the health of banks or not as much as it was before. And the concept of or the narrative of a banking contagion, I don't think anyone's mentioned it so far. Is that still a

Starting point is 02:42:06 worry? I think that the longer rates remain elevated, it's still a worry. In November of 2021, I published a theory called the earthquake effect, talking about how historic monetary tightening was going to expose more naked swimmers and potentially have a tsunami approaching the US economy. I started to think at the onset of the banking failures in the beginning of March that we were in the precipice of seeing that tsunami far out on the horizon. But admittedly, the Fed's backstop of the financial system in coordination with the treasury and the FDIC has been ultra, ultra effective. We have not seen a massive run on deposits as a result of bank-specific failures. We've seen deposits decline because I think a lot of depositors have recognized

Starting point is 02:42:58 certainly some elevated risk within the financial system, but they've been capitalistic in their nature to go out and capture a higher yield in money market funds and in treasuries specifically, which are basically trading at decade plus highs in terms of their yields that investors can capitalize on. And so on March 13th, something that I actually published was some sort of actionable investment advice that people could be listening to, which was that the NASDAQ would outperform the S&P 500, which would outperform the Dow Jones. Why was that my perspective? Because the Dow had the most exposure to financials, and the NASDAQ had the least exposure to financials. And so when we started to see out of nowhere, the Fed's balance sheet increased significantly,

Starting point is 02:43:44 reserves start to uptick a little bit higher. From that perspective, all else being equal, liquidity in the market was improving. In addition to, we started to see earnings come out significantly better than expectations. Were earnings still down on a year-over-year basis? Was revenue still down on a year-over-year basis? Yes, 100%. But the market is a forward-looking pricing mechanism and it's priced based on analyst and investor expectations. And so during that time, since the morning of March 13th, the NASDAQ 100 is up over 27.4%, excuse me, since March 13th, up 27.4%. And it's basically had minimal pullbacks along the way.

Starting point is 02:44:28 Has mega cap tech been leading the charge higher? Yes, absolutely. But I also published data earlier this morning looking at new 20-day highs, new 50-day highs, and new 52-week highs in the S&P 500. And I have to say, we're seeing broad-based participation. Yesterday, we had 109 stocks, 22% of the S&P 500 making new 50-day highs. 24 of those stocks were industrials, 17 were consumer cyclicals. This is surprising. 10 were financials. Who saw this coming? And so the market has been making higher highs and higher lows. We've been seeing more stocks make more highs than more stocks making new lows. This is all very beneficial under the hood. And it's in a backdrop of better than expected economic data, more disinflation,

Starting point is 02:45:19 less concerns about banking, so on and so forth. One thing that's, I'll finalize my comments with this because I don't mean to go on too much of a rant here. The market does not bottom on good news. It bottoms on less worse news. And that's super key for investors to understand. The market bottoms on less worse news. And that's exactly what we've seen since last October. And when was the bottom? Last October. Amazing. i think it's a good opportunity to introduce david lynn who's just joined us um he's uh he's gonna help us here he's gonna join us here in moderation david welcome my friend he's also got an amazing channel that he's just started on youtube if you guys want to check it out and probably a great time to say that if anybody wants to advertise on these twitter spaces or if

Starting point is 02:46:06 you're a project and you want incubation we've pinned two tweets with the email addresses for any queries one of them is sales and one of them is incubation at the crypto town hall.com any any business related queries send them those emails and we'll attend them as quickly as possible yeah let me run that's how you run run man. That's how you do it. So guys, whatever the market will do today, tomorrow, next week, next month, crypto or non-crypto, we are working with projects. If you want to come on the show, the crypto show. This is generally a crypto

Starting point is 02:46:34 show. Today's an exception because we've got the FOMC meeting. Do not hit us up. No more DMs. Now you've got to email us. Just pinned above. You can check it above or it's on Ryan's profile. There's a tweet with the emails if you want to come on the show or if you want to work with our incubation we're still working with projects we get tokens equity in return for our services so we're still pretty active and and uh pretty bullish but um yeah rand i'll let you do the intro for david and can i can

Starting point is 02:46:55 i actually can i kick off with a question for david rand yeah definitely yeah so so david as we prep for the for the for the uh uh to start streaming the FOMC meeting, my question to you is, you interview people in the space, crypto and non-crypto, on your channel, and what's the general sentiment? Because we've seen people on the panel, he disagrees. He's started off more bearish, now becoming more bullish. I'm leaning more on the bull side. I think Ran is in the same.

Starting point is 02:47:19 Gareth is on the opposing side. What's the sentiment like now? How has it shifted over the last few months uh thanks for uh having me can everybody hear me yeah bro we can hear you go all right cool thanks uh very much for having me good to see you mario good to see you around and uh a lot of other faces i recognize yeah the general sentiment is has been bearish to the point where if you are anything but bearish you are labeled a contrarian even by your own right which i find amusing even market should have 20 percent i love being contrarian the the market has been on a tear

Starting point is 02:48:01 stack tech stocks have been on a tear i see g Gareth Soloway here. Hi, Gareth. We've had a conversation with Gareth before about this very topic. And, you know, the tech stocks, if you strip away the tech stocks from the S&P 500, the S&P X tech has been flat. And so it's really just a couple of big names in the big tech spaces

Starting point is 02:48:20 that have been driving up this rally in the indices. And so the general sentiment has been bearish because of an impending recession, but like I've talked to some contrarian traders about this, everyone's short right now. And the only thing you can do is buy things back when everything's short. And so because of that,

Starting point is 02:48:36 markets will keep going up. That's the contrarian view right now, but the overall sentiment to answer Mario's question directly, it's very bearish. Okay. That's good. So I'm a dancer Mario's question directly, it's very bearish. Okay. That's good. I'm a contrarian. Yeah, we're the two contrarians.

Starting point is 02:48:51 We're clearly the two contrarians. Dave, I agree with you that I think the general sentiment is most people are short or not long yet, and I think that tells me that we're going to be pretty early in the cycle, I think. Who's short, though? I mean, I think that's a misconception that I think that tells me that we're going to be pretty early in the cycle I think. Who's short though? I think that's a misconception that

Starting point is 02:49:07 I think there is an insane amount of short covering since March. I don't actually view that. If you look at mutual fund data, mutual funds raise cash to about 2.5% local high and they've actually deployed about

Starting point is 02:49:23 50 basis points of that cash already chasing. And hedge fund managers had already de-risked in 2022 when it came to tech. They've actually realized that they were lagging and they have been aggressively buying these names. So I don't know who is actually short. Yeah, sentiment's not great, but I think a lot of the short covering has already happened. I agree with that. Yeah, I think that's exactly right. With the high short interest, right?

Starting point is 02:49:53 Because it's obvious with those names, if you have 50% short interest, you haven't seen covering yet. No, people haven't been covering at all yet. I think we're starting to see it, but if the S&P pushes further, we'll start to see it. 500 and I think it's the same situation as we have with Bitcoin before we get an altcoin run only once people are really convinced of the Bitcoin run that they then move to altcoin run and I think that that's exactly what's happening here in stocks you've got the Microsoft you've got the Apples you've got the uh Nvidia's and whatever else pushing up the the the the the S&P and I think the rest of the rest are going to follow specifically after the short interest ratio for the S&P as a whole on the 500 stocks is actually pretty low. The high short interests are in the very challenged businesses that either don't generate profitability or have high debt.

Starting point is 02:50:56 Yes, people are underinvested. There's a lot of cash on the sidelines. There is $800 billion that's moved into money markets in the last six months. And there's $200 billion that's moved into money markets in the last six months, and there's $200 billion that's moved into bonds. So there is money that can move back into equities, but I think saying that there's a huge short interest in the S&P 500 is just not right. It's a very low level of short interest across the S&P. Dave, what do you think? I mean, you speak to these people daily, you speak to investors daily. Tell us what your data points are.

Starting point is 02:51:27 Yeah, so I'm just looking at the CFTC Commitment of Traders report. The S&P 500 speculative net position right now. Yeah, it's pretty short right now. I mean, I'm happy to look at some other data. You're looking at futures, but I'm just looking at the

Starting point is 02:51:46 short interest data for... I'm looking at short interest data, not swing traders. I'm talking about just in general. The short interest across the S&P 500 names is actually pretty low relative to historical levels. That's what I'm saying. Guys, I haven't heard from Peter. Peter, you've been

Starting point is 02:52:01 pretty quiet today as well. Can you hear me? Mr. Bryant, can you hear me? I knew he either has a glitch or he's dropped out. So I wanted to bring him down and back up because he wouldn't usually be this quiet. Gareth, go ahead while I fix Peter's. Yeah, I was just going to add in. Yeah, I'm seeing the same thing. I mean, you know, on the S&P, there's a lot of hedges going on.

Starting point is 02:52:20 So I'm seeing bigger institutions that are long buying puts on the market because they're trying to protect their long portfolios because of the crazy run we've had on. So I'm seeing bigger institutions that are long buying puts on the market because they're trying to protect their long portfolios because of the crazy run we've had on. But overall, when you look at individual stocks, it is historically low. And I'd just like to point out too, that it's not like people are overall bearish. If you look at the fear and greed index for the stock market, it is an extreme greed right now. It's not super high, it's at 81, but it's definitely telling us that the general public has flipped to the more bullish side, which again, is usually towards the end of a run versus the beginning. I'd like to just hop in. I really could be a Tesla shareholder. So if you look at Tesla's

Starting point is 02:52:58 short interest, it's gone up by 20 million shares over the last six months. So there are a lot of people who are short individual names and maybe not the indexes. I have a general question for anybody who wants to take it. So to answer Mario's initial question about sentiment that I've been hearing, people, at least the people I've been talking to, a lot of them are bearish because they think the recession is either already here, the data hasn't reflected that yet, or they think the recession is impending in the next two quarters or so. And so the assumption here is that, the underlying assumption is that bear markets usually coincide with the recession. The data doesn't necessarily support that.

Starting point is 02:53:36 Not every single recession in the past has been coincided by a bear market. So I'll just ask anybody who wants to take this question is let's assume we will get a recession sometime within the next four quarters. Do you think stock markets will pay because of a recession? I think it's hard for people to know exactly how things will play out because if we enter a deep recession, the Fed is going to cut, right? So different parts of the economy will react in different ways. However, I do think that earnings trajectory is headed lower. Is it going to continue lower in 2024? If we continue at this pace and there aren't any material changes in policy, I think one thing that people are missing who have not been in the market for 15, 20 years is that having a cost of capital this high slowly but surely decreases demand of everything, whether you're a small business or a consumer. Now, if they change that,

Starting point is 02:54:40 the Fed is arguably hiked too high for too long already. And if they keep that through the end of the year, through the first quarter of next year, you are going to see an acceleration of the things we're seeing already, which is just defaults across. And we talk about commercial real estate, but there's a $5 trillion publicly traded corporate debt market and private loan market that has already seen more bankruptcies than we saw in April of 2020. And that, by the way, is what is going to cause credit spreads to rise and is going to cause the Fed to, I think that's what's going to cause the Fed to cut. And that's going to take place in 2024 because during COVID, when rates were zero,

Starting point is 02:55:24 all these companies took advantage of zero rates and they refinanced their debt. Just like you refinance your mortgage, they refinance their debt to 2025. Commercial real estate firms couldn't do that. The reason why they couldn't do that was they had been amending and pretending a lot of these retail loans and office loans through 2008. And because of the work from home, banks weren't willing to refi at those same levels. So these guys just said, oh, the economy will go back to normal. Let's not worry about it. What ended up happening is these buildings never saw utilization go up. Now, the corporate

Starting point is 02:55:55 situation is actually worse than the commercial real estate situation if rates stay high for another year, let's say, because all these maturities are coming due starting in 2025. And when you refi debt, if you're the CFO or treasurer of a company, you start thinking about refinancing a year before the bond matures, right? You're not a moron. So in those types of scenarios, if you're a decent company today, but under 2 billion in enterprise value, you're borrowing at 12%. You're not borrowing at 5%. You're not borrowing at 7%. You're not borrowing at 9%. If you're borrowing unsecured, you're borrowing at 12%. And if you are a bad company, and you, for example, if you have exposure to a lot of these companies, crypto,

Starting point is 02:56:34 financial services, medtech, any company that doesn't generate free cash, you are borrowing at 15% or you're shut out of the market. So you either have to raise equity at a very dilutive valuation, or you have to raise debt at a price that is likely hurting your equity value. So it's not all hunky dory. If the Fed were to just normalize rates to two or 3%, things could be, things would be okay. And the economy could slow down and then rebound. But if the Fed keeps rates like this and things really start to break, what Powell, I'm sure, understands is that some things that will break will not be able to be fixed. But guys, isn't that normal business cycles where the Fed goes from too tight to too loose to too tight to too loose? Of course. It's a little bit different now because the economy is more levered than it's ever been before. You guys keep talking about government debt and you forget that corporate debt and commercial real estate debt are all very, very high levels. Some of these companies in private equity, you've had 15 years of multiple expansion. When you have 15 years of multiple expansion, companies start borrowing at nine times debt

Starting point is 02:57:50 to EBITDA instead of three times debt to EBITDA because they think that they're worth 15 times so they can take on more debt. So what ends up happening then is companies that are not as good tend to borrow more money. And when that happens and people realize that this company is only worth four or five times and it has six, seven times of leverage, that creates a solvency perception or a risk. And that makes it difficult to refine. That's what starts this bankruptcy issue. So it's not as easy as you guys make it think. It's not going to affect S&P 500 companies. It's not going to affect NASDAQ companies because they're under lever, but it will affect the majority of companies that

Starting point is 02:58:29 issue in the high yield leverage loan and private credit markets, which is a pretty big employer in our, in our, in the U S. So again, this can change because this is a fed created problem, right? And if the market is forward looking and the market actually thinks that the Fed is going to, it could be a very shallow slowdown. But I don't think people, anyone on this panel can actually articulate what is going to happen and what could actually break. There are things that are going to break that we aren't even talking about because of how high the cost of capital is. I think I agree with you because if we knew what was going to break, we'd put in the measures to make sure that they don't break before they do. Henry, I see you've got your hand up.

Starting point is 02:59:09 And after that, we're going to go to Peter Brandt because I was trying to get a view for the charts. And we are 59 minutes away from the decision. I got the sound. I got the sound there, at least. So thanks. Yeah, and I absolutely agree with what you're saying here. So what is this?

Starting point is 02:59:24 This is RJ. I can see it here on the icon. so thanks yeah and i absolutely agree with what you're saying here uh so what is this rj i can see here on the icon uh yes i i this is a normal cycle that way we see that the rate the rates are coming up it's not it has anything to do with the fed let's just agree that the fed is following the market so we can just go take a look at the market rates the two-year is actually what sets the rates for the fed so take a look sure let's say the Fed follows the two-year gun lexicon as well. And that's why it's about the business cycle. And that's why we're going to see the leading indicators, which we have seen coming down, breaking into also the coincidence and also into the lagging indicators, which is the

Starting point is 02:59:56 rates. And that's what we're seeing now. We're seeing the slowdown in the rates and the rise of the rates. And actually, we've seen the top in the 10-year back in October as well. So we have all these components in place. And that's why I agree with you. This is what is going to break something. And it already has broken things. And forget about this from the financial world. Think about this from average Joe, from me, for me and me here in Denmark. I mean, I'm paying three or four times on my mortgage loan here all of a sudden.

Starting point is 03:00:22 And that is bringing my consumption down. And when you do that on billions of people, which is what is happening out there, then you got the big cycle. So this about, you know. Mr. Henrik, 100% right. Now think about a company that has 10 billion of debt. I agree. And 2 billion of you.

Starting point is 03:00:38 I agree with you. I agree with you. And they have floating rate debt. Quick numbers, because this is just pure math. Floating rate debt at 10% on $5 billion is half a billion dollars. You have $1 billion of EBITDA. Your CapEx is $300 million. So you have a billion of EBITDA, earnings before interest, taxes, depreciation, amortization,

Starting point is 03:00:56 $500 million. I'm preaching to the choir here. I'm with you. And all of a sudden, your CapEx, you try to cut your costs. You cut your CapEx from $300 to $200. You have $300 million of free cash flow left. LIBOR was zero. LIBOR went to 5%.

Starting point is 03:01:10 All of a sudden, your interest costs doubled. And your interest went from $500 to a billion. Now you're burning $300 million. And that's my point. And that is exactly my point. I said it's commercial, it's businesses, and it's private. It's ordinary people. It's a consumption.

Starting point is 03:01:26 It's 70% of the GDP in the U.S., consumption. And consumption will come down because people are facing higher financials or mortgages and whatever it is, payments on that. So this is the problem. This is what is turning the supertanker. So this is not about something that's going to change really quickly. We're going to see the supertanker turn really slowly and something is then by the end

Starting point is 03:01:48 of it, when the recession really sets in, when we're starting to see the deterioration of the labor market and elsewhere, we will see companies starting to also, and we'll see the fault. We're going to see the black swan coming out somewhere and then people will say, this is the reason for the crisis. Exactly. I agree. Would you agree

Starting point is 03:02:03 everyone's calling this a business cycle and forgetting what happens in a business cycle when you're in a business cycle defaults go up and credit spreads are they estimate the probability of default of a company over the duration of that debt in that net of the recovery right when that spikes the fed is looking at that the bank of america bo you know boa os index you can find online that predicts bankruptcy and bankruptcy predicts unemployment so so this everyone's saying oh this is a business cycle not understanding that in a business cycle you actually see defaults go up and the reason why they haven't gone up is because during covet everyone refied out and we're approaching that cliff next year. And also because- No one can predict the future.

Starting point is 03:02:47 No, no, no. But also I will say, reason is also because businesses were earning so much money last year. Everybody was expanding their capacity in certain forms. And that is also why we're going to see the deflationary pressure because for a certain amount of time, you're going to say, oh, this investment I did, I need to stick to that. But then all of a sudden we're going to see the deflationary pressure because for a certain amount of time, you're going to say, oh, this investment I did, I need to stick to that. But then all of a sudden you're going to say, okay, the demand is not coming back. And this was the surplus, the huge demand we got from the stimulus coming out. And that was why the spike that came out from that in terms of inflation was because the demand was not there, the businesses tried to react to it, and now they had to react

Starting point is 03:03:22 in the other direction. And that's why we're going to have a business cycle rollover. So, yes, we're going to see a – just one second here. We're going to see absolutely a fallout of this, and we're going to see businesses fail. All right, Gareth, I see your hand's been up for a long time. Go for it. Mike, it's yours. Yeah.

Starting point is 03:03:41 I was just going to bring up – I just was curious from the bulls on the panel, is that if the bull case is just there's money on the sidelines, I mean, that's much more of a short-term narrative. That's not something that's going to sustain you for years and years. Are we thinking that there's no sort of slowdown? Is the economy going back to this roaring type of atmosphere? Because I look at some of these large cap stocks, right? We're talking Apple and so forth, which has made up a majority of the upside in the S&P, in the NASDAQ. And they're now trading at PE ratios, forward PEs of north of 30, right? So we're talking Microsoft and we're talking Apple and all the rest of them. And so now you're at these crazy expanded PEs. And if we see any sort of recession, right? What are these stocks pricing in at this point? Because right

Starting point is 03:04:24 now there's literally nothing negative on the horizon that's affecting valuations. Money's just chasing in. And you look at, does China start to ban more chip companies like they did with Micron? I mean, there's so many possible negatives. But to me, I look at the market and there's literally nothing being priced in. And you can see that in the VIX, right? The VIX is at historic lows, not seen since before COVID. So again, I'm just curious about the bull case. What's the longer term driver here, or is it just simply money on the sidelines? I got a run, so I just wanted to say goodbye to everybody. Thank you for having me, Mario. Thanks, Ross. Thanks. Appreciate it.

Starting point is 03:05:01 Thanks, Ross. Peter, I know you've been waiting a long time, and I'm actually dying to hear whether you're taking the bull side or the bear side of this argument. Well, hey, thanks, Mario. You know, I guess I'm just too old and probably not smart enough to worry about trading what hasn't happened yet. And, you know, I just, I'm always in the market, stock market bottom last October.

Starting point is 03:05:27 Now, somebody may say, no, we really topped in December, January 2022, and we're still in bear market. But as far as I'm concerned, we've been in a bull market since the October lows. And in my way of thinking, really, there's nothing more bullish than a market that's going up on worry. This is just a typical market that continues to rally and go up on a wall of worry. Somebody mentioned commitment of traders. Let me touch on that. You look at the S&P 500 commercials. We're talking now about big trading houses. We're talking about people who've got

Starting point is 03:06:07 skin in the game. Long 370,000 S&P contracts, hedge funds, short 340,000, 350,000 contracts. The COT, as far as I'm concerned, is that I want to be on the side of commercials. I don't want to be on the side of hedge funds. Hedge funds to me is what I want to bet against. As a matter of fact, if you looked at the present net long position of commercials and S&Ps, it's close to as large as it has ever been in the history of the S&P contract. If you look at hedge fund shorts in the S&P, it's as close to as short as it has ever been in history. Just one other thing, I'll kind of pass the hat to those who really want to talk about what is yet to come but is not now, and that's the yield curve inversion.

Starting point is 03:07:02 Of course, we have this big inverted yield curve, or at least it's a flat yield curve. But there are some internal signs that that yield curve may be wanting to normalize. I look and trade the spreads within the SOFR3 contract. And I've been long with the September SOFR short the next June SOFR, and it's a trade that's working, which means that within the pricing structure of the SOFR, the SOFR is saying, we need to go back to a more normalized yield curve, or we at least need to take some of the inversion out of it, which for me is kind of an early warning sign.

Starting point is 03:07:40 So anyway, I'll pass it on to those who want to- We should get Peter up here. I'd love to listen to that. That was great. The SOFR trade was great. Do you have any targets for that side, or are you just riding momentum at the moment? No, I think S&Ps make a new high.

Starting point is 03:08:01 I mean, you've got an inverted head and shoulders bottom, and people say, oh, head and shoulders. you've got an inverted head and shoulders bottom. People say, oh, head and shoulders. Don't tell me about head and shoulders. But the reality is that patterns take place. Some patterns fail. Some patterns are carried in the implication. By all evidence, we had a head and shoulders bottom, and the NASDAQ has almost reached this target. It's there for all practical purposes. We've completed head and shoulders continuation pattern in the S&Ps. It's there for all practical purposes. We've completed head and shoulders continuation pattern in the S&Ps. It projects prices at least close to the 5,000 level. So, you know, for right now, I look at a market that is going up on a wall of worry. I look at a market

Starting point is 03:08:39 that's got a near historical large commercial position, near historical large hedge fund position, and a market that's going up. And who cares whether, I'm an index trader. I don't care whether one stock is carrying the index or 20 are. Well done, Peter. I agree. That's super helpful but um is there is there a way to to give the some some points on the other side as well um just very quickly so like on the on the head and

Starting point is 03:09:16 shoulders banner pattern i'm not a technical guy but i think it's listen the market goes up over time you will benefit and you create wealth by being long indices. You can position, you can trade. What we saw in 2020, 2021, 2022 was a period of extreme excess. And we made a fortune since the fourth quarter of 2021 of shorting busted SPACs and crappy companies and frauds. And a lot of those companies still exist in the system. The S&P 500 and the NASDAQ are going to perform differently than the majority of the economy because today the concentration of

Starting point is 03:09:57 companies without debt and pristine balance sheets is very, very high. Those companies are trading at high valuations partially for the right reasons, because they are areas of safety. And one of the reasons why they're areas of safety is we talk about hedge funds from their short perspective, but they're also long. Most of these funds are multi-manager shops that run market neutral. And what these guys at Citadel, at Ballyasney, 0.72, Eisner, and others are doing right now is they are aggressively buying these tech names while shorting other names in the basket. So they realize that they missed the trade. And there is, you're talking about concentration risk,

Starting point is 03:10:39 there is an insane amount of money concentrating in these names because as a hedge fund manager, speaking from experience, nobody's paying me to buy T-bells or prefs or safe things that are easy money layups. They're paid to buy highly liquid issues and to short names against them and generate levered alpha, like Citadel's levered 11 times. They are short stocks and they're long stocks against it. So just let you, if you look at the CFTC, which is not representative of the entire short interest of all the stocks, it's one representation of people using futures to hedge. You also need to talk about the other side, which is all these guys are aggressively buying tech to offset the shorts in their book because they're worried about missing out. And there are swings that happen like this in the marginal

Starting point is 03:11:25 traders, the marginal buyers in the market. There are 300 billion of CTA swings every month in the hedge fund market, which is a three trillion, right? Two thirds of which is equity. You have to understand that they are all aggressively buying these names because they're worried about missing out, especially during the banking crisis, value underperformed growth. Hedge fund managers following the value factor had their worst performance in the last decade in May of 2023. And they're aggressively trying to reposition. It is very difficult for anyone to know how that positioning is playing out. But from the sidelines, it does look like the market always climbs a wall of worry, first of all. But second

Starting point is 03:12:05 of all, I don't think you can say one thing about the CFTC and avoid the other part of it, which is a lot of the move in the tech names is not retail. Retail is not driving Apple to all-time highs. A lot of its hedge funds also repositioning. And I think that needs to be understood. And whether we go back to the lows, nobody can predict the future. But I think that needs to be understood. And whether we go back to the lows, nobody can predict the future, but I think we're overdue for some sort of a correction because there was relief and there was a lot of short covering, believe it or not, that happened after the debt ceiling was resolved and after the last CPI prints. And you need to put that in perspective. It's not clear.

Starting point is 03:12:49 I don't care who you are. It is not clear that something else isn't going to break in the system and that the economy is not going to slow down if you look at every leading indicator globally. Travis, I want to get your views. I see you just come up as a speaker. I know you've been listening for a couple of... I've seen you for a while. What do you think? Are we in this raging bull market that Peter Brand's seeing or are we actually about to see the top as Gareth and a few others are seeing? 100 uh you know i run a crypto fund and uh crypto is like completely divorced from macro right now in my opinion just because of all the idiosyncratic stuff we have going on right now so i don't i really don't have too much of a view on on macro at the moment yeah well the traverse is perfect

Starting point is 03:13:39 so so in terms of um crypto be completely detached um how long do you think that will be for? I hear myself a bit echo Travis. So if you can mute and unmute when you're speaking, don't speak. But yeah. So how long do you think that will last? And do you think that we will see correlation again if equities continue the bull run that some speakers have talked about? Could we see crypto follow suit?

Starting point is 03:14:00 So in the very near term, it seems like all of crypto is kind of waiting on these DOJ charges against Binance, which everybody seems to think is coming quite soon. And that's going to be a kind of near term shoe to drop. And we'll have to see what that looks like and what the knock on ramifications are from that. But then there's like an adage that I came up with a couple of years ago that I think is a very good way to frame Bitcoin, which is Bitcoin loves QE and detests QT. And when you look back over the last however many years of crypto's history, Bitcoin's history, I think that that does hold quite true. And when you look at a pause right now, and then we can argue about how long they're going to keep rates high before they start cutting. We can argue about how long they're going to keep rolling the balance sheet off before they pause on that. And like whether

Starting point is 03:14:58 or not that's enough for, you know, Bitcoin to start heading higher. I'm not sure. Normally, the way these bear markets in crypto have worked historically is that Bitcoin dominance rises through the bear. Bitcoin takes off, gives the all clear sign, and then capital starts to flow into alts in a bull market. Alts outperform Bitcoin by a lot on an absolute basis during a bull, but then give all of that back and then some in the subsequent bear. I do kind of struggle to see how much capital can flow into alts with this level of regulatory uncertainty in the united states like a jv yeah yeah despite despite the moves this trevis despite the moves we're seeing in the east yeah yeah i'm just i'm not sure it's enough with with that level of uncertainty uh about how alts

Starting point is 03:16:01 are going to get treated in the united States. And this SEC Coinbase case, you're not going to get clarity in three months or six months from this. This is likely going to be a long, drawn out thing, and it's going to have its own legal timeline associated with it. There is some chance that as the fact patterns start to emerge in SEC versus Coinbase, that if the market starts to get a sense that the SEC may lose that case, which they certainly could, the market may start to express that in the alts market. But that's not going to be the next few months kind of thing. So I think we're just going to have to have a good amount of information, additional information kind of come out

Starting point is 03:16:41 before the market can start to get a handle on trying to price in whatever eventual outcome happens with that case. I'm interested to hear Peter's view. Peter, you said you trade indices. You spoke about all the indices. You gave your outlook on the S&P and the NASDAQ and the tech stocks. How do you see Bitcoin? I mean, Bitcoin is enough of an index for you to trade, right? I'm extremely constructive on Bitcoin. I mean, I'm constructive from kind of my own macro view, which is probably not put together

Starting point is 03:17:16 in the same architecture as somebody who really looks at economic macro, but I just view Bitcoin as a store of value, as the ultimate store of value. And so the only trade I'm absolutely sure of is that the US dollar and other fiat currencies will buy less 20, 40, 60 years from now than they do right now. And so while Bitcoin is going to have these huge swings, multiple 2X, 3X, 5X rallies, followed by 85% declines, I think long-term, it's a store of value play.

Starting point is 03:17:57 It's a store of wealth play. I think we saw the bottom of the bear market, Bitcoin, back in November. We're on our way up. I see three or four short-term positive things in Bitcoin taking place right now. So the big price level that I'm looking at in Bitcoin, it's really if we can get back up over 28. I think if we can get back up over 28.5 in Bitcoin, we won't see 25 again. So you won't see 25 again. You won't see 25 again ever

Starting point is 03:18:39 or you won't see 25 again in this cycle? We won't see 25 again in this cycle. Wow, interesting. And do you look at Ethereum and maybe like Ethereum as a proxy for other altcoins or is that too far below the line?

Starting point is 03:18:59 Well, I just hate altcoins. I think 99% of altcoins will be become worthless and that includes the altcoins. I think 99% of altcoins will become worthless. And that includes the altcoins that a lot of people think is not going to be one of the altcoins that will be worthless. I like the decentralized nature of Bitcoin. I mean, my long-term store of value play on Bitcoin is based on that. It's based on decentralization.

Starting point is 03:19:24 I think that's one of the key features that will make it the legacy coin. And Bitcoin is based on that. It's based on decentralization. I think that's one of the key features that will make it the legacy coin. So, yeah, I've traded Ether from time to time. I don't go past Bitcoin and Ether for me. Bitcoin is crypto and crypto is Bitcoin. And so that's really my focus. I know some people are in love with some of the functionality that's built on top of Ether, but I think

Starting point is 03:19:52 in five years, we're going to have superior utility built on top of it. Peter, by the way, can you hear me? Just want to make sure. Hold on, I don't think Peter can. Peter, can you hear me? Peter? Yeah, Peter can't hear you. Oh, you can. Perfect, perfect. Yeah, cool,? Yeah, Peter can't hear you. I thought so.

Starting point is 03:20:06 Oh, you can. Perfect, perfect. Yeah, cool, cool. I thought that was a glitch. But the question is for you, Ryan, actually. What's your portfolio like, Ryan? I don't think I've ever asked you that, at least not for a long time.

Starting point is 03:20:16 So my portfolio right now, it's probably underweight Bitcoin. So I'm probably about 25% to 30% Bitcoin. I'm probably about, right now, about 20% in cash. And then the balance is a mix of altcoins, Ethereum and a couple of other big altcoins. I don't hold much of the small altcoins anymore. I think I've done most of them.

Starting point is 03:20:38 And look, I mean, I think that, you know, my portfolio isn't optimally constructed given we haven't restructured our portfolio fast enough given the nature of the SEC attacks. So yeah. Mario, I'm going to actually send the question back to you. How are you structured altcoins versus Bitcoin? Yeah, I think we're overweight, surprisingly.

Starting point is 03:21:01 We're overweight altcoins, but we're kind of you know moving away slowly from crypto and you know so we're very heavy crypto and a bit too heavy on on altcoins but mostly through you know just vc type plates so you know investments for two three four five years and moving moving not ai obviously um i know it's very frothed up but it's something we've been watching you know we've got the the ai. So it's from the media side. We're doing a lot there. Outside of that, I'm not a big fan of cash. I should be. It's probably a mistake of mine. And my e-commerce business is sitting on a lot of stock and we stocked up heavily because we're pretty bullish. So the market does collapse.

Starting point is 03:21:37 And if Gareth is right or any other bears are right, I'm not screwed but i'm not gonna be too happy so so i'm relatively bullish i did not expect the regulatory crackdown we've seen even though we've been talking about it for a long time i did not expect the sec to be that aggressive to be labeling that many tokens as securities uh from a macro level i'm very bullish you know i'm not the expert here i tend to listen to a lot of the speakers but i just feel like there's i started getting bullish when when the whole um everyone was crying a banking meltdown because I just thought it was very easy for the Fed. If things got really, really bad, it wasn't hard for the Fed to pivot. I think the solution wasn't really too difficult.

Starting point is 03:22:15 And I'm a believer in that AI will increase productivity, and I think that will play a role in inflation dropping. I'm relatively bullish on the geopolitical situation, even though you see me do spaces here and there about China tensions, World War III risk, etc., and Russia escalation, all that. I'm relatively bullish, but then again, I never expected Russia to cross the border. I've never expected markets, crypto to collapse the way it did. I never expected a lot of things that we're dealing with now. So I tend to be more of an optimist. But yeah, that's where I stand. Is there a coin

Starting point is 03:22:45 that is inverse to the S&P? I'm just curious. Inverse or completely or zero correlation? Yeah. Everything, I'd say like now,

Starting point is 03:22:54 everything, almost everything, all the alts are zero correlation. Like where's Travis? Travis, you could correct me if I'm wrong, but I just feel like at Rand,

Starting point is 03:23:00 we can hear you eat that beautiful meal. Travis, I think that everything is not inverse, but just does not correlate with the stock market, with the S&P at the moment, just based

Starting point is 03:23:11 on the amount of Black Swan events that we've seen. I think you've just been annihilated. Only since April, we lost our correlation to the NASDAQ and the S&P, and we started correlating a little bit more with gold, but only since April. I actually covered it on my show today where we looked at the correlations of

Starting point is 03:23:27 crypto versus all the other asset classes. Was we talking about Bitcoin or just Bitcoin? I'll say crypto and Bitcoin, how's the correlation with Bitcoin and the S&P even? Because I noticed Bitcoin de-correlated

Starting point is 03:23:43 Yeah, it's totally, it's totally uncorrelated right now. And Bitcoin's correlation of different macro instruments kind of ebbs and flows over the last however many years. And it goes through these instances where it'll be, you know,

Starting point is 03:23:59 very tightly correlated and then it'll wane. And, you know, sometimes it's correlated to tech stocks. Sometimes it's correlated to the, you know, sometimes it's correlated to tech stocks. Sometimes it's correlated to the Remembe. Sometimes it's correlated to gold. Sometimes it's correlated to inverse Dixie. Sometimes it's correlated to, you know, inverse yields like this, this kind of thing. But it really has ebbed and flowed and it has a tendency to you know de-correlate when there's either really good or really bad idiosyncratic news within crypto and obviously you know it's been a bit of a shit storm

Starting point is 03:24:32 in crypto these last few months and so the correlations are are not there at all let me i want to ask before we get to the meeting we start streaming there i do want to ask the panel about their thoughts on ai and and you know it's very easy to make the argument it's overhyped etc but the the impact of ai on on productivity inflation um and the amount of capital flowing into it so i want to get some thoughts on that before doing so i just want to read what wells fargo um what was wells fargo put out fomc's may meeting so last month indicated the end of an aggressive tightening cycle with a unanimous vote for a 25 basis point rate hike but keeping options open for additional hikes. Monetary policies lag, and the 500-bip of rate hikes

Starting point is 03:25:09 suggest the Fed may choose to wait for another month. The most likely outcome is no change in the policy rate, but the possibility of a hike in July, the narrative has been similar across the board. However, increasing uncertainty and deferring views within the FOMC raises the chances of potential dissent in future meetings. So I think the next month's meeting

Starting point is 03:25:31 is where Ryan was saying that we could see a pivot, or Ryan's already calling it a pivot. Others see a potential hike next month. So I want to get thoughts on what I just read on AI's impact. In the meantime, for any project listing or if you're an investor you're sitting on a portfolio we are so me scott

Starting point is 03:25:49 and ran are accepting projects to come on the show and more importantly projects to join our incubator um strong focus on web3 and crypto you know bullish bearish long term we're pretty bullish so we're working with a bunch of projects for equity and or tokens in in crypto and even ai so hit us up. It's a pinned tweet above. You can email us. There's two separate emails, one for sponsorships, one for incubation. So hit us up above, anyone in Web3 or even AI.

Starting point is 03:26:15 Email us above. But just back to the question, I've read what Wells Fargo put out, but I want to get thoughts on AI. Maybe we'll go with Patrick. Patrick, you've just joined us. Good to have you, man. Can you hear me? Yes.

Starting point is 03:26:27 Hello. All right. Do you want to speak again so I can make sure your mic is good? Testing. One, two. Yeah, your mic is pretty rubbish, man. If you can fix it,

Starting point is 03:26:37 I'd love to get your thoughts on the meeting we're going to see and then I could shift to the AI decision. I'll give you a couple of minutes. Let me go to the AI discussion. Caleb, Kibasi, is it getting overhyped? Will it impact productivity? Are we being too hopeful by saying AI will, like Larry Fink said earlier today, will play a role or will be the reason that inflation starts to drop considerably? Kibasi, is that wishful thinking? I don't, I mean, okay, is it overhyped or not?

Starting point is 03:27:12 I mean, that's tough to say. I think AI is, it's not just a fad that's going to disappear. That's for sure. And could it be a bubble and the next big thing at the same time? Absolutely. I mean, no market just appears out of nowhere, becomes a top thing driving the markets, and then, you know, keeps going up straight up forever. So I think AI is definitely the next big thing. I mean, I think there will be a lot of players within the space that disappear or don't become. But moving away from the question about being overhyped, do you think it will really impact

Starting point is 03:27:46 inflation in the next couple of years? No, I mean, not necessarily. I don't think AI and the whole inflation, I mean, there might be some correlation there, but I don't see that being a predominant driver of inflation over the next year or two. Do I see it being a predominant driver of the market? Yes. or two. Do I see it being a predominant driver of the market? Yes. And is that another reason to stay bullish in markets? Yes. I mean, I think that the AI hype in terms of market potential is still only getting started. I've been very bullish of NVIDIA since October. I've been very bullish of basically any big

Starting point is 03:28:22 name behind both the hardware and software of AI. And I think, you know, you see, if you take out, you've seen all the headlines, if you take out the AI stocks from the S&P 500, we're up 2% year to date or flat in some cases. I mean, is that something that people are spinning into a bearish narrative that a few names are holding up the market? Yes, but that also speaks to the potential of AI and what people are expecting so i i still think ai has

Starting point is 03:28:48 room to run and i think it's going to keep um supporting equity evaluations into the end of the year all right let me go to patrick nash off your mic is working patricky there yeah i plugged in the my headset but uh much better i appreciate it man give us give us your quick thoughts what what do you expect in the next 10 minutes um and what do you expect over? So we have two topics really away from AI, the decision today, what's going to happen next month, and your thoughts on the markets. Well, look, I'm a macro guy and I have to zoom out. I just nested a post I just did, guys. It's what the Fed reacts, what makes them budge. And as a chart trader, I try to find these correlations. And initial claims seems to be a macroeconomic event that really spooks the Fed.

Starting point is 03:29:32 So they have probably a plethora of other metrics to check. But if you check out that chart, whenever initial claims break out and they really start trending upwards, that's when you start seeing the first rate cuts. So I have a chart that's over 50 years, and you'll see that when the initial claims start moving upwards. And also initial claims, guys, I didn't overlay here, but if I would have done the 30-year divided by the 10-year, when the long-term prospects of inflation start outpacing the shorter term, that chart looks exactly like the initial claims, jobless claims. So look, it's starting to move up, the initial claims. Is it enough yet for them to get spooked and start cutting?

Starting point is 03:30:09 We'll find out, but it is trending upwards. So the probabilities of getting rate cuts are increasing as time goes on. So Patrick, I love that comment because I think that going forward, it is inevitable that unemployment is going to go up, but I think you need to see it go up to above 5%. I mean, the Fed uses lagging data. We all know that. They use lagging data and they're

Starting point is 03:30:31 bureaucratic and they're academics. And in the last 50 years, and you look at economic cycles, even further back, 13 bear market through 13 economic cycles, 10 of those resulted in a hard landing primarily because of the Fed, and three were soft landings. So because the Fed uses lagging data and because they act too late, if they start to act, which I think they are, they're going to start cutting rates when defaults go up and unemployment starts really ramping up closer to 5%. By that time, a lot of things in the economy will already be broken. And some things like some corporate defaults will be so bad that it's going to be hard to come back. There are going to be some institutions that just are wiped out, small

Starting point is 03:31:14 businesses and medium-sized businesses. So I think the issue is that the Fed made a mistake. They loosened the economic policy for too long and they put too much money into the system along with fiscal policy. And then on the flip side, they're probably going to tighten longer. And that's something that none of us can actually predict. The market's been wrong about it all throughout this year. And it would be interesting to see if Powell is more forward-looking than Bernanke or Yellen or Greenspan, because at this point, he doesn't look to be. I'll give you the mic right after, David, because I know we've got a few minutes before Ryan reads out the decision. Mike, Joe, and Rob, Mike, do you want to go first?

Starting point is 03:31:57 Your thoughts on what we can expect in a few minutes and your thoughts on the markets. I'll check if that's Mike McGlone. There's so many Mikes in the world. It is you, sir. Yes. Thanks, Mario. They're not going to do anything. They're going to be hawkish and they're going to stay hawkish until the stock market goes down.

Starting point is 03:32:16 What does hawkish mean? What does hawkish mean? They'll keep jawboning. They're going to just keep jawboning. They're going to stay vigilant. You know, each governor coming out and warning that they'll keep rates restrictive. And here's what I think you should look for to expect a decent bottom and decent buying opportunities. When you get surprise rate cuts, a series of it and a long variable lag. So I do appreciate people saying market's going to

Starting point is 03:32:43 go up because it went up. And I'm talking about the stock market. But to me, we're at the stage right now, put yourself in the Fed's shoes. There is no reason for them to consider anything except to keep rates at these levels and high until the stock market tells them by going down. Because inflation's going down, everything's fine. So Mike, just to confirm, you're saying no interest rate increase, just keeping rates high? Yep. It's already priced in.

Starting point is 03:33:14 If you look at the WRP function on the Bloomberg terminal, it shows virtually like 7% they're going to hike today, 50% they'll hike at the next meeting, July 26th, and still potential they're going to hike in September. But no cuts. And that's the way it's going to stay. And that's just, let's talk about direct correlations. Stock market going up, rate hikes staying in the system, rate hikes staying strong. Stock market going down is what it's going to take for rate cut. That's my point. We're not going to get that liquidity in the system until the market forces them. Mike, what do you think about the RBA and the Bank of Canada hiking after the pause. And not only that, expectations for the RMA to do three more hikes this year

Starting point is 03:33:47 and the Bank of England to do two hikes and the Bank of Canada potentially to do another hike. How did that narrative change and what drove that change? And I muted you, Mike. You just got to unmute again because I heard the TV in the background. Yeah, so to me, exactly.

Starting point is 03:34:03 That's the key thing is the surprise rate hike from the Bank of Canada is, and any, all these rate hikes are not, that's the key fact. That was a statement from our chief of FX strategists and B.R.G. Trill Friedman. It just, these things are still tilting that way. And that's what I really enjoyed about, you know, the long-term technical strategists and people come on and say, you have to buy it because the market's going up and have all these patterns and things. This is something I've never seen. And I've only been trading since the 80s where the Fed is still hiking despite plunging commodities, you know, and all these forward-looking things really tilting downward. This, to me, is what's changed in every single thing that everybody in this cause has been doing in their entire investment careers. And that is the Fed is not there to save you this time. And the cryptos are pointing to that. The yield curve is pointing to that. The commodity collapse is pointing to that.

Starting point is 03:34:59 There's only one thing left, and that's the stock market. So this is a key point. There's only two key banks in the planet that are cutting, and that's because their economies are tilting negative. That's China and Japan. So Mike, there's a real estate expert that just messaged, his name is Sokil in Toronto. And basically what he said was that, and his family owns hundreds of millions of real estate, I think, you know, Bank of Canada pivoted back. I mean, reverse pivoted. They hiked after a pause because real estate prices started to inflect higher. And it looked like the Bank of Canada was bent on preventing real estate speculation. Just like when Powell started in 2021,

Starting point is 03:35:38 he was very clear about sending real estate prices lower. We had 7.5 trillion of wealth created in two years. He was hell bent on increasing unemployment, despite what Congress people badgered him about. And he was hell bent on keeping equity market and cryptos included in that, preventing fervent speculation. And it's all about inflation expectations. And I actually think that the Fed has hiked too much and too far. And in a normal economic environment, I would have probably assumed that the Fed was going to cut and I would have started to go long. But what's actually happening is if Powell is so terrified of being the next Arthur Burns, and he actually keeps rates this high until PCE actually hits 2%, then he is

Starting point is 03:36:27 going to create a self-fulfilling prophecy where he actually blows up a number of things in the economy that we won't even know about until three months after they happen, to be honest. So, I mean, I agree with you, Mike, that it's very difficult just using technical indicators because hedge funds are aggressively buying tech right now. And we had this mini AI boom and a lot of it's based on reality. And a lot of it's just complete bullshit because a lot of companies are just reclassifying revenues as AI.

Starting point is 03:36:55 So yeah, guys, just a heads up. We've got two minutes to go before the decision. So yeah, a few, a two minutes to go before the decision. Just give you guys a heads up as soon as it's decided.

Starting point is 03:37:04 Sorry, Patrick, just do the decision. Just give us some, sorry, two minutes to go before the decision. Just give you guys a heads up as soon as the decision is made. Patrick, sorry. Patrick, go ahead and speak to the decision. Sorry, can you hold on? Sorry, Jay, did you hear Ran just speak now or not? Just make sure if it's glitching for you. Oh, I'm sorry. I just have the Bloomberg television behind me. So if Mike was responding or someone was responding, I'm sorry about that.

Starting point is 03:37:19 No, no, Ran was speaking, but I'm wondering if it's a glitch you can't see. We've got two minutes left. Before you go in, Mike, as well, just the email that's working at the moment. The incubation email is not working. So if you're interested in working with us, DM Ran. I'm getting a lot of comments. Let us know what you expect in the comments below. Before we give the mic to Mike, and then, Ran, you'll interrupt when the decision is up.

Starting point is 03:37:39 For the audience, we haven't told you. Comment and go in the comments. Ask us questions there. Tell us what you expect. And what your thoughts are after the decision is out. Mike, a minute or so, a few seconds before the decision is out, go ahead and Ryan

Starting point is 03:37:51 will interrupt you so don't feel perfect. Just to let you know, things don't break typically until markets go down and make them break. We saw a little bit of that. You basically are missing that component right now. All right. So we've got a few seconds before the

Starting point is 03:38:07 markets are all pretty much flat across the board. SAP just started dropping. Okay. Rates are unchanged. So the first bit of news that I can tell you is that the Fed has held rates unchanged. That's come up right now. Markets haven't even

Starting point is 03:38:23 responded yet. It literally came out the second. Yeah, we have a pause. Now we're going to wait for the details and we're going to wait for the press pack or the meeting pack, which is going to come out any second. As soon as it does, I'm going to read through it. I'm just waiting for the newsroom to

Starting point is 03:38:40 drop. Yeah, the market's pretty flat. Still haven't reacted yet. Well, I guess the markets were actually expecting it. I guess the markets were actually expecting it. Well, the market's pretty flat. Still haven't reacted yet. Well, I guess the markets were actually expecting it. I guess the markets were actually expecting it. I'm seeing NASDAQ 100% down. Sorry, hold on. Who's talking about NASDAQ? Go ahead, Caleb.

Starting point is 03:38:55 I'm seeing NASDAQ 100 futures down quite a bit here on one-minute candles. If I zoom out on five minutes, we've just fallen. On one-minute candles. Yeah, I mean, it's Fed Day. So down 0.45% over the quarter. I love one minute candles. I love one minute candles. Yeah, I can see the S&P

Starting point is 03:39:11 drop as well. The Nasdaq slat. I mean, on a day, the Nasdaq slat. Session lows on the Nasdaq. Yeah, so I think the market's waiting for Okay, so I'm the market's waiting for, the market's waiting for, okay, so I'm getting some more,

Starting point is 03:39:27 I'm getting some more news. Voted 11-0 for Fed's fund rate action. So unanimous vote to keep rates unchanged. Economic activity has continued to expand at a moderate pace.

Starting point is 03:39:37 Holding rates steady allows assessment of policy impact. So, I mean, this is a pivot. This is saying we're going to hold steady for a while. I'm surprised it's unanimous though. Yeah, I mean, this is a pivot. This is saying we're going to hold steady for a while.

Starting point is 03:39:45 I'm surprised. Yeah, I was surprised. But generally, they are unanimous. I mean, if you look at the last couple of months, they've been unanimous. It says, recent indicators suggest that the economic activity has continued to expand at a modest

Starting point is 03:40:02 pace. Job gains have been robust in the recent months and unemployment rate has remained low. Inflation remains elevated. The US banking system is sound and resilient. Tighter credit conditions continue for households and businesses are likely to weigh on economic activity, hiring and inflation. The extent of these effects remains uncertain. The committee remains highly attentive to inflation risks. The committee seeks to achieve maximum employment and inflation at the rate of 2% over the long run. In support of these goals, the committee decided to maintain the target range for the federal

Starting point is 03:40:33 fund rate at 5% to 5.25%. Holding the target range steady at this meeting allows the committee to assess additional information, its implications for monetary policy. In determining the extent of which additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening monetary policy, the lags which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the committee will continue reducing its holdings of treasury securities and agency debt and agency-backed mortgage securities as described in its previously announced plans. The committee is strongly

Starting point is 03:41:08 committed to returning inflation to its 2% objective. How am I doing, guys? Do I sound like Jerome Powell? Some breaking news on the Fed. On the rate levels, the Fed median rate forecast rose to 5.6% for the end of 2023. And that's what we expected in yesterday's space, that they were going to increase the SEP forecast and for 4.6% for the end of 2024. So the Fed is basically saying, higher for longer. We may not hike, but this is the worry that I have. They'll keep rates higher. This is exactly what we expected. I mean, we basically got exactly what we expected, which is why the market's pretty much on really moving. You've got the NASDAQ.

Starting point is 03:41:48 I'm going to be honest. I'm not looking at it on the one-minute candles, but the NASDAQ is completely flat. The S&P 500 down 0.41 and the Dow Jones down 0.33. So pretty much… Keep in mind, the Fed just said they see inflation to 2.5% by the end of 24 now, 3.2% by the end of 23. Core inflation, 3.9% by the end of 23 and 2.6 by the end of 24. And they've said every single meeting they're committed to 2% inflation. So it seems like they're still leaning with higher for longer if they don't even see inflation at 2% by the end of 24. Do you think a pivot will spike inflation again?

Starting point is 03:42:26 I think people have talked about cuts for a while. So just suppose they cut. Is that going to reinvigorate inflation? Not only cut, it's the underlying economy's tanking and deflation anyway. So no, in the short term. Ran, I am looking at the one-minute candles. I'm looking at the one-second candles on Bitcoin.

Starting point is 03:42:44 And we are moving slightly lower. Yeah, so Bitcoin is moving slightly lower. S&P is slightly lower. It's chopping slightly. It's not anything, I think, of note. US dollar picked up slightly as well. No major impact. I think that was all expected.

Starting point is 03:43:00 Your initial thoughts, Patrick and Rob? Yes. Look, if I could just chime in there, I nested SPX versus 10-year yields, like another 50-year chart. But just to contrast these one-minute charts, there was a paradigm shift event that happened after the spike of the SPX versus the 10-year yields,

Starting point is 03:43:21 I think back in 2020. We've broken out down of a 40-year trend line. And now the yields are going to, they're broken that upwards trend of SPX outperforming the yields. And for it to be in a bull market, like we had from 1980s all the way to 2020 with that 10-year interruption in the 2000s, SPX has to outperform the 10-year yields. And right now, that's not what's happening. So even if nominally, NASDAQ's doing a bear market rally or going up, the SPX is going up nominally, if you adjust them for 10-year yields, they are not in a good place at all. So rump pulls or more could happen to the US equities nominally. And you have to expect that adjusted for inflation,

Starting point is 03:44:04 adjusted for 10-year yields, the US equities are not going to be performing, giving you as much return as it did in the 1980s or from 2010 all the way to 2020. So people have to bear in mind, there might be better investment ideas other than NASDAQ and tech. While the anomaly, they're going up high, other stuff will be going up higher. Stig Brodersen Well, the CD stay high above 4.5%, the rates that then is.

Starting point is 03:44:26 You can just hold cash and beat inflation right now. Exactly. There's a whole bunch of instruments right now that'll give you a better return than what used to work from 2009 all the way to 2020, 2021. The game changed,

Starting point is 03:44:43 but people, they're in old habits, right? What's Alambud? It's tech. It's crypto. It's AI. People are looking at all these nominal gains, but they have to look adjusted in real terms. Are they really getting the return they need? Anything else, Ran? Ran, can you hear me?

Starting point is 03:45:04 While waiting for Ryan to come in Jay how are the markets looking still pretty flat or everyone else I think is sitting there trading S&P is down 30 points since this was released I'm looking at the

Starting point is 03:45:22 rate futures I mean there's now not even a single rate cut likely by the end of 23 based on futures um so it seems like i i think markets are viewing this as a little bit more hawkish than they expected because part of the part of the release was that there are there may be more rate increases later this year um inflation at 2.5 percent by the end of 24 obviously is a long time away um but they also said most fed officials see rate cuts in 2024. so i i really think this is the fed just kind of hedging in both directions because they don't really know they're it's a wait and see type of

Starting point is 03:46:02 thing and they they want to see how the data trends yeah i'm just having a look at the the um where is the eos dollar i had it open just now uh your stall is still going up um at the the smp is still going down by the looks of it and why do you still going down and let's look at the dixie drop to 25 the dixie is spiking as well no where, where is it? Yeah, it is. 103? What is it? 103.26. Yeah, 103.26. Yeah, exactly.

Starting point is 03:46:28 It was just before it was 102.6. Yeah. Six or seven. Yeah, just before it was seven. So your thoughts on why the market is reacting as such? Mike, your initial thoughts? Yeah. I'd like to add a key thing to remember here. Real money doesn't move right after affluence. This is purely

Starting point is 03:46:51 speculator traders. I really enjoy listening to Peter because when I was dealing and did this kind of stuff, this is all high leverage spec trading. It's completely insignificant what's happening now. You've got to give it a dare to let the dust settle and see the real flows. Yes, right now the signal is potentially short term. The best is over. We've priced in for the end of the cut. The whole world said we're going to be done cutting. Once you're done cutting, that's a great thing. But just be really careful. And I see, that's one thing I love being in with Bloomberg. I see the announcers do it all the time. They say, ask me, Mike, why is the market up? Why is it down? I don't care. It doesn't matter. So let's be careful with that and point out

Starting point is 03:47:28 really what's happened here. They didn't hike. They signaled they would hike again. And maybe it's the end of the cycle, but ask yourself, what's going to take them to stop hiking? And I already answered that before. Guys, I'm looking at the dot plot. In case you don't know what the dot plot is, that's when each member of the meeting gets a document and they put a little dot on where they think rates are going to be at the end of a certain time period.

Starting point is 03:47:56 And if I look at it for the end of 2023, they're looking at between 5.5 and 5.75. So that means that they are seeing another two increases right yeah they're seeing another another one to two increases this year that's what the majority of the fed uh are seeing and i think that that's why the market's responding like this because the majority of the fed members are saying that they're going to get another two rate increases this year. And that, just to give you an idea of the majority, 1, 2, 3, 4, 5, 6, 7, 8, 9, 9 out of 1, 2, 3, 4, 5, 6, 7, 8, 9, 9 out of 18. See the rate at the end of 2023 at between 5.5 and 5.75%. So I think that's the reason why the market's responding the way it's responding. And just to heads up here, this is the same way that the markets reacted at the previous

Starting point is 03:48:50 FOMC. I think the Fed members have a almost responsibility to come out a little bit more bearish. And I think that if we look at what the market is actually pricing in, having seen this, so we're looking at what the market has seen. Having seen this data, I'm just calling up the chart. I'll take a second just to load. Sorry, my computer, my PC is very, very, very slow. Just make sure, if everyone listening, just make sure in the comments, let us know your thoughts on decision in the market's response um whether you're bullish or bearish uh so do let us know in the in the uh in the comments in the bottom right corner ask us questions as well and uh we've also fixed the

Starting point is 03:49:33 emails for everyone asking why you know we cannot email you if you want to work with us etc just check the pinned tweets and they've got the amended emails if you want to okay so yeah here's what the market here's what the market's seeing now. The market's seeing one more rate increase this year. Even though the Fed is calling for two, the market's seeing one more rate increase this year and then no rate cuts. Now, I've been saying there's going to be no rate cuts

Starting point is 03:49:55 for a long time. I think now the market's actually agreeing with that. But I also don't think there's going to be one more rate increase. I think we're done, to be honest. But let's see what happens at the next meeting. And I guess let's talk, let's see what Alex is saying. Right now, the probabilities of a, hold on, just looking, the data is coming in very, very, very fast.

Starting point is 03:50:16 So on the 26th of July, which is the next FOMC meeting, 93.4% chance of no rate hike. That is as per the probabilities now, which is... Hey, Rand, can I add something? Right now, it's 70% basically. They're going to hike at that rating. The Fed funds are priced for five and a quarter. The current effective rate is 5.08. So you're right, but they're still leaning more towards a 25 basis point hike at the July meeting. 69% at the moment. Go ahead, Patrick. Yeah. Just when people want to know what's going to happen with the next rate cut,

Starting point is 03:51:03 it depends always when it happens in these macro cycles. So I nested just another chart, guys. Again, it's a big, big pitch chart since 1947. And when US equities have been outperforming, let's say the producer price index, rate cuts, even if they happen, they're always seen as bullish events and they sustain the up move in the US growth stocks. But once the SPX, let's say, broke down versus inflation, broke down versus a produced price index, like a technical breakdown of an uptrend, the rate cuts are actually seen as bearish.

Starting point is 03:51:32 And sometimes you guys, I hear you guys talking, you hear, oh, well, if they cut, it's because the market and the price, let's say the market tags, well, it's because the market has priced in some type of capitulation or a watershed moment and it's been priced in. So it flips, it's not always a rate cut cut people have been used to the past 10 years rate cuts let's say the

Starting point is 03:51:50 market propels upwards but right now we're in a dynamic that the rate cuts could actually be a rug pulse so wait i'm reading something now from zero hedge mario i don't know if you just want to put in that tweet but the thing that shocked the thing that shocked the market is when they're comparing the May dot plot to the June dot plot. So bear in mind we're one month later. And in May, when they did the dot plot, the terminal Fed fund rate or where most Fed officials saw the Fed fund rate was at 5 to 5.25 at the end of 2023. Now they're seeing it at 5.75. So what they're saying is the rates are going to get higher and stay there for longer.

Starting point is 03:52:31 It's not higher rates for longer, but actually even get higher and stay there for longer. And that's what shocked it. You can see it much better in this tweet that I've asked Mario to tweet from Zero Hedge. What shocked the market? Yeah, it's the May dots versus the June dots. Again, I think that the market usually does overreact to this,

Starting point is 03:52:57 and the market actually does price in its own assumptions, which you can see on the CME FutME futures on the CME futures page. Can I just say it's Jonathan here? Hi there, Mario and everybody else. Can I just say that this seems to be disastrous for the CMBS, the CRE market? So rates are going to remain higher all the way through to early 2024. But QT is continuing at pace. So this is just very, very negative. But don't you think that this is what the Fed had to do? Don't you think that this is what the Fed had to do?

Starting point is 03:53:34 If you're going to pause, you also want to protect yourself going forward and say, look, we kind of reserve the right to raise rates. I think that that's maybe the situation here. Well, they're trapped. I mean, they've been trapped since they started tightening monetary policy. It was two lakhs for decades before, and now they're tightening. And, of course, you know, they're stuck between a rock and a hard place.

Starting point is 03:54:00 I mean, you know, there is a collapse developing within commercial real estate in the US. I think it was Trap at the end of last week. I forget who, one of their analysts said that delinquencies could be higher than 10% by the end of the year. And of course, what they need is they need interest rates to come down and rapidly. And they also need quantitative tightening to to stop you know the tightening of the the fed's balance sheet sort of you know reduces the capital that's in the system so yeah it's uh it's not good i'm not sure if it's not good i mean i think i think let's let's just take things to what the first thing is let's celebrate the pause because

Starting point is 03:54:43 we finally after uh x amount of consecutive increases, some of them by 0.5 basis points or some of them by 0.25, we now have a pause, which is for me a slight pivot. And I think the only thing that is actually scaring the markets here is where the Fed officials see rates

Starting point is 03:54:59 at the end of the year, which means I think in their heads, they're getting ready to say, we're leaving the options open for another interest rate hike, one of the two, which means I think in their heads, they're getting ready to say, we're leaving the options open for another interest rate hike or another two interest rate hikes. That's the way I see it. I think more will be said on this at the press conference, which we're going to stream live

Starting point is 03:55:16 in about 13 minutes. 13 minutes. Point out that the Fed's own staff doesn't agree with Powell. Like in the last meeting, I'm not sure what they'll say in the next meeting coming up in 10 minutes. In the last meeting, Powell was very clear that he doesn't agree with their own staff's projections of a mild recession by later this year. So I think the dot plots are reflecting what the governors think, not what the staff thinks. So ultimately, I'm not sure who's going to win this battle. My view, sir, is…

Starting point is 03:55:42 Jobs to the next, jobs jobs report doesn't it so um obviously if cpi starts to sort of fall at an accelerated rate um and if the jobs numbers if they cool then uh then it's unlikely that they'll need to increase the rate by another um you know 25 basis points points. But if the core inflation remains high and if the jobs reports, the jobs numbers are still buoyant and positive, then, you know, it's going to be very difficult for them not to raise. So the problem I see is that,

Starting point is 03:56:17 you know, there's been hope in the marketplace that actually the Fed will pivot and then shortly after that, say within the following quarter, start to reduce interest rates. And that hope has now gone. And I know they've advised in the long term, well, our rate's going to be 5.5% or 5.25%. But now what they're saying is actually it's definitely going to be above 5%.

Starting point is 03:56:41 And of course, the market... About 5.5. Yeah, well... About 5.5, actually. That's know, the market... About 5.5. Yeah, well... About 5.5, actually. That's what I'm saying, about 5.5. They also just... The reason I interrupted you, we just got another segment from the Fed report,

Starting point is 03:56:53 and the Fed no longer expects the US to enter into a recession in 2023, which is interesting, because we had a lot of people here saying that in Q4 we're going to have a recession. I think Eric was one of them. Gareth was another one of them. I think they're both actually off the stream now.

Starting point is 03:57:07 But the Fed is no longer seeing a recession in 2023. The Fed expects a 4.1% unemployment rate at the end of 2023, down from 4.5% now. And they're seeing GDP increase by 1% from 0.4%, which was the previous... So is that the governors or the staff? The staff revised their projections, Grant? That's from the Fed report that came out.

Starting point is 03:57:31 No, I guess it's from the government, yeah. Yeah, they revised, yeah. They revised. Okay. I literally don't understand how they're even doing... Sorry, David. But I don't understand how they're doing those metrics. I understand that the data might be showing them that,

Starting point is 03:57:44 but clearly the staff of the Fed are talking to main street and the governors aren't because uh just like if you look at the the higher rate employers in the in the u.s for example which is small to medium businesses they have had on average of 15 to 20 reduction in their credit and essentially they all run on credit so i just don't i don't understand how they get into that number i get that the data chart might be seeing that but if they just speak to tens of thousands of people who are on that just just literally go into twitter and use the search tool and tell me which business is growing uh versus three years ago even i can't see how that makes sense so just just to respond to that very quickly, the Fed, the reason why the

Starting point is 03:58:25 dot plot went up dramatically, and you can argue whether 5.6% is dramatic or not, is because of this idea that the Fed views unemployment to stay at 4.1%. This is exactly what I was saying earlier in the call. Unless unemployment, it's literally verbatim what I said, unless unemployment goes above 5%, the Fed is going to, or the trajectory is that way. The Fed is going to keep rates higher for longer, and that's enough to break the momentum that we've been seeing so far this year. And the fact that the Fed believes that there is no recession this year, I literally said that you can't have it both ways. You cannot have the Fed cut rates to zero and the economy to have a soft landing. And on the other frame

Starting point is 03:59:06 of things, if the economy does have a hard landing, then the Fed, of course, will ease. But you can't have both. You can't have your cake and eat it too. And that was, I think, the mentality going into this Fed meeting. Like yesterday, we literally said that the SEP would be higher sorry joe go ahead all good yeah you know i think we've been in some sort of rolling recession since literally like almost q4 22 you know when you look at big tech you know you look at apple you know it's like they had their two consecutive quarters of negative net income you know google same thing something like a shopify you know they actually went negative and now

Starting point is 03:59:45 they're coming out of it. You look at the banking sector, they should have had a much worse moment than they did, like outset from unlimited QE, we're going to save everyone no matter what happens. So I think that was the befuddlement that happened where you kind of have this sector separation between the recession. And I think that's throwing people off. And I think the next thing is housing, right? We're at a full standstill. We're at 7.5%, 30-year mortgage rate.

Starting point is 04:00:16 The millennial and now Gen Z, they're in full capitulation mode. Even though you're seeing... Go ahead. We had a question. No, finish off, Joe, and I've got a question for you. Yeah. I mean, you're seeing rates at 7.5% for decent FICOs on a $300,000 loan. New loan apps are actually up this week for the first time, and the highest it's been in a couple of months here.

Starting point is 04:00:36 And they're capitulating. Where is all this money though? And when you look at some of the core inflation that people are looking at, you've got a ton of money that's been saved by these folks, but they can't go drop $100,000, $200,000 on a home. They don't want to pay four times as much as they were going to pay, or two and a half times as much as they were going to pay when rates were really low. And so they're going to go spend it in other places. So got a tweet by walter just a few seconds ago and the phrase was from an analyst the phrase quote at this meeting is a strong hint that holding steady is seen at just this meeting implying that more hikes are to come soon

Starting point is 04:01:17 presumably july or september it's very much a signal for a summer hike and kind of goes against similar to what scott said and against what Rand said, is that health. So if they don't raise interest rates today, the health of the hikes, it does not mean we're in for a reversal. So the poor... But I think Mario...

Starting point is 04:01:35 As many would have expected. No, Mario. A lot of it depends on the press. Go ahead. I think put yourself in the position of the Fed. You're already embarrassed because we got here. You're already embarrassed because inflation was transitory. You're already embarrassed because of where we got to. You don't want to egg on your face again. So what do you do? You say, look,

Starting point is 04:01:52 at this meeting, we're holding rates steady. That gives us the option to continue to raise rates later on. And when I read in the statement, they said, look, we're going to keep evaluating the data based on holding rates steady. I'm still putting my money on the fact that there's no more rate increases but let's see i may be wrong the market is showing that rate increases are expected um would love to get some thoughts on this um and also the response from the market like if you look at the so bitcoin drop but nothing major we saw the smp drop but again again, it doesn't look that big of a drop. And the Dixies up kind of recovered the drop that we've seen over the last 24 hours. So just based on the market response, and I want to go back to you, Joe,

Starting point is 04:02:37 we'd love to get your thoughts. And then what language should we be on the lookout for in the press conference in a few minutes? Well, I think if you've got to operate under the pretense that these guys actually don't know what they're doing, right? And so we've raised rates to a certain level. And I think 25 more basis points doesn't really do too much to us. I think it's the hold steady that people are really trying to keep an eye out for and how long is that hold steady? And is this a new norm of operating um your business with you know this environment is what people are trying to to understand but i you know i think you know when you look at the the decision here it's it's hey

Starting point is 04:03:14 let's let's hold and let's hope and that's all they're doing they're doing the same thing as us let's hope that the numbers turn around let's hope um you know employment you know like unemployment starts to move up a little bit and and that's all they're doing. But yes, like Ran is saying, they're in their government agency, and they're saving face. Let me read out some analysts' thoughts on the market response.

Starting point is 04:03:35 The market was pretty, so I'm going to read out here, Michael James at Wedbush Securities. He's the managing director there. The market was pretty overbought going into the meeting, and any sign of hawkish commentary was going to be negative. We received it, and that's the initial knee there the market was pretty overbought going into the meeting and any sign of hawkish commentary was going to be negative we received it and that's the initial knee-jerk reaction we need to get more color from chair powell but the initial statement clearly

Starting point is 04:03:52 reads more hawkish than the market was prepared for at least coming into the statement and we've got other statements that are on the scene or sam stovall says the market has sold off because investors are concerned there will be possibly at least two more rate hikes between now and the end of the year with no rate cuts. Some people were expecting that the Fed would actually pause this month but also not raise rates anymore, that they were high enough, while others were thinking that they'll pause at this meeting but maybe add one more hike in July and that would be it. However, it does seem that if the FOMC members have become even more hawkish since the last meeting and I think it has taken investors by surprise. Initial thoughts, Caleb, Rob, and again, what should we in Kabasi as well? And

Starting point is 04:04:30 what type of language would you be looking out for in the press conference in a few minutes? And Ryan, interrupt us when the conference starts, please. I'll just keep my comments here on this pretty brief. The fact that this was a unanimous vote to pause, it sounded like that was kind of surprising to some people. The fact that this was a unanimous vote to pause, it sounded like that was kind of surprising to some people. I think that's exactly what we should have expected. The Fed has been very persistent for the course of the last 20 years, really since even Bernanke, that consistency and unanimous votes and falling in line is very, very important, particularly at inflection points. And so to see this decision today and the consistency of the vote, I think is what should be relatively

Starting point is 04:05:12 unsurprising. I did one of those long form tweets talking about how, you know, I think given the fact that the Fed has invoked the mistakes of Arthur Burns in the late 70s and the flip-flopping of policy, they don't want to repeat that, right? They don't want to pause or cut and then have to hike again and kind of keep playing both sides. Because one thing that's super important for both the health of the financial system and the economy is some form of consistency in monetary policy. So when the Fed pauses or when they cut, they do that for quite some time. When they hike, they do that for quite some time. Rewind back to the 2015 hiking cycle. What did they start that hiking cycle with? Hey guys, we are going to hike rates by 0.25%

Starting point is 04:05:58 every other meeting. And that's exactly what they did for two and a half years. And so given the fact that they've cited the mistakes of Arthur Burns and the inconsistency of policy in the mid to late 70s, I think if anything, this is officially a reflection of the Fed's confidence that we are firmly in disinflation. The unfortunate part about that is they are six months too late to recognize disinflation and adjust monetary policy as such. And so this is going to be the new challenge going forward. From my perspective, inflation and the inflation story is now old news. Expect to see the labor market become the new focus for market moving dynamics going forward and Fed policy. Rob? Yeah, I agree with you 100%. Yeah, go ahead. Yeah, Ryan, just jump in. By the way, Ryan, when the stream starts, just jump in,

Starting point is 04:06:53 interrupt whoever's speaking, and just unmute everyone. Every Fed decision this year has been quote unquote unanimous, but then when we exit the Fed blackout period, every Fed official says the exact opposite thing as the person next to them. So I don't think the Fed is... You're not suggesting they're inconsistent now. Come on. What was that? I didn't hear you. You're not suggesting they're inconsistent now, are you?

Starting point is 04:07:17 Come on. Yeah, exactly. The Fed decision is transitory, guys. The Fed decision is transitory. So, I mean... Yeah, we have one minute left to go. I'm watching. I'm on my stream. I've got one minute left to go.

Starting point is 04:07:34 All right, Ryan, do you want to... Ryan, do you want to stop the music? Yeah, no. Go ahead, Kibasi, and then we'll go to Rob. We've got seconds going. Yeah, I mean, I was just saying, I mean, I don't think they're nearly as aligned as they're making themselves out to be

Starting point is 04:07:47 there's no possible way that every single decision this year was unanimous you're telling me every single person has voted for the decision that the Fed made this year I think they're just trying to I think they want people to think they're working together

Starting point is 04:08:04 exactly it's a perception right so I think they want people to think they're working together. Exactly. It's a perception, right? So I think there's still a lot of uncertainties for what's going to come. I think out of all of the meetings, this one's going to be the most interesting to listen to new of. Here we go. They're just waiting for Powell.

Starting point is 04:08:20 They've put on the mics. Hey, Rain, just a quick tip. If you're watching it on YouTube, click the settings button and put it on 2x speed and I guarantee you'll have the fastest live stream. You'll feel the future. And just in the meantime,

Starting point is 04:08:38 everyone, while listening, just let us know in the comments. We'll be watching the comments, getting your thoughts and preparing the questions for the panel. So make sure you put your comments in the bottom right corner. and yeah ryan we can kick it off when you like good afternoon my colleagues and i remain squarely focused on our dual mandate to promote employment and stable prices for the american people we understand the hardship that high inflation is causing and we remain strongly committed to bringing inflation back down to our 2% goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy doesn't work for anyone. In particular,

Starting point is 04:09:17 without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. Since early last year, the FOMC has significantly tightened the stance of monetary policy. We have raised our policy interest rate by five percentage points, and we've continued to reduce our securities holdings at a brisk pace. We've covered a lot of ground, and the full effects of our tightening have yet to be felt. In light of how far we've come in tightening policy, the uncertain lags with which monetary policy affects the economy, and potential headwinds from credit tightening, today we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings.

Starting point is 04:10:04 Looking ahead, nearly all committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2% over time. And I will have more to say about monetary policy after briefly reviewing economic developments. The U.S. economy slowed significantly last year, and recent indicators suggest that economic activity has continued to expand at a modest pace. Although growth in consumer spending has picked up this year, activity in the housing sector remains weak, largely reflecting higher

Starting point is 04:10:39 mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment. Committee participants generally expect subdued growth to continue. In our summary of economic projections, the median projection has real GDP growth at 1.0% this year and 1.1% next year, well below the median estimate of the longer-run normal growth rate. The labor market remains very tight. Over the past three months, payroll job gains averaged a robust 283,000 jobs per month. The unemployment rate moved up but remained low in May at 3.7%. There are some signs that supply and demand in the labor market are coming into better balance. The labor force participation rate has moved up in recent months, particularly for individuals aged 25 to 54 years.

Starting point is 04:11:36 Nominal wage growth has shown signs of easing, and job vacancies have declined so far this year. While the jobs-to-workers gap has declined, labor demand still substantially exceeds the supply of available workers. FOMC participants expect supply and demand conditions in the labor market to come into better balance over time, easing upward pressures on inflation. The median unemployment rate projection in the SEP rises to 4.1% at the end of this year and 4.5% at the end of next year. Inflation remains well above our longer-run 2% goal. Over the 12 months ending in April, total PCE prices rose 4.4%, excluding the volatile food and energy categories. Core PCE prices rose 4.7%. In May, the 12-month change in the consumer price index came in at 4%, and the change in the core CPI was 5.3%. Inflation has moderated somewhat since the middle of last year.

Starting point is 04:12:45 Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go. The median projection in the SEP for total PCE inflation is 3.2% this year, 2.5% next year, and two point one percent in 2025. Core PCE inflation, which excludes volatile food and energy prices, is projected to run higher than total inflation, and the median projection has been revised in the SEP up to three point nine percent this year. Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. The Fed's monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes hardship as it erodes purchasing power, especially for those least able to meet the

Starting point is 04:13:51 higher costs of essentials like food, housing, and transportation. We are highly attentive to the risks that high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2% objective. As I noted earlier, since early last year, we have raised our policy rate by five percentage points. We have been seeing the effects of our policy tightening on demand in the most interest rate sensitive sectors of the economy, especially housing and investment. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. The economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on

Starting point is 04:14:35 economic activity, hiring, and inflation. The extent of these effects remains uncertain. In light of how far we've come in tightening policy, the uncertain lags with which monetary policy affects the economy and potential headwinds from credit tightening, the committee decided at today's meeting to maintain the target range for the federal funds rate at 5 to 5.25 percent and to continue the process of significantly reducing our securities holdings. As I noted earlier, nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. But at this meeting, considering how far and how fast

Starting point is 04:15:16 we've moved, we judged it prudent to hold the target range steady to allow the committee to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In our SEP, participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate

Starting point is 04:16:05 will be 5.6% at the end of this year, 4.6% at the end of 2024, and 3.4% at the end of 2025. For the end of this year, the median projection is a half percentage point higher than in our March projections. I hasten to add, as always, that these projections are not a committee decision or plan. If the economy does not evolve as projected, the path for policy will adjust as appropriate to foster our maximum employment and price stability goals. We will continue to make our decisions meeting by meeting based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks. We remain committed to bringing inflation back

Starting point is 04:16:52 down to our 2% goal and to keeping longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do at the Fed is in service to our public mission. We will do everything we can to achieve our maximum employment and price stability goals. Thank you, and I look forward to your questions. All right, so now we have the questions that are going to come up. Thank you. Colby Smith with the Financial Times. I'm curious what gives you and the committee the

Starting point is 04:17:41 confidence that waiting will not be counterproductive at a time when the monthly pace of core inflation is still so elevated. Interest rate sensitive sectors like housing, while they felt the drag of the past Fed actions, have started to recover in some regions and financial conditions, you know, most recently were easing. So I guess I would go back to the beginning of this tightening cycle to address that. So as we started our rate hikes early last year, we said there were three issues that would need to be addressed kind of in sequence. And that of the speed of tightening, the level to which rates would need to go, and then the period of time over which we'd need to keep policy restrictive. So at the outset, going back 15 months, the key issue was how fast to move rates up, and we moved very quickly by historical

Starting point is 04:18:34 standards. Then last December, after four consecutive 75 basis point hikes, we moderated to a pace of a 50 basis point hike, and then this year to three 25 basis point hikes at sequential meetings. So it seemed to us to make obvious sense to moderate our rate hikes as we got closer to our destination. So the decision to consider not hiking at every meeting and ultimately to hold rates steady at this meeting, I would just say it's a continuation of that process. The main issue that we're focused on now is determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time. So the pace of the increases and the ultimate level of increases

Starting point is 04:19:15 are separate variables. Given how far we have come, it may make sense for rates to move higher, but at a more moderate pace. I want to stress one more thing, and that is that the committee decision made today was only about this meeting. We didn't make any decision about going forward, including what would happen at the next meeting, including we did not decide or really discuss anything about going to an every other meeting kind of an approach or really any other approach. We really were focused on what to do at this meeting. So there was no kind of initial debate about the possibility of July, any sense of the initial support at this stage for that move? So again, we didn't make a decision about July. I mean, of course, it came up in the meeting from time to time, but really the focus was on what to do today. I would say about July,

Starting point is 04:20:05 two things. One, decision hasn't been made. Two, I do expect that it will be a live meeting. Thanks, Howard Schneider with Reuters. I was just wondering if you could help us understand the narrative here, because it feels like there's been a level shift in the dots. Stronger GDP, less of a hit to unemployment, slower progress on inflation. And I'm wondering in this sort of where's the disinflation coming from? The labor market's going to be stronger, it looks like. It's not coming from there. Demand is not coming down all that fast, according to GDP. You've doubled your estimate of GDP. So what's the narrative here? It seems like it's getting more immaculate rather than a little

Starting point is 04:20:48 messy. So you're right that the data came in, I would say, consistent with but on the high side of expectations. So and if you go back to the old, the former SEP, the last SEP in March, you will see that growth moved up. These are not huge moves, but growth estimates moved up a bit. Unemployment estimates moved down a bit. Inflation estimates moved up a bit. And, you know, all three of those kind of point in the same direction, which is, you know, that perhaps more restraint will be necessary than we had thought at the last meeting. So although the level, frankly, is pretty, the level of 5.6 is pretty consistent if you think about it, where the federal funds rate was trading before the bank incidents of early March. So we've kind of gone back to that.

Starting point is 04:21:34 So your question is, where's the disinflation going to come from? And I don't think the story has really changed. The committee has consistently said and believed that the process of getting inflation down is going to be a gradual one. It's going to take some time. And I think you go back to the three-part framework for core PCE inflation, which is, we think, as good an indicator as you can have for where inflation is going forward. You start with goods. With goods, we need to see continued healing in supply conditions, supply side conditions. They've definitely improved a substantial amount. But if you talk to people in business, they will say it's not back to where it was. So that's one thing. And that

Starting point is 04:22:13 should enable goods prices to continue, goods inflation to continue to come down over time. In terms of housing services inflation, that's another big piece. And you are seeing there that new rents, new leases are coming in at low levels. And it's really a matter of time as that goes through the pipeline. In fact, I think any forecast that people are making right now about inflation coming down this year will contain a big dose of this year and next year will contain a good amount of disinflation from that source. And that's, again, probably going to come slower than we would affect. That leaves the big sector, which is a little more than half, pardon me, of the core PCE inflation. That's non-housing services. And, you know, we see only the earliest signs of disinflation there. It's a sector,

Starting point is 04:23:04 it's a very broad and diverse sector. I would say in a number of the parts of that sector, the largest cost would be wage costs. It's a service sector, so it's heavily labor intensive. And I think many analysts would say that the key to getting inflation down there is to have a continuing loosening in labor market conditions, which we have seen. We have actually seen, you know, I could go through a number of indicators suggesting there's been some losing in labor market conditions. We need to see that continue. I would almost say that the conditions that we need to see in place to get inflation down are coming into place. And that would be growth meaningfully below trend.

Starting point is 04:23:42 It would be a labor market that's loosening. It would be goods pipelines getting healthier and healthier and that kind of thing. The things are in place that we need to see, but the process of that actually working on inflation is going to take some time. Nick. Nick Tamaros of the Wall Street Journal. Chair Powell, what's the value in pausing and signaling future hikes versus just hiking now? I mean, not to be flippant, but I don't lose weight just by buying a gym membership. I have to actually go to the gym. 16 of your colleagues put down a higher year-end 23 rate today. A majority of you think you're going to have to go up by 50 basis points this year. So why not just rip off the Band-Aid and raise rates today? So first, I would say that the question of speed is a separate question from that of level.

Starting point is 04:24:39 Okay. So, and I think if you look at the SEP, that is our estimate, our individual, it's really accumulation of our individual estimates of how far to go. I mentioned how we got to those numbers. In terms of speed, it's what I said at the beginning, which is speed was very important last year. As we get closer and closer to the destination, and according to the SEP, we're not so far away from the destination in most people's accounting. It's reasonable, it's common sense to go a little slower, just as it was reasonable to go from 75 basis points to 50 to 25 at every meeting. And so the committee thought overall that it was appropriate to moderate the pace, if only slightly. And there are benefits to that. So that gives us more information to make

Starting point is 04:25:23 decisions. We may try to make better decisions. I think it allows the economy a little more time to adapt as we make our decisions going forward. And we'll get to see, you know, we haven't really, we don't know the full extent of the consequences of the banking turmoil that we've seen. It would be early to see those, but we don't know what the extent is. We'll have some more time to see that unfold. It's just the idea that we're trying to get this right. And if you think of the two things as separate variables, then I think that the skip, I shouldn't call it a skip, the decision makes sense. And so, Senator Moffitt's not really buying with Paul is live. It's getting stronger. With only the June employment and the CPI report for June due to be released before the July meeting, you get the ECI after, you get the senior loan officer survey after, you get some bank earnings at the end of next month. What information will the committee be using to inform their jury on whether this is, in fact, a skip or a longer pause. Well, I think you're adding

Starting point is 04:26:26 that to the data that we've seen since the last meeting, too. You know, since we chose to maintain rates at this meeting, it'll really be a three-month period of data that we can look at. I think that's a full quarter, and I think you can draw more conclusions from that than you come from any six-week period. We'll look at those things. We'll also look at the evolving risk picture. We'll look at what's happening in the financial sector. We'll look at all the data, the evolving outlook, and we'll make a decision. The NASDAQ is up 100 points. Thanks for taking our questions. Gina Smiley, New York Times. You obviously, in your forecast, marked up the sort of path for growth, marked down the path for unemployment, marked up the path for inflation

Starting point is 04:27:10 pretty notably. I wonder, you know, since March, what has changed to make you think that the economy is a lot more resilient and inflation is going to be a lot more stubborn? And given that, you know, why do you feel confident that this is as high as you're going to have to revise the federal funds rate? Or do you think it's possible we could have even a higher than 5.6 percent terminal by the end of this cycle? You know, I mean, on the first part, I just think we're following the data and also the outlook. The economy is the labor market, I think, has surprised many, if not all analysts over the last couple of years with its extraordinary resilience, really. And it's just remarkable. And that's really, if you think about it, that's what's driving its job creation, its wages moving up, its supporting spending, which in turn is

Starting point is 04:28:00 supporting hiring. And it's really the engine, it seems, that is driving the economy. So it's really the data. In terms of, you know, we always write down at these meetings what we think the appropriate terminal rate will be at the end of this year. That's how we do it. It's based on our own individual assessments of what the most likely path of the economy is. It can actually, in reality, wind up being lower or higher. And there's really no way to know. But it's what people think as of today. And as the data come in, it can move around during the intermeeting period. It could wind up back in the same place. But it really will be data-driven. I can't tell you that I ever have a lot of confidence that we can see where the federal funds really will be data-driven. I can't tell you that I ever have a lot of confidence that we can see where the federal funds rate will be that far in advance.

Starting point is 04:28:51 I think that's a key point. That's what we were saying earlier. That's a key point. Mr. Chairman, thanks for your question. You had said back at the end of May that you thought risks were getting closer to being into balance. Is that still the case, or has your mind changed about the

Starting point is 04:29:05 balance of risks out there? And also, could you give us an idea of what would be a sufficiently restrictive funds rate? Obviously, the current rate, according to the committee, is not sufficiently restrictive. Is it five, six? Is it six? Where is it sufficiently restrictive? Thank you. You know, I would say again that I think that over time, the balance of risks as we move from interest rates at effectively zero now to five percentage points with an SEP calling for additional hikes, I think we've moved much closer to our destination, which is that sufficiently restrictive rate. And I think that means, almost by definition, that the risks of sort of overdoing it and underdoing it are getting closer to being in balance. I still think, and my colleagues agree, that the risks to inflation are to the upside still. So we don't think we're there with inflation yet, because we're just looking at the data. And if you look at the full range of inflation data, particularly the core data looking at the data. Now, if you look at the full range

Starting point is 04:30:05 of inflation data, particularly the core data, you just aren't seeing a lot of progress over the last year. Headline, of course, inflation has come down materially. But as you know, we look at core as a better indicator of where inflation overall is going. So, I think what we'd like to see is credible evidence that inflation is topping out and then beginning to come down. That's what we want to see. Of course, that's what we want to see. And I think it's also, we understand that there are lags, but remember that it's more than a year since financial conditions began tightening. I think the reason we're comfortable pausing is that we are still, much of the tightening took place over last summer and later into the year. And I think it's

Starting point is 04:30:50 reasonable to think that some of that may come into effect. So we're, you know, I think stretching out into a more moderate pace is appropriate to allow you to make that judgment of sufficiency, you know, more, with more data over time. Rachel. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. I wanted to ask further on the lag effects. When you're considering when you would hike again throughout the course of the year, are there things that you would expect to kick in as those lag effects come into effect that would inform your decisions? Have you learned things over the past year that give you some sense of timeline for when to expect those lags to come into effect? Yeah. So, it's a challenging thing in economics. It's sort of standard thinking

Starting point is 04:31:42 that monetary policy affects economic activity with long and variable lags. Of course, these days, financial conditions begin to tighten well in advance of actual rate hikes. So, if you look back when we were lifting off, we started talking about lifting off. By the time we had lifted off the two-year, which is a pretty good estimate of where policy is going, had gone from 20 basis points to 200 basis points. So in that sense, tightening happens much sooner than it used to in a world where news was in newspapers and not on the wire. So that's different. But it's still the case. What you see is intrasensitive spending is affected very, very quickly. So housing and durable goods and things like that. But broader demand and spending and asset values and things like that. But broader demand and spending and asset values and things like that, they just take longer. And you can pretty much find research to

Starting point is 04:32:32 support whatever answer you would like on that. So there's not any certainty or agreement in the profession on how long it takes. So, you know, and that makes it challenging, of course. So we're looking at the calendar. we're looking at the calendar, we're looking at what's happening in the economy, we're having to make these judgments. Again, it's one of the main reasons why it makes sense to go at a slightly more moderate pace now, as we seek that ultimate, I can't point to that ultimate endpoint, I can't point to a specific data point, I think we'll see it. When we see inflation really, really flattening out reliably and then starting to soften,

Starting point is 04:33:11 I think we'll know that it's working. And ideally, by taking a little more time, we won't go well past the level where we need to go. I was curious if you could give us an update on what you're seeing on credit tightening since the bank incidents from March and how you're teasing that out apart from these lag effects. So it's too early still to try to assess the full extent of what that might mean. And, you know, that's something we're going to be watching, of course. what we would view as significant tightening beyond what would normally be expected because of this channel, then, you know, we would factor that into account in making rate decisions. So that's how we think about it. Let's go to Chris.

Starting point is 04:33:58 Thanks. Chris Rugeber at Associated Press. You mentioned that many of the trends are in place that you want to see. Core services, ex-housing has come in pretty low in the past couple of months. And as you noted, a significant portion of core inflation is now housing prices. And then we've had some quirks in used car prices. So given that these trends are in place, I guess I'm sort of asking the flip side of Nick's question why uh signal additional rate hikes aren't things headed in the direction you need why not simply give it even more time or uh it's surprising to see so much hawkishness in the dots uh given what we're seeing recently yeah so you know we've remember we've um we're two and a half years into this or two and a quarter years into this, and forecasters,

Starting point is 04:34:46 including Fed forecasters, have consistently thought that inflation was about to turn down and typically forecasted that it would and been wrong. So I think if you look at core PCE inflation overall, look at it over the last six months, you're just not seeing a lot of progress. It's running, and it's running at a level, you know, over 4.5%, far above our target and not really, you know, moving down. We want to see it moving down decisively. That's all. You know, of course, we are going to get inflation down to 2% over time. We don't want to do, We want to do that with the minimum damage we can to the economy, of course. But we have to get inflation down to 2%, and we will.

Starting point is 04:35:31 And we just don't see that yet. So hence, you see today's policy decision, both to write down for the rate hikes by the end of this year, but also to moderate somewhat the pace with which we're moving. I think we'll give it one or two more questions. I mean, at the last press conference, you mentioned you didn't see wages driving inflation. And there was some research from the San Francisco Fed suggesting wages aren't necessarily a key driver. But you've talked about the labor market today and the need for softening. Can you give us a little more specifically of how you see the tight labor

Starting point is 04:36:09 market driving inflation at this point? Thank you. Right. So I'm not going to comment on any particular paper, but I would say that I think the overall picture is that at the beginning, in early 2021, inflation was really becoming for very strong demand for largely for goods. People were still at home. They had money in the bank and they wanted to spend. They spent a lot on goods. And of course, at the same time, and because of that high demand, to some extent, supply chains got all snarled up. So prices went way up. Inflation went way up. That was the origin. It wasn't really particularly about the labor market or wages. But as you move through 21 into 22 and now in 23, I think many, many analysts believe that it will be an important part of getting inflation down, especially in the non-housing services sector,

Starting point is 04:37:06 getting wage inflation back to a level that is sustainable, that is consistent with 2% inflation. We actually have seen wages broadly move down, but just at a quite gradual pace. So, and that's, you know, that's a little bit of the finding of the Bernanke paper with Blanchard of a few weeks ago, which is very consistent with what I would think. Michael McKeith from Bloomberg Radio and Television. You said in the past that you don't like to surprise markets. It's kind of been the Fed's view. Markets should have an idea of what you're going to do before you go in. You also said a number of times that it would take a while to bring inflation down. You reiterated that again today, and that we would get to a point where inflation could be sticky.

Starting point is 04:37:54 So I'm wondering, as we go into the next meetings, how Wall Street or others should look at your reaction function. What will you be reacting to, time or data? In other words, if nothing much changes, if we're looking at the same sort of labor market, the same sort of inflation levels in July or in September or November, will you move because you've said you feel you need to? Is it time that's going to require additional movement, or would it be a reversal in inflation? So, I don't want to deal with hypotheticals about different ways data might move out. So, of course, we don't go out of our way to surprise markets or the public. At the same time, our main focus has to be on getting the policy right. And that's what we're doing here. And that's what we'll do for the upcoming meetings. I will say the July meeting will be live, and we'll just have to see.

Starting point is 04:38:47 I think you'll see the data, you'll hear Fed people talking about it, and markets will have to make a judgment. Well, do you think inflation is likely to continue coming down based on the lags and based on your threat of additional movement? Or are we going to be in a period where we're not going to know what's happening? You know, I think if you look at, if you just look at, I'll just point you to the forecast. So, inflation is running, core PCE inflation is running at about four and a half, a little higher than four and a half percent. And the median FOMC participant thinks it will go down to 3.9 on a 12-month basis. This is by the end of this

Starting point is 04:39:25 year. So that's expecting pretty substantial progress. That's a pretty significant decline for half a year. So that's the forecast. You know, we do try to be transparent in our reaction function. We're committed to getting inflation down. And that's the number one thing. So that's how I think about it. Victoria Guido with Politico. Could you talk about the balance sheet and how you're thinking about it? What are you looking for to judge whether we're approaching reserve scarcity and is treasury issuance going to affect that? Also, are you considering lowering the RRP rate in order to take some pressure off banks? So let me say, first of all, on the treasury part of it, if I can talk about that and then go back to the balance sheet. So on that, of course, we've been very focused on that for a

Starting point is 04:40:20 couple of months, as everyone has. Treasury has laid out its borrowing plans publicly. I think we all saw, I saw the Secretary's comments yesterday to the effect that Treasury has consulted widely with market participants about how to avoid market disruption and that they're going to watch carefully for that. So, that's from the Treasury, which actually sets the borrowings. At the Fed, we'll be monitoring market conditions carefully as the Treasury refills the TGA. The adjustment process is very likely to involve both a reduction in the RRP facility and also in reserves. It's really hard to say at the beginning of this, which will be greater. We are starting at a very high level of reserves and still elevated RRP to take up for that matter. So we don't think reserves are likely to become scarce in the near

Starting point is 04:41:14 term or even over the course of the year. So that's the Treasury part of the answer. We will, of course, continue to monitor conditions in money markets, and we're prepared to make adjustments to make sure that monetary policy transmission works. Was there another part of your question? Yeah. Are you considering lowering the RRP rate to help take some pressure off banks? So, we have a number of, I would say, the RRP doesn't look like it's pulling money out of the banking system. It's actually been shrinking here lately. So I don't think that's not something we've thought about a lot over time. It doesn't really

Starting point is 04:41:56 look like that's something that we would do. I think it's a tool that we have. If we want to use it, we can. There are other tools we can use to address money market issues, but I wouldn't say that that's something that's likely that we would do in the near term. Janelle Martin with Bloomberg. Have you seen sufficient cooling in the housing market to bring inflation down? For example, how does the recent rebound affect your forecast and how does it factor into monetary policy? So certainly housing, very interest sensitive. And it's the first place really, or one of the first places that's either held by low rates or that is held back by higher rates. And we certainly saw that over the course of the

Starting point is 04:42:45 last year. We now see housing putting in a bottom and maybe even moving up a little bit. You know, we're watching that situation carefully. I do think we will see rents and house prices filtering into housing services inflation. And I don't see them coming up quickly. I do see them kind of wandering around at a relatively low level now. And that's appropriate. Do you think you'll have to target that with further rate increases? Well, I think we look at everything. We don't just look at housing. So I think the way it works is individual participants sit in their offices all over the country and they write down their forecast and including their most likely forecast, including their rate forecast. And then they send it in on

Starting point is 04:43:34 Friday afternoon and we accumulate it and then we publish it for you. So that's how they do that. Well, I don't know that housing is itself going to be driving the rates picture, but it's part of it. Just NASDAQ up about 1%. So we are getting a bit of a rally. Thank you for taking the question, Mr. Chairman. Edward Lawrence with Fox Business. So I want to go back to comments you made in the past about unsustainable fiscal path. The CBO.

Starting point is 04:44:01 The Dixie is at 102.9. 2.8 trillion in 10 years. The CBO also says that federal debt will be $52 trillion by 2033. At what point do you talk more firmly with lawmakers about fiscal responsibility? Because I'm assuming monetary policy cannot handle alone the inflation or keep that inflation in check with the higher level spending. I don't do that. That's really not my job. We hope and expect that other policymakers will respect our independence on monetary policy. And we don't see ourselves as the judges of appropriate fiscal policy. I will say, and many of my predecessors have said,

Starting point is 04:44:42 that we are on an unsustainable fiscal path and that needs to be addressed over time. But I think trying to get into that with lawmakers would be kind of inappropriate given our independence and our need to stick to our netting. Is there any conversation then about the Federal Reserve financing some of that debt that we're seeing coming down the pike? No, under no circumstances. Courtney. Thanks for taking our questions, Chair Powell. So looking at the SEP, it looks like GDP for this

Starting point is 04:45:19 year was raised significantly, your forecast for GDP this year. The unemployment rate, meanwhile, was pulled downward. And so should we take that as a sign that the committee is more confident about the prospects of a soft landing, at least as it relates to what you were expecting in March? You know, I would just say it this way. I continue to think, and this really hasn't changed, that there is a path to getting inflation back down to 2% without having to see the kind of sharp downturn and large losses of employment that we've seen in so many past instances. It's possible. In a way, a strong labor market that gradually cools could aid that along. It could aid that along. But I guess I want to come back to the main thing, which is simply this. We see the committee, as you can see from the SEP, the committee is completely unified in the need to get inflation down to 2 percent.

Starting point is 04:46:24 And we'll do whatever it takes to get inflation down to 2 percent. And we'll do whatever it takes to get it down to 2 percent over time. That is our plan. And, you know, we understand that allowing inflation to get entrenched in the U.S. economy is the thing that we cannot allow to happen for the benefit of today's workers and families and businesses, but also for the future. Getting price stability back and restored will benefit generations of people as long as it's sustained. And it really is the bedrock of the economy. And you should understand that that is our top priority. Just a quick follow up on that. I'm just a little confused because you said the committee will do whatever it takes to get inflation down over time. But when I look at the SEP, inflation is still projected to

Starting point is 04:47:08 be elevated next year, but the Fed funds rate is lower than where it is now. Can you help me understand that? Sure. So, you know, if you look two and three years out with the forecast, first of all, I wouldn't put too much weight on forecasts even one year out, because they're so highly uncertain. But what they're showing is that as inflation comes down in the forecast, if you don't lower interest rates, then real rates are actually going up, right? So, just to maintain a real rate, the nominal rate at that point two years out, let's say, should come down just to maintain real rates. And actually, you know, since we're having real rates that are going to have to be

Starting point is 04:47:52 meaningfully positive and significantly so for us to get inflation down, that certainly means that it will be appropriate to cut rates at such time as inflation is coming down really significantly. And again, we're talking about a couple of years out. I think, as anyone can see, not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate, if you think about it. Inflation has not really moved down. It has not so far reacted much to our existing rate hikes. And so we're going to have to keep at it. I think it's pretty much, it's just more of the same now.

Starting point is 04:48:33 Thoughts, guys? Let's start. I have a question for you, Ran. Yeah, go ahead. I have the same part of the question. Do you still think that a pause is a pivot? Yes, very much. Well, hold on, hold on.

Starting point is 04:48:45 He said that they will likely continue to raise rates. How can you be a pivot if there can even be the chance of raising rates? No, no. He did not say they were likely to continue to raise rates. He said likely before the end of the year. No, no, no. He did not say that. He said the majority

Starting point is 04:49:01 of the Fed members thought it was likely. See, I'll read out exactly what he said. Let me read out what he said. There's two things he said on that point. Nearly all policymakers view some further rate hikes this year appropriate. Next one, another one here. Nearly all participants see further rate, further hikes appropriate. And the third one here, some further rate increases likely appropriate this year.

Starting point is 04:49:22 So he gave his own personal opinion in the third one I mentioned, and the other one's policymakers and participants. So I'm more confident than ever that there's going to be no more interest rate hikes this year. It's a pause, and I think it's a pivot. I think it's a pivot. Okay, if it's a pivot, then what is a pause? How would you define pause if that is a pivot? That is a pause. So a pause is a pivot, then what is a pause? How would you define pause if that is a pivot?

Starting point is 04:49:46 That is a pause. So a pause is a pivot? Correct. If you're going up and you pause... I think this is semantics. I think we're on the same page. I think it's semantics. But Scott, do you think that...

Starting point is 04:49:56 I really agree to disagree on this, but I will die on this deal. Let's forget about those... You'll die on this. You'll die on this. Can you hear me, Scott? I actually tend to agree with you on the future path. I'm hoping that they won't raise again,

Starting point is 04:50:08 that we will then see the pivot. But I think, for me, I think to expect cuts anytime soon is a little aggressive. Yeah, we should go ahead and tell Scott. Yeah, yeah. Tell Scott. Tell Scott he can't hear me. Tell Scott he can't hear me.

Starting point is 04:50:20 Scott, you can't hear Mario. I don't think we're going to get cuts, to be honest. And I said that from the beginning. I don't think we're getting cuts. I just don't think we're going to get cuts, to be honest. And I said that from the beginning. I don't think we're getting cuts. I just don't think we're getting any more increases. But I certainly don't think we're getting cuts this year. I think rates stay as they are until the end of the year. Unless and until something breaks.

Starting point is 04:50:36 And how did the markets respond? Just I'm bringing Scott back up. But how did the markets respond so far? I haven't opened it up yet. So the NASDAQ is up about 1%. It's recovered most of the drop, hasn't it? Yeah So the NASDAQ is up about 1%. It's recovered most of the drop, hasn't it? Yeah, the NASDAQ's up 1%. The Dixie's back below 103.

Starting point is 04:50:50 It's 102.9. The only thing that's not moving is Bitcoin, but I think we'll get a delayed reaction. I think tomorrow we'll get a move from Bitcoin. By the way, it's not much of a reaction. So, Scott, you're back up. I wanted to ask you a question before we go to the panel. Is that your thoughts on what we just said? And do you think we've seen, you're back up. I wanted to ask you a question before we go to the panel. Is that your thoughts on what was just said?

Starting point is 04:51:05 And do you think we've seen, you know, that we might see it? Forget the semantics. No more rate hikes. Is that a possibility in your books, Scott? I would say no more rate hikes, personally. But I think that the very fact that they're still open to it, to me that all right let me let me let me jump in scott scott you got a lot of background noise man a lot of background noise i think it's on your oh ran ran you can mute your mic please man you got a hot mic right i'm just about to remove it

Starting point is 04:51:35 yeah i don't think that's me all right cool and while you're doing this run let me just just tell the audience one thing um i've just pinned it above let me remove other pin tweets i've just tweeted the links if you want to join us if you're a crypto or even ai project if you want to be incubated by our team or if you want to be advertising on the show coming up on the show hit us up rand street is pinned above mine as well so my profile on rand's profile hit us up probably scott retweeted it as well uh so hit us up check any of our profiles the email is there and if the email doesn't work just put it in the comments or DM us as well. But the best is to email us.

Starting point is 04:52:07 It's in the tweet. If you want to come up on stage, if you want to advertise on the show, or if you want to be incubated by our incubator. Mark, your initial thoughts on what was just said, because there's two things. Like when I'm reading what was said, Mark, it just doesn't seem like the rate increases are over,

Starting point is 04:52:23 but then Rand is like, yeah, they're bluffing. But the market seems to agree with Rand based on the reaction we're seeing so far. Bitcoin's recovered. S&P's recovered. The Dixie's is almost back to the same levels. Your thoughts, Mark?

Starting point is 04:52:40 First of all, Mary, always good to be with you and the rest of this distinguished panel, Rob and all the rest of my friends. Well, look, we got the hawkish pause that I was expecting. I think it's pretty clear from these comments that we've got another 50 basis points coming our way between now and the end of the year. I was very interested to hear Chairman Powell sort of, you know, this thought bubble. I wish I was watching live, kind of a picture of him looking up in the air of, you know, this thought bubble, I wish I was watching live,

Starting point is 04:53:07 kind of a picture of him looking up in the air saying, you know, I don't know what disinflationary pressures could be coming to make us feel more comfortable. We know exactly what those disinflationary things are, right? It's the American consumer who's out of credit, out of savings, is eventually going to have to stop spending money on experiences, which is why you have that distinction in services and non-core services, etc. That's got to come to an end at some point. But I have a question for the rest of the panel. Did anybody catch him saying, this is why we skipped and then stopped himself? And so, wait a minute, I Wall Street analysts analyze every time this guy whispers

Starting point is 04:53:47 or makes any kind of a sound. Is it a skip? Freudian slip for sure. Yeah, I think it's a skip. Yeah, I think he slipped because he quickly corrected himself and said, I'd be in pause, and skip means more hikes coming. Exactly, exactly right so then why so based on what you just said mark if markets analyze every single word he says then why are they responding reacting to where they are and

Starting point is 04:54:16 we can't just say markets are forward looking and then say markets are wrong why are they reacting more positively to the uh to the press conference after the decision rob why are you laughing at me rob hold on rob is laughing at me mark hold on two seconds rob what is it wow i find it funny that yeah you you were right i was right no man i was definitely not right i have no idea then you can't be forward you can't be forward projecting and then react straight i agree okay okay mike go ahead rob rob always has to be such a contrarian mario um no i listen i think just like as somebody said a moment ago it might have been you wait and see on bitcoin's reaction this is the market's initial reaction right we got the pause we wanted we didn't get the hike that a few banks were expecting i don't know how anybody thought that

Starting point is 04:55:02 that was going to be the case especially after yesterday's cpi number but i think the market's breathing a sigh of relief as expressed with this little tepid rally but but give it time i think once the market has time to digest all of this i think we could see everybody realize that we had a hawkish pause and as close to as explicit an adoption of two more 25 basis point rate hikes as we were going to get from this Fed chair at this meeting. Yeah, I agree. Look to the markets on Friday closed

Starting point is 04:55:33 to see what the big guys are doing. Peruvian Bull, good to have you. It's been a while. Yeah, good to see you, Mario. I'm expecting you to speak for a while because you haven't been on stage for a long time. At least not for a while. Can you give us all your thoughts?

Starting point is 04:55:49 What did you expect beforehand based on what was, what about the decision, market response and the press conference that we just saw? Yeah, well, I was expecting a pause. I mean, the data is cooling on the headline numbers. The core is still elevated. We're still at that kind of around 5% in the core PCE, but that may take a lot more time to calm down. I was surprised.

Starting point is 04:56:17 I mean, there's a couple things that I thought were really poignant from the conference. One is, yeah, that 14 slip that he made with the hint at possible rate hikes in the future. And the other thing was the question that the reporter, I'm not sure which organization they were with,

Starting point is 04:56:35 discussed about the coming treasury issuance of the next decade. And they basically said, you know, the federal debt is expected to expand to over $50 trillion by 2040, and will you finance that? And Powell said, the federal debt is expected to expand to over 50 trillion by 2040. And will you finance that? And Powell said, unequivocally, no.

Starting point is 04:56:51 And that is surprising to me because that's a huge signal to the bond market that the Fed is planning to not be a buyer for this future treasury issuance. And I think the reporter should have rebutted to that because I don't know how that's going to be possible heading forward on a go forward basis. And the further that we've traveled down this road of rate hikes, the more that treasury is going to be paying on interest. And there's a lot of... Janet Yellen's going to have to refill the TGA by about 1 trillion over the next few months just to get the government back to a healthy checking account. So my question is, I mean, maybe we can open this up to the panel, but does anyone really believe that bullshit?

Starting point is 04:57:33 Right. That Powell says he's not going to buy anything, not finance the debt. To your point, who is going to buy a trillion or $1.5 trillion worth of treasuries. And knowing that I believe a third of that $31 trillion in debt or something is coming basically to maturity in the next year, it'll have to be refinanced from 2% or below to above 5%. How is that going to work? It's a great question. We should put that to the panel.

Starting point is 04:58:01 Exactly. Oh, no, this is, so I discussed this back in in october of last year this is what i call the peruvian bull debt paradox when you when you have a treasury that's so indebted that um interest payments um are starting to eclipse major budget items like for example the u.s navy we're paying more interest than we uh fund the name will be each year that that means yeah it will be the entire military very, very, very soon. And so what happens is Powell's now running into this debt paradox where he thinks that by hiking rates, he's going to be lowering inflation.

Starting point is 04:58:34 But all he's, he is maybe lowering inflation in the short term. But what he's doing is he's resetting all the treasury bonds at higher rates that the treasury will have to pay out. And if tax receipts don't rise to meet that, you know, government demand for, for money, then who, you know,

Starting point is 04:58:49 the government's going to have to fund it somehow. And that means deeper deficits, more treasury issuance, and, you know, long-term more debt. And so this, this gets us into a debt spiral that is not good long-term.

Starting point is 04:58:59 And Powell will be creating the opposite effect of what he wanted with higher rates. He'll be creating higher inflation. And this is the same thing, by the opposite effect of what he wanted. With higher rates, he'll be creating higher inflation. And this is the same thing, by the way, that... Yes, the same thing that Argentina's running into. You said going into a debt spiral, and I've spoken with many people on these panels who believe we're long into a debt spiral already. Especially when you consider the reduction, how much was collected by the IRS for taxes this year? Like we said, the fact that this is going to be the number one line item, obviously, is going to be servicing this debt.

Starting point is 04:59:30 I mean, that being more than military spending is astounding, right? I mean, when you think about it and knowing how much comes in and goes out, isn't this already a debt spiral? Yeah, exactly. We're already past the event horizon. I mean, the question is how fast does this accelerate? And, you know, Powell, if Powell continues to hike, this will only accelerate, you know, more rapidly that he'll only exacerbate this crisis at the benefit of lower, you know, short term CPI. So his question has to be, does he want to lower CPI in the short term and accelerate the debt spiral? Or does he want to pause or even cut slow down the debt spiral and then allow inflation to run hot so key points since we stopped key

Starting point is 05:00:10 points since we stopped the stream the press conference just ended so i'll read out a few key quotes and then the team wrote down from when we stopped the stream we are talking about a couple of years out for rate cuts okay that was an interesting one we are talking about a couple of years out for rate cuts um that's one was an interesting one. We are talking about a couple of years out for rate cuts. That's one thing mentioned there. We are not seeing the kind of progress FOMC wants on core inflation, which is what you mentioned. I think it was Mark that mentioned that. Oh no, that was your Peruvian. We expect wages not to fall, but to grow more slowly. Dynamics in the labor market is central to our discussion we are watching cre carefully i do expect there will be losses in commercial real estate the fed is carefully monitoring the banking

Starting point is 05:00:49 system and last two points last point is as we see what's happening with credit conditions individual banks will take macro economic implications into account in rate settings so slight final quick points we'd love some quick thoughts and in the meantime for the audience check the pinned tweet if you do want to work with us in the incubator if you're a crypto or um non-crypto project hit us up it's the emails in the tweets above um and let us know in the comments your thoughts or any questions that you have so far let's go to amy amy good to have you back on the panel thanks um yeah you know i'm actually really happy with how this conference went. I was thrilled to hear the slip of the word skip. Because I think that he was pretty clear that saying over and over again, the 2% number, he really reiterated, he wants to see inflation get back down to 2%. And that to me, a skip is more appropriate than a pause. And you know, they're indicating they could still see another 50 basis points of hikes. And I actually do think

Starting point is 05:01:52 that's appropriate, especially if they are really committed to that 2% number. And you know, he also reiterated that not a single person wrote down a cut for this year. So I do think that that was an appropriate level of hawkishness. And I was pretty happy with what he said. What should be on the debt spiral then, Amy? In that view, do you think that's going to become more problematic than we were discussing before? Or do you think we're being hyperbolic? I would love to hear the other side of that argument.

Starting point is 05:02:31 Gosh, you know, I mean, I think we are in the debt spiral to some extent. So it's hard to say. I think at this point, the debt spiral is probably unavoidable. It's just a matter of how rapidly or how slowly it's going to spiral so um i you know in terms of that whether or not we do me a favor uh because i'm going through the comments can you just explain very basically for the audience what you mean by that spiral and how that would look like the death throw what it would look like? Correct, yeah, and how that would impact the markets and the economy. I mean, if we just continue to have a debt spiral,

Starting point is 05:03:10 then we're going to just roll into inflation and hyperinflation. Because if we continue to have debt that we cannot sustain and make payments on, I mean, eventually, I think the only way for the economy to continue on would be to inflate away that debt. I don't see a way that

Starting point is 05:03:26 print, print, print, print, print, print and inflate, inflate away the debt. And then we're going to see amongst that we'd see a wage price spiral, but we would see, I mean, that would be an inflationary crisis. And I do think that I don't think it's totally hyperbolic to think that that could be on the horizon or that we could be in some sort of early stages of that. But in terms of it's tough because I think just today, looking at the data that the Fed is looking at, looking at where the policy is right now, I think they're making the appropriate policy decision for what they have to work with right now, I think they're making the appropriate policy decision for what they have to work with right now. Could it prove in the future to be wrong? Sure. But, you know, I think to them, the debt spiral is still sort of this thing that's out there that they can't really quantify right

Starting point is 05:04:20 now. And they can't really necessarily, they're not looking at that. That's like like a broader bigger picture thing that right now they're literally just looking at like the the pci they're looking at the cpi the pce um they're looking at the numbers that they have and they're trying to make the best decision that they can with this data that is probably a little bit lagged but it is the data that they have um they can't make policy decisions on these scary hypotheticals, just like with the cracks in the CRE market and the banking sector. Like those are real things. Those are out there. The weakening consumer is a real thing. It's out there. But they can't make policy on those because they're not quantified. They're they're unknowns at this point in time. So they're they're just going off the data that they have. Right.

Starting point is 05:05:05 And I mean, I guess to be fair, although I don't know if that's the right terminology here, it's not really the Fed's job to be concerned necessarily about the debt spiral, right? It's on their horizon, of course. But to your point, their job is inflation and labor, right? And so I think we saw that very clearly with the regional bank crisis. At no point did the Fed give a single inch on admitting that they had anything to do with that by rising interest rates so quickly and causing that problem in the banking system. So it's. Yeah. Scott, wasn't wasn't that crypto's fault though, Scott?

Starting point is 05:05:41 I thought that was crypto's fault, Mark. Everything's crypto's fault. It's actually all my fault, I'm pretty sure, because I like crypto. I mean, you just have to ask which community in crypto whose fault it is. But yes, that was, apparently, which is why apparently it was appropriate for them to see the bank on a Sunday.

Starting point is 05:06:00 So, look, I don't think... I agree with you. I mean, it's not in their direct purview but i think that this should absolutely be on their radar because the problem is you know to to describe a debt spiral basically for the audience or for anyone who doesn't understand it you know the way governments operate is they have a budget and they try to match their tax revenues to their expected spending and if they spend more then they have to find that money somewhere. And what they do is they issue bonds, bills and notes and bonds to finance temporary government spending. And this money will add up. And what they usually do is they

Starting point is 05:06:35 roll over the bonds by issuing new bonds to pay off the old ones. And as the deficits grow, the total debt issuance grows and the interest on that debt issuance grows. And so what happens with the debt spiral is the total debt gets so large and the interest payments get so big that the government or the sovereign gets caught in a trap of continually issuing more and more debt to pay off the older maturing notes. And so, for example, this year, the CBO is forecasting $663 billion in interest payments. And that's going to rise to $745 billion next year and $1.4 trillion in 2023, or 2033, which I think is a massive underestimate. I did the back of the napkin math.

Starting point is 05:07:21 And if they refinance, of course, they're not going to. But if they had to refinance all outstanding debt at the current one-year treasury rate, it would be $1.6 trillion, which is 40% of last year's tax receipts. And this is a serious issue because as the government issues more debt, the interest rates rise because the credit risk rises, unless the Fed steps in and does QE. And that interest rate rise means that they have to pay more and more on that debt, and then the rate of the debt growth accelerates and the interest payments accelerate. And this is a hyperbolic process, right? It doesn't go linearly, it grows exponentially. And so you run into the situation where you're a country like Argentina, where you raise

Starting point is 05:07:58 the Fed fund rates to 85% and inflation goes to 110%. And inflation two years ago in Argentina was 50%. So it doesn't matter how high you raise the rates, because all you're doing, if the sovereign is the main one in debt, all you're doing is accelerating this debt spiral where this government has to issue more and more debt to pay off the interest. And then that means more interest payments next year. And so it's very dangerous. And I know that Powell may want to adopt the veneer of complete third-party neutrality and central bank independence. And that's wishful thinking, in my opinion, because he's going to be faced with the choice of either financing this debt

Starting point is 05:08:38 or letting the treasury go into the bond market and try to sell this to banks and see if the banks actually have the appetite for this, which if this continues in the long run, they won't have, which will be very bad. So yeah, I think it's absolutely a problem long term. Yeah, we've got Jeffrey Gondlacki saying, Fed's decision is a, quote, hawkish pause. He doesn't think the Fed will continue to hike. Interesting, he does not think the Fed will continue to hike. Interesting. He does not think the Fed will continue

Starting point is 05:09:06 to hike. Agrees with Ryan. And real economic indicators look very bad. That's just three minutes ago in a CNBC interview. Does anyone think the Fed will hike this year? So, Mario, we spent a lot of time talking about that. Does it really even matter? Does it matter if the Fed

Starting point is 05:09:22 hikes 25 bps or keeps rates? Yeah, I've already said it, Mario. I think we've got two more basis point hikes going. Hold on, hold on. My apologies. Yeah, hold on. Yeah, yeah.

Starting point is 05:09:34 So I think it's glitching for you, Mark. You can't hear Jay. I'll bring you down and back up. Sorry, go ahead. The bigger thing to focus on, which is what I think the market is really taking into account, is that the Fed basically said no cuts and said that the SAP showed two hikes this year. Whether they do that or not, who cares?

Starting point is 05:09:50 The market is only pricing in one anyway. But what worries me is if they keep rates above 4% through next year, which I frankly don't think they will, but that's what they're saying. If that happens, a lot of things are going to break in the economy. That is the main thing to focus on. QT lasting through next year and rates down above- Can you list some of those things that you think will break? Absolutely. By the way, this is my own opinion. It doesn't have to play out this way. Secondly, for these things to break doesn't mean it's a catastrophe, but it does mean that certain sectors could see sharp changes in perception within credit, within commercial real estate. The credit market is huge. You look at the high yield bond market, 1.3, 1.4 trillion, leveraged loans, 1.4 trillion,

Starting point is 05:10:36 private credit, 1.3 trillion. That's four and a half trillion dollars of debt plus 1.5 trillion in maturities, commercial real estate. I literally just gave you $6 trillion of reasons of things that could potentially break, not including the banking system, which is $20 trillion. The entire shadow lending market is $90 trillion. The Fed is actually more worried about the shadow lending market, which is what Powell said at the end of the speech I was just listening to, than the banking system. The banking system is like $4 trillion of good assets. They would need those assets to fall like a trillion and a half before I think the Fed would be concerned. I think that things that could break could be people starting to be delinquent on their auto loans because they

Starting point is 05:11:15 can't afford to pay them. People not paying their rents after living rent free for so long. Evictions after the eviction moratorium, student loan payments forcing people to default on their credit card debt because credit card rates are at 30%. You know, those consolidated upstart loans for 620 FICO score of people who are now paying up well above 20% to borrow for a consolidation loan. And the fact that people will likely are used to forbearance on their student loans and were making decisions about rent and mortgage and family expenses and healthcare and cars, you know, $800 a month payments before they realized that they were going to have to pay their student loans. So I think that there are several things. And again, the market climbs

Starting point is 05:12:00 the wall of worry, but I do think that there are several things that will slow the economy down. And I think the greatest part of what Powell stated was that Powell is looking at the market and he actually stated, he told us when they come up with the SEP projections, it's the Friday before the meeting, which is more information than we've ever had. He's telling us how he makes the omelet. So all these Fed governors get together on Friday. They look at where the stock market is. They look at where high yield OAS is. They look at the reserves in the banking system and all the other lagging indicators that they look at. And they made a decision to say that the economy is going to grow at 1% this year and 1.1% next year up from 40 basis points. And they think that core inflation will be 3.9% by the end of the year. Now, whether you think that that is will be 3.9% by the end of the year.

Starting point is 05:12:48 Now, whether you think that that is wrong and whether you think it'll be lower, they give themselves room for error and they say they're data dependent. But the fact that they looked at the stock market on Friday and then today said that we expect the market to grow, the economy to grow at 1% just shows that every time the market rallies, you're just giving the Fed more room, more of a margin of safety so that Powell doesn't make the Arthur Burns mistake. And until the shift moves from inflation to unemployment, I think that will continue to be the case. And it may be for a few months. It may not be for very long. But to say that this is over, I think is very premature. I've just got great points, Jay. I've got two counter arguments that are heard to that, and I'd like to get your opinion

Starting point is 05:13:29 on any response. So the first is that on high rates, the economy has seen elevated rates all throughout the 90s, for example, mid 80s as well. And those sectors that you brought up haven't collapsed immediately. 2008 was a decade after the 90s, for example. The second point is that even if the Fed lowers the Fed funds rate immediately, it will take a while for credit card and personal consumer credit debt rates to go down because those are usually sticky upwards. So I would respond to those two. That's a really good point. I love being on these because not only to talk to a number of kind people, but also to learn from you guys and to learn from your questions as well. So on those points, I had done some thought on that. The 90s were a completely different time when it came to the US government deficit under

Starting point is 05:14:18 Bill Clinton. When it came to US corporate debt, we were just emerging out of the commercial real estate crisis of the early 90s. Banks had cleaned up their balance sheet. Several hundred banks had already gone bankrupt during the savings and loans crisis. So we were emerging in a situation where things had already been cleaned up when it came to junk bonds. And we all know Michael Milken came up with a junk bond and blew up the savings and loans banks and what happened with commercial real estate back then. So we were emerging after that in the 90s. And at that point in time, you could afford to see rates higher because household formation was very robust. The 90s were the best time in history for the US economy. You had people

Starting point is 05:14:57 building families, homes are affordable, they're buying assets, they're buying cars. You went to a two-car home, you had women going to work, you had growing of the labor force, and you didn't have a period of the divergence between the middle class and the upper class was not as wide. And things were affordable. I think the debt levels were much lower then in the corporate sphere, in the consumer sphere, and in the government sphere. So to compare it now, like people compare now to the 70s, that's a completely incorrect comparison as well, because we were an industrial economy then, we're a service economy now. To compare ourselves to the 90s is also completely different. You know, you're talking about 30 years ago, and we didn't have anywhere near the amount of debt that we have today at the valuations that we have today. So those are the things I think that are different. And also for every 1% interest rates go up, half of our debt in the government, 30 trillion net of the Fed holdings, let's say 23 trillion,

Starting point is 05:16:05 22 trillion, as that matures, the treasury is paying an additional $400 billion of excess interest. And that has to come from somewhere because our spending didn't really come down with the debt ceiling negotiations. It has to come from increased taxes. And nobody wants that to happen. So our view is that, one, the Fed will cut at some point. But in the near term, the economy is so levered that if rates were to go to close to 6%, you would see thousands of bankruptcies. And I'm talking about middle market businesses, small businesses as well. You would

Starting point is 05:16:30 see thousands of bankruptcies over the period of the next 12 months, and the market is not prepared for that. So I think eventually the Fed is going to act. But to your question, this is nothing like the 90s because 6% interest rates now are like 10% interest rates in the 90s or higher. So then how can anyone- Even the fixed charge- Yeah, that's a great point. No, that's a good point. Yeah, thank you. If that's the case, then how can Powell even get away with hinting at higher rates if getting close to 6% will

Starting point is 05:17:03 start blowing things up? That's a great question jay question so i couldn't hear the the gentleman speak because i think the twitter space is too big yeah so so yeah oh good so peruvia is saying is that if so many things will break for six percent how could powell even hint at a at an interest rate hike i think that that Powell, I mean, look at the market, it's flat. I think that Powell has been better than Bernanke, better than Yellen, and better than Greenspan at threading the needle. He is a very eloquent speaker. He's very balanced in the way he approaches conversation. He's never rude or disrespectful, and he always thinks before he speaks. And I think what he's trying to do is he is trying to get inflate.

Starting point is 05:17:47 He raised 500 basis points in 12 months, majority of that being within six months. And what he's trying to do is he's trying to squash inflation because he knows all the debt maturities that are coming. Him front loading this, he waited too long, but front loading this is actually the right thing to do because if he squashes inflation early, then rates can fall and you won't see as many defaults happening later. So that's why I think he's trying to thread the needle and get as high as possible without creating an idiosyncratic shock. So when he was talking about commercial real estate in the banking system, he's like, yeah, we expect small banks to see volatility. He basically said that commercial

Starting point is 05:18:27 real estate exposure is concentrated in a lot of the smaller banks in America, but it's also well distributed. So what he said there, and I'm sure it offends people, is that he's okay with some of the smaller banks seeing these issues. And frankly, just like when he said it in November of 2021, that he's okay with people losing their jobs, he's being very honest with how he approaches things. And I think he's done a great job of threading the needle. The problem is he waited too long to hike, right? And then he kept conditions too low for too long.

Starting point is 05:19:00 It's triage, isn't it, Jay? You know, he's just trying to manage the problem. I mean, if you look at business rents in the US, 40% delinquency. You've got 3% delinquencies in the CMBS space, commercial delinquencies. And as I said earlier, that's expected to rise to 10%. So again, I mean, it's going to deteriorate. I suppose you're right in some sense that if he can bring inflation down, then he has more policy tools and levers that he can use to try and lessen the pain sort of 18 months, 24 months out.

Starting point is 05:19:39 So Jonathan, I think you always make eloquent points and I love that you're up here, sir. That is exactly correct. The biggest risk that the Fed faces is that inflation kind of stays around three to 4%. And then we actually see some sort of economic crisis. It can be a left tail. It can be something that I'm not smart enough to understand. We don't have a crystal ball. It could be something like in Japan, some nuclear explosion, and then some sort of idiosyncratic event or another version of COVID. It could be anything. It could be banks collapsing in China. If he's worried about cutting and doing QE, going into the next crisis, that is what causes a deflationary spiral shock for a short period of time.

Starting point is 05:20:29 And he's trying to avoid that because our balance sheet of the Fed has gotten so big relative to GDP that the only way to prepare for the next crisis, which is what the Fed's job is, is to get inflation down as quickly as possible. Yeah, I know you're spot on, Jay. I mean, I sort of interrupted you and maybe you didn't hear, but they're looking at geopolitically, China obviously potentially reducing its holdings of US treasuries. You're looking at OPEC that is also potentially looking at further reductions in oil output to try and force the price up. So all of those are inflationary. And I think you brought that up. Look at the last 20 OPEC cuts. Every time OPEC has cut,

Starting point is 05:21:19 and I know it's lagging data, the oil market actually falls. It's really bizarre, right? OPEC reacts to slowing demand and the Chinese economy has not rallied, has not come back as fast. That doesn't mean oil can't go from here because I think inventories might come down, especially as we finish up drive, as we go into driving season. But in the first half of the year, oil demand has been anemic and it's the first time in a long time since COVID. OPEC has cut two months in a row. Imagine how scared they must be. And guess what? Saudi took the brunt of it. I personally think that Russia is selling more oil to Asia than is being disclosed. And they're trying to take market share from Saudi and they're playing a game and that is hurting the oil market. And that's actually helping our inflation numbers come down. So

Starting point is 05:22:03 Russia is actually helping the US in a funny way. But to your point, the geopolitical risks coming back at the end of the year around Ukraine, Russia could be something, China volatility could be something, but you could see Turkey, look at what happened in Turkey. Turkey hired the former co-CEO of First Republic Bank and Erdogan won the election. The Turkish lira has imploded. Imagine what happens to European banks in Spain that own hundreds of billions of dollars of Turkish debt. Now, nobody's talking about that. I think one of the only people talking about that, but it's not something I expect right away, but it is a left tail risk that could cause global contagion, right? Especially as Europe is in a weaker economy and is leaving, they're doing their own version of QT called LTRO3 expiration. So again, like people-

Starting point is 05:22:56 Which is way bigger in the market. We're all predicting, reacting. And what's important to know is Donald Rumsfeld, right? The known knowns, known unknowns. And Powell is basically telling you that he doesn't know what's going to happen. But the only way to prepare for that is to hike rates to a point where we're not imploding the economy, but we're slowing down to one percent growth and that's what he wants oh also just on that i mean of all of the places around the world that you could see a spring of a random um i guess unforecastable or not forecasted uh crash it would probably be the european markets right now you're absolutely right in terms of a lot of these banks are holding on to other european nations um uh guilts etc and they are

Starting point is 05:23:51 not in good place uh in general turkey's not in a good place hasn't been for a while that is actually dragging markets in europe and then we've got ecb tightening much much tighter than the fed generally speaking the market in europe is much much more stagnant than the us and so you know this you know in many ways it could be europe drags america we are looking in these spaces we look to the united states to lead on everything but you know europe europe needs china europe has led europe german german exports to china drive the german industrial giant and without you know, this China stimulus could change things. Let's see. I think that they're hamstrung in it as to

Starting point is 05:24:30 how much stimulus they can actually do. But this- And it's only a temporary fix. It's only a temporary fix. And, you know, we're looking at European stocks rallying, but keep in mind, European stocks are trading at less than half the multiple as US tech specifically. So some of it's catch up. Some of it's the fact that power prices actually went negative, believe it or not, in Europe. And they have, because of good weather conditions and mother nature, they had a very good year in terms of managing power prices compared to last year. That market climbed a wall of worry. That doesn't mean that things in Europe are okay. It just means that they're a lot better than they were last year. And I think Europe still is much more susceptible to an

Starting point is 05:25:09 economic slowdown than the US, especially if Asia slows down and their trading partners do less trade with them. Yeah. And just to finish that point off, I mean, we did have a very warm winter, which was incredibly lucky considering the european energy situation and my company works across that with it was panicking i mean the executives of these energy companies were panicking and i think they are still panicking uh today that the the panic is now pushing out to well actually if we have a bad winter this winter or next winter the european market in general the economy shrinks there's there's no doubt on that and it actually starts with germany they've even got reserve power issues and that's just power that's

Starting point is 05:25:50 not just getting to the fact that the debt here per ratio of the economy is much much higher growth is not here and inflation is stubbornly higher in europe than which groups of six percent in the uk six percent i mean yeah against the core inflation of basically 10 rob it's also worth pointing out that most of the european energy companies the retail companies they uh you know they they they bought on the futures market so um they entered into contracts that were longer than usual um because of high prices. So they're locked into paying elevated prices at a point now where prices are actually relatively cheap. And obviously, if we have a cold winter or there's a disruption to Norwegian gas, then we have

Starting point is 05:26:40 a huge issue. Most of the long term LNG deals, at least 40% in the market, are being secured by China at the moment. So we don't even have that to fall back on. So there are so many risks that are there. But to Jay's point earlier of Europe needs China, the US needs China. And you can see that by Bill Gates is going to meet with Xi, Tim Cook went to China, Elon Musk went to China, the CEO of Qualcomm, all of the big tech companies, they've all gone to China because they know that China is two sides of the coin for them. And it's fundamental to their business. So it's supply and then it's demand and without china they can't be competitive on on on as as as you know global players yeah i would add into that you know china's had this really

Starting point is 05:27:33 weird international messaging where you know it's going around essentially begging everyone to trade in the yuan because it needs it to and we're viewing that as a de-dollarization moment i actually think that's testament to the fact the dollar is really really strong and so yeah she is is out there the problem that you've got is that geopolitically they they to your point jonathan they are absolutely necessary for a lot of the the the companies that are carrying the market right now and so it's in this weird place where she's desperate um uh you can see that with the fact they're looking at stimulus bank bailouts the real estate market in china's poor the economy's really not recovering well after the unlock and and actually i think you're now seeing executives

Starting point is 05:28:17 getting really really really concerned that that a slowdown in china would be really bad for their business in general and that should be sending alarm bells to people anyway because if those ceos are out there meeting with the president to talk about flows to talk about ai developments whatever their key products are that's a big indicator that they're actually concerned not bullish on it and i'm going through i'm just going through the audience questions before you respond i think it was you jonathan just going through the audience questions a lot of people asking just for a quick overview on what that means, what all that means for crypto after the Fed decision today in the press conference.

Starting point is 05:28:51 So if anyone in the audience, one of our regular panelists wants to come up and just give us a quick overview there. In the meantime, for anyone in the audience, the pin tweet above and Jay, I remove your tweets occasionally. So don't,

Starting point is 05:29:02 don't sound personally, you can pin them again. But if you look at the pinned tweet or it's on top of my account, there's an email there if you want to come up and advertise on the show. Join the pitches that we have or join our incubator for Web3 projects,

Starting point is 05:29:16 crypto and AI projects. Hit us up and you can work with us or come on the show. Otherwise, just to kind of update the crypto audience right now as well just to kind of update the crypto audience right now as well we've barely talked about crypto so quick two minute overview and maybe rob and mark i think you guys i'd love to get your thoughts on what that means for crypto and anyone else that wants to jump in scott i'm not sure you're still with us scott

Starting point is 05:29:38 yeah yeah yeah yeah fuck okay then i'll give you then I'll ask you the question. What do you what is that? What does all this mean for crypto man? Yeah, my question a problem in FOMC, man Yeah, but moving moving away moving away from those what imagine those problems didn't exist What does that mean that you know? because even if the problems are fixed if we're seeing a liquidity crunch or seeing risk assets taking a hit and that will still play a role because the existing problems have kind of hit rock bottom

Starting point is 05:30:08 and I think the only thing that could take crypto even lower is macro events. There's other things that could take crypto lower, but... Binance imploding. What else? Frankly, listen,

Starting point is 05:30:24 I think and I think there's a consensus certainly among the hosts and a lot of guests that crypto is probably bottomed for this cycle and this is something we talked about I don't know five hours ago but you know crypto Bitcoin specifically travels in a four year cycle that surrounds the having

Starting point is 05:30:39 events which is when the supply new supply of Bitcoin is reduced roughly every four years. And if you just look at the chart of that four-year cycle, even ignoring everything that's happened on this planet in the world, go into a coma, nothing's changed in this cycle from the previous ones. So I think that, I mean, I honestly hate making predictions, as you know, but I think we just have a very, very, very boring, sideways, choppy, apathetic year. You know, we go down a few thousand here, we go up a few thousand, go up to 35, down to 20.

Starting point is 05:31:11 And then by the end of 2024, we're in a bull run and looking back and going, wow, that's so obvious. Anyone else agree? Rob, where do you stand on this? It's interesting. i don't have a massive uh view on the pricing of crypto what i would say is that in order for cryptos in general to grow you're going to need institutional money and the problem that you've got at the moment and what what i see for longer term prices being a problem is yes you've got binance and yes you've got debt uh you know sorry credit uh interest my brain's really slow sorry uh interest rates rising the problem with interest rates rising is that that

Starting point is 05:31:50 generally has a drag on the economy because things you know cost more uh to run and people don't have as much money to invest in such things on a retail basis and they definitely don't have that an institutional basis and so that until that's resolved and i think until the binance situation is resolved and the sec finally makes the decision about what it means by all this stuff you're going to have i think agree with scott a relatively sideways action and then hopefully they don't kill it completely or do something monumental they've already been a bit stupid at how they're handling things but hopefully they're not monumentally stupid and do something that cracks it. By the time we get that

Starting point is 05:32:27 clarity, it'll be a different SEC with a different with no Gary Gensler. Gary Gensler will be working for Binance by then. He already didn't get that job. He's holding that CD, playing hard to get. If you're going to continue like this, we're never going to get Gensler on the show. You do know that.

Starting point is 05:32:47 There's pro and con. You get it off the chest, that's the benefit you get out of doing this. The con is, bye-bye Gary Gensler. The question is, do you want to learn Elizabeth Warren? I will speak pretty well. I have heart palpitations

Starting point is 05:33:01 every time I hear Elizabeth Warren speak. It just makes me feel so uneasy. Because she's so hot? Well, I don't like to comment on people's appearance, but I just think that her views are just so unreal. It drives me insane. It's just, everything she says starts with, these billionaires, and then off she goes.

Starting point is 05:33:24 She's away. Mary, I just wonder if you ordered The t-shirts yet that say don't call it a skip I have not Do you want to do it first Can you update Can you update them again Don't call it a skip Can you update the slip up that happened earlier today

Starting point is 05:33:41 Yeah of course during the press conference With J-PAL Who are you referring to sorry So there or the slip-up that happened earlier today? Yeah, of course, during the press conference with Jay Powell. Who are you referring to? Sorry. So there's, Mark is speaking right now, Jay. You can't hear him. I'll bring you down and back up, Jay. Go ahead, Mark.

Starting point is 05:33:57 Yeah, and sorry about that. Before, I couldn't hear Jay when he was speaking. I hate to talk over my friends. Yeah, but what we're referring to with the don't call it a skip was the Freudian slip on the part of Chairman Jerome Powell in conjunction with the press conference that he had, as he always does, after the formal announcement of the adoption of the pause that the Fed would not hike or cut rates uh during this june meeting but in a in response to a question and mario i don't remember who the reporter was um he said well you know in conjunction with this skip and then he quickly stopped himself and realized that he had sent something he shouldn't and he quickly corrected himself and said no it's not a skip it's a pause oh oh can you answer the question and the reason that's interesting apart aside from the fact that crazy people like myself and rob and scott and others that literally listen to every uh connotation

Starting point is 05:34:50 and intonation in the man's voice and i know that probably means we should get a hobby or a dog it does it does yeah it does right but the the the words have meaning and words matter and by saying a skip when you skip something you know i'm going to skip my diet day and today i'm going to have some carbs that means i'm going back to the routine the next day which is as close to an explicit adoption of further hikes this year it's part of the reason why when i was talking over jay before um inadvertently I said we've got two more 25 basis point hikes in store between now and Christmas. You're a gentleman. I didn't even know what was going on in the background because of the tech glitches, but thanks. Let me just send out a few more

Starting point is 05:35:39 speakers coming up, but I'd go to Amy. Amy, you've been pretty quiet. Any final thoughts on the decision today and the market's response um as we wrap up the space um you know i just listening to what he said i don't know that the diet was the best analogy because whenever somebody says oh i'm skipping my diet to the cheat day i feel like that's the end of the diet you don't go back to it after that um but I think it's before Christmas in that case. Maybe I'm wrong

Starting point is 05:36:08 if you think about it that way. But I feel like... I just want to think... I just feel like the Fed has been consistent. I know we're trying to all criticize them, but they've been like

Starting point is 05:36:16 constantly different narratives popping up and, you know, from especially the banking contagion, banking collapse and the economy, the economy going through the Great Recession,

Starting point is 05:36:27 the great deleveraging. We're talking about... Everyone's freaking out about the debt ceiling just a few weeks back um yet the fed's policy has been consistent their focus on inflation has been consistent and everything seems to be okay we could be avoiding a recession can anyone give credit to the feds i know jay you kind of hinted at giving him credit can it and ryan as well can anyone give them credit are they doing the right thing? Like, I know that they're an easy target to just make fun of them and blame everything on them. But, you know, things could have been a lot worse. Like, guys, don't forget, we are in the midst of a war up in Ukraine.

Starting point is 05:36:56 There are tensions with China. We've had, you know, today, Bill Gates' meeting, Xi Jinping directly. It could be a one-on-one meeting, which hasn't happened in years with any big entrepreneurs. From the West um we're seeing uh you know vivek ramaswamy has been on our space and called for uh a complete ban a bill to ban businesses from doing business in china u.s business from doing business in china and vice versa is taking sanctions to another level like

Starting point is 05:37:20 considering all these factors and the geopolitical tensions we're facing um we know the world is not falling apart jay well the fed i think it's easy to target them because they made two obvious mistakes now there are some political considerations but the one mistake that the fed made was leaving policy conditions too easy there have been a number of papers written as well about the wastage of a lot of the stimulus about the corruption and PPP. The government itself has admitted to almost $500 billion, the number is likely higher, of misspent capital that was what probably went straight into real estate and crypto and asset classes. And what the Fed did

Starting point is 05:38:05 was the Fed essentially, along with the fiscal stimulus, made the situation worse and they made inflation worse. They shouldn't have hiked. The last six to nine months of easing shouldn't have happened. And then they waited to hike probably six to nine months too late. Now, it's easy for me to say that because I don't have the stress that Powell has, but I think those are two easy things to target. But on the contrary, I think the Fed, Powell has tried to fix this. He understands that he might've made a mistake, maybe he had no choice in his mind, but I think he's tried to fix this and focus on inflation coming down in a very rapid fashion. He's tried to pull inflation down and his goal, in my opinion, it was to pull inflation back down to 2% within two years. And it's taken a little

Starting point is 05:38:52 bit longer. And I think that he understands that he needs inflation to go down before the next business cycle. And he's communicated it almost to a painstaking extent. Today in the Fed meeting, they told us, Mark was even commenting on, there's some hidden things he said, but he blatantly told us how they come up with the SEP target. They're being almost too transparent. So I give the Fed credit. Sometimes that can be annoying if you're a long-term investor, but the Fed has been incredibly transparent and they've done the right thing because with unemployment, I think they've probably over right thing because we're with unemployment you know i think they've probably over tightened but given how tight the labor market is yeah they had room to

Starting point is 05:39:31 do it and given how the markets are they have they have room to do it and regarding the transparency we're all trying to catch their bluff but what if they're just not bluffing um again i'm not the expert here you guys are but but yeah so i'll rob i will i will wrap up the space because it's been almost six hours scott he said we'll do six hours well we're gonna miss it by 15 20 minutes um i thought we'll drag this on for 15 20 minutes just so we can say we did a six hour space again but i think it's not worth it what i want everyone in the audience to do before you go before you leave because the space will end i'll see you again tomorrow 6 15 p.m if you're in crypto or earlier if you're not not 6 15 p.15pm I'm in Dubai, whatever, 10am

Starting point is 05:40:05 10.15, yeah, exactly and I know this is a finance space, so a lot of you will probably come in earlier for the finance space where Scott is there too, but the crypto space, crypto town hall but more importantly, I want you all everyone in the audience, go on the pinned tweet above or it's on my profile, the latest tweet on my profile and I want you to do two things

Starting point is 05:40:21 either message us if you want to come on the show or work with us if you have a project or you know a project if you're an investor with portfolio companies, do that. And if you're not and you can think of a good project,

Starting point is 05:40:30 tag them in the comments. This way they'll see the tag and they'll hit us up if they want to work with us. I'm shilling it harder than I usually am just because I feel like I want to start shilling more.

Starting point is 05:40:40 Otherwise, I'll see you all tomorrow. I really appreciate it. Scott, final words? You know what I do? Actually, Scott, you know what I usually do? I was about to do it to you. I'm i'm like no i don't think these people would like it you can't be right when you do the final work i know how i'm about to get hung up on oh no i won't do it here i don't think anyone will understand it but you've

Starting point is 05:40:55 seen me do it in other spaces have you yeah so just yeah so just what i what i do in other spaces i don't do it here especially not to scott because he scares me but what i do in other spaces you can't because i'm i'm the host you can't do it uh but just I don't do it here, especially not to Scott because he scares me, but what I do in other spaces, you can't because I'm the host, you can't do it. But just what I usually do, what I usually do is I tell, I go,

Starting point is 05:41:11 choose a random speaker, generally someone we know, Joa, I do it a lot to Joa, or the co-host. I'm like, hey man, any final words,

Starting point is 05:41:16 but an incredible space, any final words for the audience? And they're speaking, as soon as they start speaking, I just end the space. It's the most beautiful feeling you get when you do it. Generally people take it well, but I don't do it

Starting point is 05:41:25 in the finance spaces just because I know that this is not the right audience and Scott is a scary guy, but Scott, I'll let you wrap it up since you've been really active in this space.

Starting point is 05:41:33 God, I want to be able to...

The Wolf Of All Streets - Live: FED Conference | Rate Pause with Nouriel Roubini | Crypto Town Hall

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