The Wolf Of All Streets - Market Shocks & Crypto Drama: Fed, CPI, Trump, Sanctions, & Shkreli Lawsuit!

Starting point is 00:00:00 The Fed, inflation, Trump, a Wu-Tang album, potential sanctions. We have a lot to talk about this week on the Friday Five. It's NLW and I reviewing the biggest stories of the week. Let's go. the macro, we had CPI, FOMC, PPI, BLI, PPI, Blippi. We had all the PPIs and PIs of every variety you could imagine. And at the end of the day, I think it left people generally confused and disinterested. Good morning, man. How are you? Good. How's it going? Happy Friday. It's going well, trying to continue to unpack everything that happened this week, certainly

Starting point is 00:01:08 in macro, as I mentioned. Fed signals one rate cut this year, but keeps door open to two. If you took a look at the dot plot by late 25 and 26, we literally had a spread of Fed governors everywhere from 2% to 6% of their Fed funds rate that they were looking for. They're confused about the data. We're confused about the data. Inflation seems to be slowing based on CPI and PPI, but they don't have enough information yet to cut rates. What's going on here? And does it even matter at this point? It does, but it's not in an interesting for us kind of way, right? In the sense that, so we've got our second month in a row of sort of moderating inflation,

Starting point is 00:01:49 which is good news relative to a little bit of a spike we saw in the first quarter, right? And so to the extent that you're looking for a continuous ebb down of inflation so that we finally get rate cuts, things are proceeding, although a lot more slowly than people would like. The question sort of, no one really thought that the ECB and the Bank of Canada cutting rates last week was going to influence Powell. And it certainly didn't, right? The US just operates on its completely own terms. It's very clear that, I think that what stood out to me about all of this is that Powell and the Fed know that the second they cut rates, they have no more ability to control the markets. We are just in the cutting

Starting point is 00:02:31 cycle. It's game over. It's not a question of can they cut them a little or can they start it and then delay? It's like once we're in the cutting cycle, we are in the cutting cycle. They're going to lose all control. They're going to lose all ability to move markets again. And so anything that happens after that, if inflation surprise packs up, they would have to sort of make a more dramatic move to the other side. And they really don't want to do that. It's clear that Powell thinks that in the span of history, having to wait a few more months doesn't matter. It's very clear to him that he believes that it does not matter. He even said so. He said something to the effect of, we thought there were going to be rate cuts this year. They might be next year instead. You know, whatever, basically.

Starting point is 00:03:12 And, you know, unfortunately, I think that as much as markets don't like that, it's you know, he's probably not not that far off. The one interesting thing to me that if you really want to get deep on the tea leaves, is when asked about what an appropriate sort of rate of PCE inflation would be to begin cutting, the number he gave was around 2.7. Well, that's where we are. That's where we've been for the last couple of months. And obviously, we're not cutting yet. So it kind of seems like what Powell is saying is that we're at the right level. We just have to be convinced that it's really at this level before we start cutting. So I think that the long-awaited cuts are coming soon. It's very unlikely, I think, that it's July.

Starting point is 00:04:05 Most people are pegging it for some time in the fall. But it was a lot of what was expected, but it's certainly a lot better than it could be given everything happening out there. So sort of a nothing burger of an event, but an important way marker nonetheless. Yeah. What strikes me is that last month we were talking about inflation heating up based on similar numbers and now it's cooling, which gives me very little confidence that next month we won't just see a complete flip. And what also strikes me is how consistent Powell has been. He literally hasn't changed his tune really in a meeting, I would say, since December when he sort of alluded to a pivot kind of for the first time.

Starting point is 00:04:42 But the pundits and the analysts, ourselves included, we still just dive into everything he says, how he says it, whether he coughs to the left or sneezes to the right. And really he just keeps saying the exact same thing. Yeah. The other, the other thing that's worth noting, I think is that he, when you look at the data, so one of the big questions is why, if things are going okay from a sort of an overall perspective, do people feel like this economy sucks so bad, right? This is the, the, the really interesting question. It's a political question. Uh, certainly it's, it's likely to doom the Democrats at this stage based on what it looks like, right? The contrast between how the economy is technically doing and how it feels like it's doing. Well, I do think there's something of an answer in some of these numbers,

Starting point is 00:05:33 because if you look at what is moderating from an inflation perspective, it's more in things that are not luxury items, but are discretionary items, right? It's electronics, it's clothing, it's things that people don't have to buy for the sake of living, right? And so if the place that inflation is moderating is in places where you might have already cut expenses anyways, it would make sense that that's not going to really resonate too deeply with your actual lived experience. Auto insurance is still incredibly high. You know, shelter is still high, although that's the most lagging of all the indicators. Food is finally flat, but it's not like it's been low for a long time. So, you know, I think that

Starting point is 00:06:17 you actually can start to get a little bit of a better understanding about why it feels so bad to people, even though these numbers are technically coming down. And it's a problem of thinking about things in the aggregate versus really diving into the lived experience of any given person. Yeah. The things that are actually affecting the everyday person are still bad. And we still have a wealth effect among the wealthy because we have markets rising. I mean, we also have a general trend in the United States about what people see or read or hear on the media impacts their perception on what's really happening. I just happened to bring up this story

Starting point is 00:06:53 because it came up this week. But most people think the US crime rate is rising. They're wrong. Almost 80% of Americans and 92% of Republicans think crime has gone up. It actually fell in 2023. An expert blames a familiar culprit for the mistaken impression. Of course, that's viral videos and news, right? So I think in this world

Starting point is 00:07:09 of social media and 24-7 breaking news, the public is not getting a true perception of what's actually happening. The country's gotten safer. It's a symptom of the same thing. Although I think in this case, objectively, people are worse off if their bills are more expensive and their food is more expensive. No, but I do think it's an important point. And this is certainly something that's going to be hyper accentuated in an election year, right? In any presidential election year, there's always someone who has an incentive to say

Starting point is 00:07:41 that things are trash, right? And it doesn't matter. It's not a question't matter. It's not a question of parties. It's just a question of who's in power versus who's trying to get in power. You know, the part of the it's like, you can't get elected by saying, you know what, actually, everything over the under the other guy for the last four years has been pretty good. Like, you got to really hone in on what sucks, you know, so I do think that that's probably adding to the overall feel as well. Speaking of elections and politics, which are my favorite topics to get the comments going,

Starting point is 00:08:09 we obviously have a situation like you just described, which is that we know that things are objectively pretty bad for the crypto industry under the current administration. And we have the other guy taking advantage of that. We can talk to death whether we think it's genuine or whether it's pandering for votes. I don't think it really matters at this point. But here we go. Donald Trump says he wants all remaining Bitcoin to be made in USA. As we know, he met with a number of miners. He met with David Bailey from Bitcoin magazine and is even sending off, I don't know what we call them on truth. What do you call it on Truth Social? Is it a tweet? Is it an X? Is it a truth bomb? I don't know. I think you fired off a truth bomb. Vote for Trump,

Starting point is 00:08:55 Bitcoin mining may be our last line of defense against the CBDC. Biden's hatred of Bitcoin only helps China, Russia, and the radical communist left. We want all the remaining Bitcoin to be made in the USA. It will help us be energy dominant. One thing we could say is that he's all in at this point. Yeah, I mean, absolutely. So first of all, how has no one made the Bitcoin magazine joke yet? I feel like that's gotta be a rebranding that's happening. So no, listen, you're exactly right. Trump is all in.

Starting point is 00:09:20 He's leaning into this. The way that he is talking about, he's gone from, I don't like that a couple of years ago to I'm fine with it, even though I prefer the almighty dollar to I actually like cryptocurrencies to I'm your guy. I love this stuff. It's actually going to help the system. And listen, there is a cynical take on that, which is apply it to any politician, Trump or otherwise, right? You always should take, you know, have at least half of your brain assuming that it's the cynical take. However, at the same time, it also reflects a pattern that we've seen over and over again, the more that people get into something, they start understanding

Starting point is 00:09:56 these things more, they actually see how, you know, Bitcoin and crypto can, you know, impact the things that they care about in ways that are positive, they get deeper, you know what I mean? Like, it's, it's not an unexpected pattern of someone who's starting to pay attention more. And so I think it's reasonable for people to also have the at least, you know, benefit of the doubt giving, like, maybe he's just spending more time on it and is genuinely interested in it. Like I said, you know, I don't want you to take that to the bank, but it's at least open. And to your point, he's clearly in. I think the fact that he's now going in on specific subsectors, that he's figuring out how this connects to energy policy and other things like that, it's clear that he is not content to just have sort of made

Starting point is 00:10:37 the point and moved on to the next thing. This is really a bet that's being made here now, perhaps because it's been resonating, perhaps because it's driving sort of mainstream media nuts and they're feeding into it. But whatever is happening, he's made a decision and a calculation that this is a winning issue for him. And it's certainly continuing to drive a wedge in the partisanship of the industry. It's going to be interesting over the next five or six months to see how the Biden administration, White House, Elizabeth Warren, I would say in particular, reacts to this sort of deepening with the industry of Donald Trump. They can either obviously

Starting point is 00:11:15 soften, which I think with their rhetoric, they've softened the Biden campaign, say that it will take potentially cryptocurrency donations via Coinbase. Their own SEC is suing Coinbase. Obviously. I think we all understand the irony and insanity of that. But when we start going down the Bitcoin mining path and anti-CBDC and energy, that really is going to touch some hot buttons with narratives that we've seen in the past against the industry. Are we going to see pushback saying that Bitcoin is boiling the oceans and uses more electricity than the country of Argentina from the other side? Or are they going to give some way here and start to at least become less antagonistic? The further he goes, the more

Starting point is 00:11:57 pressure I would say is on the other side to either react in the opposite or just slow the rhetoric so they don't lose votes. I think one of the hard things for, you know, there are still plenty of progressives out there who are trying their best to not let this become a fully partisan issue, including a lot of Democrats in Congress. But man, the Bitcoin mining wedge is even harder for people to not draw the comparison, right? The last thing we heard out of the White House about Bitcoin mining was a 30% tax on energy used for it. It could not be more different than this rhetoric. So it's a rough time to be a progressive or a liberal in crypto. But the flip side is it's sort of a potentially a night is darkest before the dawn kind of moment

Starting point is 00:12:45 where it's also surfacing every ounce of interest in crypto from that side to rally, to try to distinguish themselves, to try to move, to try to reclaim progressive narratives around it. So I think in the long run, it's actually going to be a good thing for even the sort of progressive take on crypto and Bitcoin. It's just going to be painful for a minute here. Objectively, we are in an exponentially better place than my best case scenario would have been looking at this a year ago. We were in the depths of SEC versus Coinbase and Binance, no court cases in our favor, no positive rhetoric except for from a few Republicans, specifically in Congress. And now we have a thawing, a forced thawing of the current administration and one candidate who currently,

Starting point is 00:13:31 if you look at the odds, is leading very much in favor of the industry, at least vocally in favor of it. It leads to another issue here, which is the next story that I completely missed, to be honest, this week. New Intelligence Act may grant U.S. president power to block digital asset access. This is the Intelligence Authorization Act for fiscal year 2025. It grants the U.S. president powers to block transactions, digital asset related or otherwise, between U.S. persons and foreign entities identified as supporting terrorist organizations, including imposing strict conditions on foreign financial institutions, maintaining accounts in the U.S. if they are found facilitating such transactions. The industry obviously pushing back very hard

Starting point is 00:14:15 against this. As I read that, not having dug in that deep, this seems like a bigger problem than just for the crypto industry. Digital assets are one thing in a large bucket, but we have to be concerned about how these powers could be abused. Yep. Yeah. So this is the classic thing. So if you look back at what really got the crypto lobby and the crypto political movement to get consolidated and get organized in Washington, it was the introduction of a last minute provision in the infrastructure bill in 2021. At first, everyone thought that it was just a mistake because they couldn't possibly be that wrong about the powers that they were trying to claim. But then when

Starting point is 00:14:54 they realized that it wasn't, and that it was actually Treasury trying to use this must pass bill to sort of expand their powers dramatically vis-a-vis crypto, it created a situation where the whole industry rallied. Chuck Schumer was extremely frustrated because it delayed his vote on this must-pass bill for about three weeks. We ended up not winning because a bunch of people basically weren't willing to vote for amendments that would have fixed things if they couldn't get their random pork barrel amendments in too. And we're still dealing with the consequences of that. But this is sort of the same playbook. It's a thing that happens in Congress all the time

Starting point is 00:15:29 where stuff gets lobbed onto must pass legislation. It's a way to get bills that wouldn't necessarily come to a floor discussion and vote in otherwise. But the difference here, there's a couple of differences here that are worth noting just in terms of our understanding of how the industry has progressed. First of all, there's very, it's unlikely that this gets voted on this year, right? So it's not quite like the infrastructure bill that had to go right away. It's an important thing, it will be authorized. But it's not that it does, it's not the same, like we have a week to rally and figure it out. There were way more in advance of when this is happening. The second thing is,

Starting point is 00:16:05 it appears from what I've seen and what I've read from people who are sort of part of the political process here, that the objectives of this are a little bit more aligned or tolerable to the industry. It's just once again, a language that's defined too broadly. And even within that language being defined too broadly, there are some bright sides in this language. So for example, I think one of the words is knowingly that they used. So someone has to knowingly engage with a party that is on, you know, sort of that is suspected of terrorism or whatever, versus like, you know, someone dusts your account or whatever. That was one of the fears in the past is that you start putting sanctions on things. And then, you know, there's all sorts of new

Starting point is 00:16:48 attack vectors where people are implicated just by, you know, existing in the public crypto space. And this solves that at least. And so the way at least that I've seen the kind of crypto lobby taking this is unlike the infrastructure bill, where it was a clear, you know, intentional power grab for sure. They're trying to treat this at least now until proven otherwise as something that's correctable, fixable, modifiable. But it's still, this is the type of thing that we have to be warning about every single time it comes up, because otherwise stuff will just get stuck in in ways that are potentially problematic. Agree. And we were mentioning Gensler before. He says Ether ETF should be fully approved by September, says SEC Chair Gensler. We obviously saw the 19B4s sweepingly approved in a surprise a couple of weeks ago, but that left the industry and filers scrambling to get the S1s approval and actually seeing these things trade with the S1 approvals. But Gary Gensler continuing to say this will happen and that it should happen by the

Starting point is 00:17:50 end of the summer. It seems like it's taking a long time and they're dragging their feet, to be quite honest, but irrelevant to me as long as we actually see these things. Yeah. I don't know. He's going to try to claim every little tiny bit of power he has, especially as he loses more power. So the ability to hold this up within reason is going to try to claim every little tiny bit of power he has, especially as he loses more power. So the ability to hold this up within reason is going to be something that we just have to expect. Yeah, I absolutely agree. We've got a couple of sort of honorable mention stories here at the end. This one definitely worth bringing up.

Starting point is 00:18:17 U.S. judge signs off on $4.5 billion Terraform Doquan settlement with SEC. The settlement bans Quan and Terraform Labs from buying and selling crypto asset securities while agreeing to pay $4.5 billion in disgorgement, prejudgment interest, and civil penalties. I have so many questions here. I don't know how much time you've spent unpacking this. A, how does Terraform Labs have $4.5 billion? B, why is the government getting paid $4.5 billion

Starting point is 00:18:44 when the people who lost all their money on this are getting net zero? As far as I know, this just seems like a very, very strange outcome for this. And obviously, it doesn't settle anything criminal for Doquan. This is strictly civil, I think. Yeah, I've spent very little time with this, but it seems like, I don't know, it just brings up the questions that you were just asking. I have no idea how these huge settlements with the government, it's hard to make it feel like this isn't just some boondoggle. We're setting records left and right for the fines that are being paid to the US government from crypto exchanges. This is a business model at this point. Yeah. And it'll pay off five seconds of national debt. It's not like the 4.5 billion isn't any way meaningful to the United States government. Listen, I don't understand the system exactly how it works. So it's hard to really give a firm opinion on this. It just seems nonsensical. I really just don't understand where the money's coming from. If these guys have $4.5 billion to pay a fine, why isn't that in some way going into

Starting point is 00:19:50 some sort of bankruptcy or fund for people? But I guess it's very hard to track down people who are holding Luna. It's not like an FTX or a Voyager or a Celsius where you have a claim on a balance that was in an account on that platform. Yeah, it's part of why Luna was such a complicated, weird thing, you know, it forked and this, this whole other thing I've seen people even try to make the take that, uh, that, you know, it was a good thing that Luna forked into this other version because now they don't have to deal with all this stuff. And it's, it's just so the whole thing is so weird and, you know, but it's, it's also more natively crypto and complex in some ways that you'll ultimately, you know, all these bankruptcy cases ultimately become just bankruptcy cases, you know, but it's also more natively crypto and complex in some ways. Like ultimately,

Starting point is 00:20:26 you know, all these bankruptcy cases ultimately become just bankruptcy cases, you know, versus sort of big, you know, crypto things. So I don't know, it's a weird thing. But one more moment of cleaning up from 2022 and moving on with our lives. Now we have my favorite story of the week, whether relevant or not. Anyone who's listened to me for years knows I'm a huge Wu-Tang fan. And we've got Martin Shkreli copied one of a kind Wu-Tang album lawsuit claims. His story is wild. You may remember that the Wu-Tang clan sold an album to one person. That would be the only person who ever got to listen to it. And Shkrelly bought it in 2015 for two million dollars then he had a forfeiture when he was in jail of 7.4 and part of it was the sale of that

Starting point is 00:21:10 album which was bought by pleaser dow i believe is their name for 4.75 million dollars and then screlly basically just started like playing it on youtube for his fans and hanging out and doing unofficial wu-t release parties. And these guys bought this thing for $4.75 million thinking they were the only ones. And now they're suing him for any money he made on it, trying to get basically penalties for him having shared it when it was supposed to be a one-off. And this is just hilarious. Yeah. I mean, this is like a fascinating cultural case. I mean, it really actually is. It's the type of thing that you would see like a graduate thesis written on because it implicates so many different types of issues.

Starting point is 00:21:52 So Wu-Tang records this thing in secret over six years, you know, and has an auction for it. And the whole purpose of it is to dramatize how devalued music has become in the era of streaming. So they're going with this traditional, they called it a Renaissance, you know, era patronage model where someone gets it. There's no commercial rights for 88 years is, you know, the terms of that deal. Then Shkreli wins it and they're aghast, you know, because this is the peak of people being

Starting point is 00:22:19 angry at him for, you know, for raising the price of this, you know, this particular drug that he raised the price on. And so it's kind of like already a crazy, unintended consequences kind of story. Then to your point, he goes to jail, it gets seized, and it's reborn in the context of Pleaser, which feels very aligned. This was a universally excited moment for, it was right as sort of DAO and NFT culture was coming into the mainstream. It suggested that there was actually a level of understanding about pop culture that made it reasonable for these people to be playing around in the mainstream, right? This was a very cool thing. Then we didn't hear about it for a while.

Starting point is 00:23:03 In fact, a bunch of years went by where nothing was happening. It appears we don't really have a ton of information, but if you look at the actual suit itself, it appears that Pleaser has been trying to actually work out how to commercialize it in a way that isn't sort of record label based, but they were clearly trying to not, they weren't going to just go with the, I'm going to do watch parties for 88 years and then release the thing. They wanted, they explicitly in their suit against Shkreli talk about it being, you know, it infringing upon their ability to exploit this commercially. So it's clear that they were trying to work out some agreement to actually get that. And they've said as much that they were trying to figure out something that would sort of honor the original spirit, but clearly wasn't the, you know, it just stays in a can for 88 years. Shkreli's whole take on this has basically been a double middle finger fist pump. Like, you know, it's a, and unfortunately for Pleaser,

Starting point is 00:23:58 it seems like a lot of the crypto legal core is also highly skeptical of how the sort of disgorgement provisions apply a couple of years later and, you know, yada, yada, yada. And then the other piece of it, the other sort of line of discourse is that pleasers action has definitely lost a lot of the crypto folks who don't really like the idea of, you know, a Dow running to the government to try to use the legal system to claim property rights. I don't know. It feels to some as though it's a contradiction in terms. Although, of course, others are like, they spent almost $5 million on it. Of course, they're going to try to defend it. But it's a fascinating story. It has tons of dimensions. And underneath, there's this, what presumably is probably a pretty good album.

Starting point is 00:24:47 Yeah, they forgot that cash rules everything around me. I mean, Wu Tang is for the children. It should be shared with everybody. Everybody knows these things. Whatever happened to Constitution Dow, by the way? There is like $30 million to buy the Constitution. They got beat by Ken Griffin or someone who was like, I'll just bid. Like, literally doesn't matter whatever it is, a million more.

Starting point is 00:25:09 And then I think they fell into like a Lord of the Flies anarchy and didn't know what to do with all the money they raised. Yeah. The Constitution down moment was a wild, a wild moment of Ken Griffin learning about that. And that being the reason that he got interested in it and then just beating them to a pulp with, you know, it was talk about, I mean, if you want to be cynical, that was one of the most brutal moments of like power just wins, you know, uh, power wins and the fact that they were able to raise that much money and not a single person

Starting point is 00:25:36 who sent that money considered the fact that they might lose. Yeah. It was a lot of times we, DAOs are as yet unproven, unfigured out aspect of this industry, I would say. There's a lot of questions remain. Is there actual space for a structure that's outside of the legal system? Are they inherently compromised because they have to interact with the legal system in some way and they just end up as Cayman Foundations, which is what PleaserDAO is actually organized as? A lot of questions remain in that area, I think. Now I'm literally wondering if it's morally appropriate for me to go find the Martin Shkreli stream and listen to this album or if it's.

Starting point is 00:26:14 It's the, it's on the internet. I think that the, the question of morality is probably less on the consumption side and more on the distribution side. The question was about distribution. Wu-Tang wanted people to hear it. They just wanted people to have a different type of experience with it, right? You've now made my day. I know exactly what I'm going to be doing for the next 45 minutes before I start Twitter spaces. He said it's in his Discord all the time. I'm going to find it. All right, guys, that's it. We got the breakdown. Obviously, every day from

Starting point is 00:26:42 NLW, you guys should absolutely be listening to that. And, uh, it's amazing. Now you're rolling with block works and doing it with them. I absolutely love it. And, you can obviously check out all his channels and his Twitter, and we will be back next Friday.

Starting point is 00:26:55 We're on a roll here. I think we might make it three weeks in a row. You're going to be here. Yes, sir. I am. All right. We got it.

Starting point is 00:27:00 See you guys next week for the Friday five. Thanks everyone. Later guys.

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The Wolf Of All Streets - Market Shocks & Crypto Drama: Fed, CPI, Trump, Sanctions, & Shkreli Lawsuit!

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