The Wolf Of All Streets - Michael Gayed: The Stock Market Will Crash | What Will Happen With Crypto?

Episode Date: December 13, 2022

A popular analyst Michael Gayed presents his analysis and insights into what's going on with the global economy, stocks, and crypto.  Michael Gayed: https://twitter.com/leadlagreport ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

SPF is having a really bad day. Charges coming from the SEC alleging that basically FTX Alameda was a Ponzi scheme and fraud from the very first day that he was always sending, knowingly sending FTX funds over to Alameda. The CFTC apparently getting ready to pile on and it's looking like SPF might spend roughly a thousand years in prison and good riddance. But that's not really the only news today. We, of course, have the endless Binance FUD that we will not really probably dig too deep into

because for now it remains just FUD. But, of course, we have markets pumping a little bit on the news that inflation dropped to 7.1% year over year. Now, we have a lot going on. We like to bring on the experts to talk about it. And I have one of your favorites, Michael Guy, the publisher of the lead lag report, portfolio manager, and all around Twitter legend. If you know him, then you know that we're probably going to say few and exquisite a lot of times today. You guys do not want to miss

this. Let's go. What is up, everybody? I am Scott Melker, also known as the wolf of all streets before we get started please subscribe to the channel and drop the people's elbow right on that like button like you are the rock in the late 90s early 2000s whenever that was whenever the people's elbow was uh do that do that to the like button because there's a lot to like today as markets are at least temporarily moving slightly to the upside. You've all seen the meme of the guy like this, and it's got a 1% next to it. That's basically us right now, right? Twitter celebrating as if we've been in a bull market already for months, as if we have a definitive bottom and nothing bad could possibly happen ever just because Bitcoin is at like $18,000, which last I checked is like, I don't know, 2017. So not as exciting, as compelling as you might think. But listen,

I'm going to go ahead. We're going to do it. I'm going to bring on the guest, the man you've all been waiting for, Michael Guyon. How are you, man? I don't know if I'm an expert, like you said, but I appreciate you calling me that, by the way. Yeah, but I mean, if you have more than 27 Twitter followers, you're officially an expert in whatever you have deemed your expertise in the Twitter description. That's fact. True. Either that or I'm a massive troll, or I get trolled.

There's no way of winning on Twitter, folks. Well, I think you definitely get trolled, but I think that anyone who talks about financial markets, money, who has the balls to actually make predictions and talk about what's likely to happen in the future, inevitably, you're going to be wrong sometimes, or you're just going to get very emotional people who disagree with your premise, right? Especially when they obviously hold a position that's counter to what you're thinking. I have to tell you something. It is amazing to me. People really don't go beyond just like the first tweet in a thread. Right. So I have it on my pinned tweet, this whole argument that I think conditions favor an imminent stock market crash. So that tweet organically got four million impressions.

But the second tweet in the thread only got 250,000. Right. and tweeting the thread only got 250 000 right so the dilemma with twitter and with having a large following is that it brings out the worst in people and that they don't think they don't go beyond the headline do you think it brings out the worst in people or do you think that you found the people are the worst it's like if you really want to understand humanity you got to look at you know twitter to see what people really think it is is amazing though, right? It's like, I don't know if it's a function of just different time frames or just people are being betrayal because, you know, if you have a following, they get either annoyed by the fact that you worked your ass off to get that kind of following. But it's like, listen, everybody's dealing with the same problem. Everyone's trying to deal with the

unknowable tomorrow. Right. And I'm very vocal in the way I think about market dynamics in what's been a very brutal year for my approach because treasuries failed as a safe haven. But it's funny, it's always the people that don't contribute anything that are constantly criticizing those that do. I would love to hear more about the premise failing. I don't think that was your premise necessarily. I mean, the 60-40 portfolio goes back since the beginning of time, it would feel like, and this is the first year that we've ever seen that just completely and utterly fail. There's been nowhere to hide. Even if you stay in dollars, obviously, you're losing 8% of your purchasing power roughly year over year.

So what does that tell you about what's likely to happen? Because I know that the failure of the bond market has really been the kind of, I guess, I'll call it a black swan or the canary in the coal mine for you. Yeah. And to be clear, it's more than just the bond market. It's treasuries. It's that so-called flight to safety dynamic, right? That historically, when you have high volatility in stocks, treasuries tend to be the beneficiary, meaning yields will either drop or at least go up at a slower pace than stocks are going down. And why is that? Because usually when you have high volatility, the market thinks that default risk is increasing. So there's money that goes into the quote-unquote safety of

government debt for a moment in time in that high volatility. So you've had high volatility in equities this year, but treasuries ended up being even more volatile than equities for the first time in history. That's a dynamic which I think is slightly different than the argument of 60-40 having a terrible year because it's about the path interaction, right? So now it's interesting, right? Because everyone, speaking about Twitter, the number one bias on Twitter is recency bias, right? Everybody is simply extrapolating the very short term into the future and thinking that it's going to keep on repeating the way we've seen just in the last couple of weeks. The funny thing is, now you've got room to make money in bonds. Now you've got room to make money in treasuries and risk off, right,

whenever another kind of volatility pulse comes. So people think that treasuries are forever broken, bonds are forever broken, 60-40 is dead, worst year for treasuries since 1788, depending on what study you're looking at. I'm pretty sure those are interesting buying opportunities. Yeah, I would agree with you there. But then as a portfolio manager, when the unexpected happens, when the thing that happens every single time fails, how do you actually approach the market? Well, I mean, in my case, I've got three funds that are rules-based, meaning they have nothing to do with my decision-making, right? They're just quant-oriented.

And they're run based on prospectus. This is another thing which is a nuance that people don't seem to fully understand on Twitter or other platforms. When you're rules-based, you have a legal document, a prospectus. You've got to follow it independent of the cycle, not favoring your approach, right? So here I am seeing the hell dynamic of treasuries failing all year, and I literally can do nothing about it because that's the way the approaches are designed to operate. Now, you know, they say hope is not a strategy. The reality is hope can be a strategy because hope is what keeps you in the game coming out of the anomaly, coming out of the dislocations, right? You've got to have hope that it will end and you've got to keep going with your approach

as long as there's real cause and effect to see the other side of it, right? So for me, it's more just kind of watching and feeling the pain, right? And hoping, and I think we are probably there now that the dynamic is near its end in terms of this interaction of treasuries to stocks. So let's dig in a bit more obviously on what's what's happening today, because it's CPI Day, right? And everybody eagerly awaits these numbers every single week. 8.30 a.m. Tuesday morning, here we are, and we see 7.1% with expected being 7.3%. And I just laughed because 7.1% inflation is still terrible. Yeah. Yeah.

Yeah. You know, and it's funny. So again, I go back to December 2nd. I put out that tweet saying, I believe conditions favor an imminent crash. And I'm saying that because indicators which are quant-based, which tend to get ahead of major declines, we're all flashing. And I see other intermarket behavior. I see sentiment. I see all this stuff.

So it's like, all right, if I'm going to make an argument for a high-risk setup, all the stars are aligned right now. So CPI data comes out today. Pre-market, at least, has been surging. Everyone's getting super bulled up. And people are saying, well, you know, there goes your crash. It's like, okay, saying conditions favor an accident is very different than saying this is the exact mile marker you might crash your right? At the end of the day, I go back to it's all about probabilities and conditions. The thing is, to your point, it's like the inflation data is elevated still. And I'm pretty sure no matter what the stock market's reaction is today, housing is still fucked.

I mean, a big driver of the wealth effect is going to be dead for a few years like this, right? Because at the end of the day, okay, so inflation comes down slowly. You still have mortgage rates at 6.5%, 7%. You still have layoffs coming. So it's like you got to also keep the bigger picture in mind beyond the noise and the small days and moves that can be large within those days, right? Keep in mind the backdrop is still not really that positive.

And how much of this in your mind has to do with dollar strength and weakness? I shared with you a chart right before. I'm just going to bring it up really quick. This is the DXY chart I've shared here a thousand times. You can draw a million lines, but to me, there was just one, sort of the Lord of the Rings. One line to rule them all. I drew a circle when we were over here and had a magic moment where price fell into it. So obviously, I'm a God tier trader and predictor and people should come to me for readings about their future. No, it's luck. But I think we all knew that 103 was somewhat in the cards, even when we were seeing a DXY back up at 115, because that's the 2016 highs.

But that means we're sitting on a key, key, key support level now for the dollar, right? So if you're making a statistical bet, you got to think that the dollar is bottoming. It can break right through. I would love to see it because we all know that there's sort of an inverse correlation between the dollar and everything else. But if the dollar bounces here, things can get very, very ugly because, I mean, we just saw it at 115. There's a 14, 15% upside here just to get back to the highs from two or three months ago. Yeah, and also I think it's interesting, right, because the initial reaction on CPI is the dollar is weak. Okay, well, a weakening dollar is inflationary. So it's like put that tweet out. It's like, all right, so the dollar cheers better than expected CPI numbers, lower inflation expectations by lowering to increase inflation expectations.

Right. So now to your point, look, for all we know, that was maybe just a correction in the dollar. I was very adamant on Twitter saying, I think the dollar's finished just before that real collapse that we saw what it was. And a lot of that was kind of just sentiment driven. But it is interesting, right? Because if the dollar were to rebound, I think it is plausible as at the same time, long duration yields are falling. Let's keep in mind what's being missed here is that treasuries are responding super strongly on the long end. And that really started, I'd argue, really mid-November post FTX. So if you keep on seeing now yields drop on the long end, which usually is kind of risk off, and the dollar rising, that would look more like a classic sort of high-risk type of setup.

So I do think that that's a possibility. And keep in mind, folks, it's like markets are funny. I keep using this line, bear markets make fools of bulls and bears. Everyone's talking as if like the year is over. In 2018, you had a nasty nasty sell-off into Christmas Eve it's not impossible to see that again even with today's reaction which is seemingly very strong at the open but who the hell knows how we're going to close yeah somewhat strong at the open a huge uh gap up on pretty much everything but as you kind

of alluded to often the first reaction is the wrong one. I mean, we talk about that all the time, that the sort of knee jerk that happens right after a big inflation print or another jobs report or another big piece of news usually can be a trap right before things go the other way. I'm not saying that that will happen, but for anyone who just sees it go up for 45 minutes and is convinced that the bottom is in, it's kind of nonsensical. And Powell is going to come in tomorrow. And who the hell knows what he's going to say? I mean, maybe he'll be published.

My point is, again, the short-termism is remarkable. And the way that people just use recency bias is really, I think, problematic. The week is not over. And listen, even if markets do close the week positively, it doesn't mean you were wrong to slow down entering what I at least believed was a storm. Now, in my case, the way to benefit from the storm is treasuries. So that actually made money, even though stocks are rallying. You can still make money not being in the stock market.

Yeah, I mean, it seems that the smartest and safest bet you can make right now if you accept that you're not going to beat inflation, is just to buy short term treasuries. Yeah, exactly. Everyone asks, what's the trade? And everything else is volatile, unstable. If you can get over 4% in two years, it seems like a pretty good deal rather than sitting in cash and getting zero. And you get to sleep at night. Yeah, very important.

That's a big part of this, right? I mean, stress levels are through the roof for everybody. It's like, all right. I mean, it's like, no wonder the healthcare sector has done so well this year. Yeah. And what's your feeling then? You were talking about for quite a while, and it was, to be fair, very near the bottom that we were going to have a melt-up, right? And I think people misunderstood perhaps what you meant by melt up. But I remember you starting to talk about in October, I was just looking, SPI was three 50. It's currently at four 10. So we melted up. Right. But how do you explain to people when you pivot from, you know,

we're going to melt up to the crash was the melt up a temporary thing. I think people get very confused between long-term and short-term predictions and what you believe will happen. And people seemingly think melt-up means new highs. When I said very publicly and loudly, that does not mean new highs. I think the bear market's going to be lost for a while. Look, it's always about conditions. It's like, all right, so it looks like it's sunny. It starts speeding up and it starts looking like it's going to start raining. So what do you do? You start slowing down, then it starts pouring. Look, I get it. People will say that that's a very convenient excuse to sort of explain away why things aren't playing out the way they do. And it's like, all right, well, if you believe that, then when it's raining, go full speed ahead,

pass the speed limit. You're not going to have an accident every single time you're driving a shitstorm, but the one time you do, it saves you to slow down, right? So keep in mind, like a part of that whole meltdown argument was that small caps would lead it. I mean, I said that all throughout and emerging markets and small caps had a much bigger move than the S&P throughout that. But I've learned when it comes to Twitter and most things, everybody is simply liking and retweeting that which they already agree with. It's all confirmation bias. Those that counter you are those that completely disagree with your view because they have a best interest from their own investments. And the problem, of course, there is that you can't be a thoughtful investor and think about probabilities if you don't hear other people's views. We have a comment here from Ruben Earthly. A question to me, but I pose it to you. Do these

conditions favor a Fed pivot? So I'd love to see a Fed pivot because historically that's very bearish, right? So first of all, I can argue to you that the bond market's already telling you the Fed's going to pivot. I mean, just look at the way long duration treasury yields have acted, right? They've fell full on quite a bit off of the mid-October peak. It's funny because I'm really getting much attention in the media. And keep in mind also historically that I hate this. The media always says we need the stock market. we need a fed pivot for the stock market to go higher you look at the history of fed funds rates whenever the fed funds rates goes from going up to going down which is the pivot historically the bulk of a stock market drawdown happens after after pivot right period after there's only two other times in history

where that wasn't the case where that happened after a stock market drawdown, which is why I go back to probabilities. History would suggest it's bearish. It's not impossible to see it being bullish. But where do you want to place your table stake bets on the small sample, low probability outcome or the situation which historically tells you what likely happens next? Yeah. And so the question then becomes, hey, what likely happens next. Yeah. And so the question then becomes, hey, what likely happens next? So do we see the pivot if the treasuries are saying that we're going to get the pivot? Is that this month? Is the pivot a return to easing or is a pivot at this point just a slow

down in the tightening? Yeah. So I mean, the real definition of a pivot is a turnaround. I don't think that's what's happening. yeah no it's not right so but it's interesting because the market i think is is is interpreting a slow down as positive but you need to slow down before you pivot right so we probably still are on the the final stages of of kind of a run higher because at some point the fed's going to stop because look the the i go back housing. People don't really feel it yet when it comes to housing because of just where we are seasonality wise, right? In the fall winter periods, the housing transactions tend to not happen anyway.

The moment you hit the spring summer period and the average consumer says, holy shit, I can't sell my house. Holy shit, I can't buy a house. And prices are going down for whatever it actually does sell. Okay. Well, that's when probably people get nervous. Yes. So how bad do you think that the housing market could become? Are we looking at a 2008 type scenario? Worse? Better? I don't think it'll be as bad personally because subprime mortgages aren't driving this actual crash in this case,

but nothing would surprise me. Yeah. I mean, look, and the inventory issues are real, right? I mean, it is a the inventory issues are real, right? I mean, let's, you know, it is a dynamic, which I think you'd almost argue makes kind of this strange steady state. So you have low inventory, people don't want to sell, and now mortgage rates are so high, so it's almost like you don't really get a proper comp on very much. Yeah, there's nothing happening instead of right. There's no activity, right?

How can you really do that? So it's hard to know, but regardless, I mean, what gets impacted, obviously, is construction, right the kind of knock on effects of the actual labor and work that goes into home building. So that, I think, is probably more the issue than sort of the fear of a housing utter crash in price that happens like what we saw post-sofsection. I find it really interesting to see how, I guess, schizo people are in predicting what the Fed is going to do, right? I mean, since October, when they raised rates 75, basically what has been priced in, if you zoom out, was 75 again in November, which happened, 50 in December, 25 maybe January, 25 February, and then they stopped tightening, right. But on a day-to-day basis,

based on a news event, you can see the market and predictive markets saying 80% chance of 75 basis points or 20% chance a day later. It's complete nonsense. We're actually perfectly on course if we get 50 for what's been predicted for months. Yeah. And I would say the Fed itself is schizo. I mean, with all the different governors that are coming out and saying different things, and it's like, it's unfortunate that we've gotten to a point in analysis where it's not about fundamentals. It's about the Fed at this point. Listen, they had obviously become untethered for a while, not to the side that people who love Bitcoin want to see, obviously, as a result of the FTX black swan and arguably through the summer. But Bitcoin went right up with the inflation print today. Yeah, I mean, it's part of that. I think the correlation against the Nasdaq, now how long that lasts, right, is anybody's guess. I mean, correlations do change.

That's just a fact when it comes to any kind of mathematical relationship like this. But it makes sense. I mean, to the extent that Bitcoin is seen as a risk-on play, then sure, you're going to have that kind of move. The thing is like, you know, listen, you're closer to this than I am. I suspect that what we're seeing with these scams

and the shitcoins, that that is going to really ultimately benefit Bitcoin longer term, right? And I'd make the argument that coins that that is going to really ultimately benefit bitcoin longer term all right and i make the argument that actually that if musk is able to kill off these bots entirely that's going to be probably bullish for bitcoin because money doesn't get siphoned away to all these bullshit you know coins right that people are trying to scam money from so that that i i think i put that tweet out before it's like the most bullish thing for for bitcoin is musk destroying bots just kill off off the sentiment that favors all

the nonsense. Make it much more legitimate so that people can actually have confidence in putting their fiat at work again. I believe you also said that the stock market couldn't bottom until SPF was in jail. Yeah. So I guess in that case, there probably won't be a crash since that happened literally just yesterday. I have to say, it's like, it bothered me knowing the, I had somebody DMing me saying, oh, why don't you listen to this Twitter space by SPF? It's like, no, I'm not going to even bother listening to a guy or supporting a guy that is a criminal.

Yeah, we somewhat deflected opportunities to have him here, right? I think I gave him enough of a platform on the flip side of it when everybody thought he was a crypto Jesus, you know, and so I was not really too excited about the opportunity to let him create his own platform. And that's something that we talked about. He was obviously, you know, speaking in a manner to try to win people's faith back and convince them that he wasn't the bad guy. And that's just over now. Right. There's a lot of conspiracy theory that happened yesterday because today was supposed to be the hearing. But I mean,

this did that doesn't matter. Right. Like they're throwing the complete book at this guy. He's going to get made off times two, I think. And I was wrong. I said I've joked just because I'm cynical that nobody was going to ever go to jail for any of this. So I'm glad to be proven wrong there. Yeah, I mean, in fairness, you know, it takes time for things to go through the legal system and with different jurisdictions. I think a lot of people also and I was among the critics saying, I can't believe this guy's still out there. Yeah, this stuff does take a little bit of logistical time and effort, right? It kind of goes back to it's like, it's amazing. The short termism is even relates to just the legal system right and how fast things people expect things to take place it's it that is the most toxic thing about the current environment that we are in which i don't see ever getting better

which is that everybody is so instant gratification they can't imagine that there's a process that involves time to get anything done and they judge anybody that doesn't go on their timeline for whatever outcome that they want. This is not a way to live life. It's not a way to think about investing. It's not a way to think about anything. Pivoting back to, pivoting, oh, didn't mean to do that. Pivoting back to inflation, do you think that it has actually topped at this point? Do you think that we go back to those, mid to high 8% numbers, or do you think that we pretty much are going to see it continuing to decline? Maybe. I think the complication there is the strategic petroleum reserve and kind of refilling that because a lot of inflation expectations are driven by oil price movement.

And you've got to fill that back up, right? So how that impacts the price of oil, I think, would be a question mark and how that then filters into inflation expectations would be a question mark. I do think it'll be interesting because if China were to eventually reopen, I'd argue that's actually disinflationary, right? Because now you've got a flood of new goods and services and all the stuff that could come from there. Although every time it looks like they want to reopen, you know, they tend to not, right? Probably inflation has peaked, but that doesn't mean that you're going to necessarily go to 2%, right? I don't think they're going to get to 2%. Maybe I'm wrong. Well, they will. Eventually, they will. But I don't think that's going to be-

You could if you have a credit crisis, right? You have to have basically a deflation event, right? Because that's the thing about this kind of long-run average of 2% inflation. To get to the average of 2% inflation, you have to go way past 2% on the downside. Just mathematically, right? You need to have probably some negative prints of prices to get back to your long-run average of 2%. So the only way I can imagine that ever happening is if you had a credit event, because most deflation and scares are scares based on some events some kind of default some kind of something right so i don't think it's outside the realm of possibility especially if the dollar going back to your point were to resume its

advance i do think there's still a lingering tail event risk that some foreign entity says we can't pay off our dollar dominated debts and that could be enough of a of a spark right for a deflation scare we have a very angry commenter that that I want to bring up some of his comments because we were talking about buying bonds. 4% in two years, what the, we'll say F, then he goes on, what the actual F? You can provide liquidity and earn that in a day in USDC and DL. Ooh, yeah, you could. Then he says, there's like seven dudes that care about treasury bonds, teach the young men.

Everyone under 25 doesn't know what a treasury bond is. Average age in the USA is 28 years old. And then he came back. Seems so stupid to suggest treasury bond with your face in the internet. That's obviously to both of us because we are both saying it. And then he says, I earn money in ETH volume on Uniswap V3 and I don't work. I sit here on my ass and stream free content. My first reaction there is you're pretending that all of what you just said is without risk.

Have we learned nothing about yield in crypto? Yeah, and also I'll say, let me know if you're hiring because that sounds like a pretty badass way of living life. Although I will say it is funny to me, and I get it. Maybe it's just part of how people don't really understand the way the financial system works. Everything's based on treasury yields. Everything's based on interest rates. I don't care how old or how young you are. Your mortgage rate is based on that. Your credit card is based on that. Everything that you do day to day is based on the baseline risk-free rate. So if you're not going to pay attention to treasuries, which can have very strong up moves.

I mean, if you look at what happened in the long duration treasury side during COVID, you could have made 20, 25, 30% as the whole world was falling apart for a trade, right? Now, from an investment perspective, you're exactly right, Scott. It's like all these comments around returns, it assumes that returns are permanent volatility would suggest that that kind of is not a guarantee

at all yeah literally as we're talking about this pulling up um the 10 year and there's yeah the the bottom of march 2020 right there the yield was.339%, and it just topped at 4.4 on 10-year. That sounds like not a bad price, not a bad yield to get. Yeah. Listen, I don't necessarily disagree with what he's saying. I understand that young people are more inclined to take risk. But, I mean, I was comfortably earning 9.5% USDC on Voyager. Oops. Right? I mean, I was comfortably earning 9.5% USDC on Voyager. Oops.

Right? I mean, that's gone. And to pretend that no exploit or hack or anything can happen in crypto when you're trying to earn yield, I would just exercise extreme caution. That's all I'm saying. Like if you're going to put your net worth into something, a bond is, whether you want to admit it or not, much safer bet than Uniswap. Well, I mean, and look, at least with like, you know, you can get high yielding

junk debt for 10, 15%, I'm sure, right? But it's very risky, right? But at least if there's high yield and there's risk, there's assets, right? That from a company that's issuing that debt. So there's some collateral you can still, in a worst case scenario, in a bankruptcy, sell off to recover some of that loss from. So I will say that if the mentality is still out there, that we need to YOLO into extremely high yielding things without consideration for risk, the bear market and everything is not over. Yeah, that's absolutely right. The predather is not too great when real inflation is 10 to 20 percent, though. And I think that what's missed there, that's a rule. Number one is protect your capital. Rule number two is grow it. Sometimes losing less is your best strategy. Would you agree with that? Oh, yes. Which is

not a very popular thing to say. You know, it's funny about that is a lot of people and I give them credit that say they saw this, the way this year played out coming. They said, we're in cash, we're doing really well. Okay. You're still losing money with cash. You're losing less, but you're still a winner, right, because you're losing less, to your point, right?

So you cannot possibly constantly have positive returns in every single environment. If you could, you'd be Madoff or you'd be SBF. Yeah. And what's interesting is that people love to brag that they're in cash and doing exceptionally well. But that matters a hell of a lot more when the next bull market comes and you see when they actually deploy it. That's a two-step trade that you need to make because if prices go back eventually in four or five years to where they were and you're still in cash afraid to buy back in,

then you haven't actually gained anything. Correct. Right? So being in cash means that you have to have that aha moment where you redeploy and are right. Correct. Exactly. And it's always two decisions to your point, right?

It's like people always just beat their chest around the one decision that was right, but it's, it's investing as a continuum of, of, of time. Right. So, and by the way, you can be lagging, you can be under inflation for nine years. And then something happens that 10th year that you get some fat pitch on. And then suddenly your 10 year return is way above inflation. It just wasn't consistent until the 10th year while you kept on losing, you know, year after year after year from one through nine. So again, I go back to I think that way that people think about investing needs a lot more nuance than than what you often see on social media. Right. So obviously, you said that a lot of your funds are based on the perspective, they're somewhat quant driven. So you're not making

decisions, you have anything that's actively managed? And if so, how are you approaching that? Or is it just not even a thing? No, no. I mean, I've always had rules-based as sort of the underpinning for our mutual fund, Roro, Jojo. Roro and Jojo have indices which are rules-based. They're designed to track the indices. The problem is I didn't launch the funds in 2002 for the Roro Index

I launched in November 2020 before this shit show happened. Although it's funny because it's like, if I knew the perfect foresight, I'd be entering a year where for the first time in history, risk off failed as treasuries, as a safe haven. I wouldn't have launched the fund in November 2020 or JoJo in July 2021. I launched them now because now there's yields. Now there's some room and everyone seems to again think

that the bond market is forever broken. If the bond market is forever broken. If the bond market is forever broken, the entire system is forever broken, folks. This is why you have to focus on yields. Yeah. So what is the worst case scenario right now for markets? If we're seeing inflation come down, we obviously, listen, you're far from the only person saying shit's going to get worse, right? And that doesn't necessarily mean it gets worse for stocks, but economically, basically everyone's at 100% pricing in a long recession, I think, at this point, whether that happens or not remains to be seen. But what's the worst case scenario? What could

kind of flip and be a black swan for markets that maybe people aren't talking about? I mean, I still think it's that risk that we were kind of close to, which is that what if in the US you see what happened, if the US plays the U.K., right, where you had that kind of insane movement in guilds and then treasuries do something similar, especially when you're the reserve currency, right? It seems like an impossible thing, but in the U.K. it seemed impossible too until it happened, right? And that's my whole end of the world is the bull case argument for the melt-up because I thought we were pretty close to that risk, so you might as well take a chance on socks, right? And by the way, this whole point about crash or no crash,

again, I go back to, I think the conditions are there very short term. At some point, markets will crash. They always crash at some point in the future. Nobody knows exactly when, but you've got to think about where the risks are highest in kind of the short intermediate term. So I think that's sort of something

to always keep in the back of your mind. The thing is, again, if you're in a scenario where treasuries continue to act more volatile than stocks, I keep going back to nothing matters at that point. So you might as well buy stocks. Yeah. And is there a specific part of the market that you'd be looking to in that scenario? If we start to bottom and things start to go up, I mean, I'm a huge fan, obviously, of buying Bitcoin. We saw what happened in March 2020.

You get the high upside beta, you know, 17x move in Bitcoin while the stock market doubles. But being that you're not a Bitcoiner, obviously, where would you start to look as you pivot back out of bonds? Oh, you should be clear. It's not that I'm not a Bitcoiner.

I'm not a narrative guy, right? I mean, I very much sympathize and agree with a lot of views of the Bitcoin maxis when it comes to what's broken in the system. But I do have a problem with the term maxi, because it assumes that you know exactly what's going to happen and that's going to play out tomorrow and it could take some time. But no, I think, look, if you're in the mode of trying to think about where to position for the next several years, I do agree that energy probably still is going to be a good place to allocate to, that there's still that longer-term underinvestment thesis behind it.

I think in general, bonds make sense, but not those with high yield, not credit-risk-oriented bonds. At some point, you're going to have spreads blow out. At some point, the recession behavior results in exactly what you should see in the bond market, which is default risk increasing. And that should favor AAA high-quality debt, which is yielding, again, to your point, kind of a nice 4%, 5%, 6% maybe for companies that are not going to go under or unlikely to go under. But the number one thing I would say is don't get married to any single idea or thought when it comes to investing. That's why I'm such a believer in the idea that you have to have a conditions-based mindset because conditions constantly change. And if you get stuck on just

one investment thesis, it blinds you to the fact that the weather around you might be changing. Which always raises the question when you're conditions-based, how do you to the fact that the weather around you might be changing. Which always raises the question, when you're conditions-based, how do you separate the signal from the noise? Because to a lot of people, especially if you're deep into the news and Twitter and following it on a day-to-day basis, everything feels like it's signal, but it's 90% noise. So how do you know when the conditions have actually changed rather than when the way people are talking about the conditions is simply what has changed i mean the true answer is with hindsight and i know that's not a popular opinion but it's just the reality right i mean it's like you know how do you know if an april shower is really um an april shower or if it's the start of a real serious downpour that lasts for a while you don't know until later in the day right so um but i do think you have to i do believe in backtesting i

do believe you have to kind of figure out causation and if there's some repeatable cause and effect on average right beyond the single rule of the die but i think you're right it is hard i mean this is this is the challenge right it's like meteorologists are the best at predicting the future in their domain but meteorologists also have large variability in terms of how they interpret the weather. Yeah. Meteorologists probably do better than technical analysts, though. They do better than everybody. They get vilified and the data is unequivocally there. And by the way, the only caveat there is meteorologists are only good three days out in a 10-day forecast. So don't tell me about stocks for the long run. So I know that, like I said, it's not your main focus, but when looking at the Bitcoin market and what's happened and all the contagion,

and I should say the crypto market, to be fair, because it has nothing really to do with Bitcoin. Do you think that there's a lot more yet to come, more shoes to drop? Or do you think that this is about as bad as it could get and maybe we see a light light at the end of the tunnel i would i would turn to you on that because you're closer to it i mean i i know one thing is usually a truism which is that there's never just one cockroach in a hotel and the thing is like you're seeing now multiple cockroaches you know and a lot of these these companies and exchanges go go under i mean i guess you can have confidence that you're probably closer to the end of it uh but is it at the end? I have no clue. And, you know, again, I go back to conditions and probabilities. I mean, if the Fed were to keep on aggressively hiking rates, that probably means

that there's still more to come out of the space. If the Fed were to slow down, pause, okay, that might be enough to kind of stabilize things things because one thing is for sure, an easy way to stay in business when you're a fraud is to keep on rolling over debt. Yeah. And we have a long historical precedence of these bear markets or corrections, recessions lasting a lot longer than people think. I'm literally just looking at it. I can pull it up, but I just pulled up an SPY chart just to see. I mean, when the market topped in 2000, it took until November 2007 to return to those highs. And that only tapped the high and dropped again

and really took 13 years. I think Mike McGlone said that yesterday to really reach and break a new high, right? When you look at that in context, all of this over here, this could start to be a bit scary, right? By the way, think about how much nonsense would have been on Twitter every single day

during those 13 years about what's going to happen next to markets. This stuff takes time. 13 years. 13 years. I mean, is it possible that we don't see highs in stocks again until 2030 or later? I mean, if you would have posed that question to emerging market investors in 2011, 2012, they wouldn't be seeing new highs for a decade. You probably would have thought that was crazy too back then, but emerging markets have gone nowhere for a decade. That's also been part of my own hell with my mutual fund because it

rotates into EM momentum that's just not there. But yeah, listen, you've had a lost decade in bonds, more than a lost decade in bonds. You've had a lost decade in emerging markets. What's to say it can happen to the US? Yeah. And yeah, I mean, there's nothing to say that it can't happen in the US, which begs the question, you've been here a while. Is there anything shockingly different besides obviously the bond market here from these previous corrections, recessions, depressions, bear markets of the past? I mean, is the bond market is that, well, plus you can argue the currency side because the volatility was, I mean, basically had a year where volatility in currencies and bonds was more than stocks, which is like bonkers. And anybody that criticizes risk parity or criticizes strategies that are designed based on historical cause and effect that don't factor in how anomalous this year has been, don't understand market dynamics and don't understand how to invest from a longer term perspective. You have to look beyond the small sample. This year unequivocally is bizarre. We'll be right back. Number of weeks the S&P has lost money is percentage of the year, 59% of the weeks. Stocks have been red. Only other time that happened was 1931. Last I checked, we're not in a depression.

So does that mean we are about to be? I'll tell you next year. I mean, Mike McGlone was on here yesterday, said it looks an awful lot like 1929. Yeah, I mean, look, the thing is the leverage is so high in the system that this is why this has to be so tricky. Every major depression or crash largely is a deflation scare, deflation event. And I keep using the line, debt is deflationary when you cannot issue more of it. Debt's inflationary if you can keep on rolling it over, but it's deflationary if you can't issue more of it because then you've got to pay the piper. So at some point that's coming. I don't know when. It's hard to imagine how the government can keep on rolling over all this debt and adding debt when rates are this high against inflation. At some point, something has to kind of naturally stop. Whether it's here today or next year or five years from now,

that's what I'm saying. No matter what, a crash at some point is going to come. The timing is the challenging part, and that's why conditions are all that matter. I couldn't agree more. I know we're up against time here for you. So where can everybody find you, keep up with what you're doing? You got the Lead Lag Report.

Where can they check that out? Yeah, I mean, primarily Twitter, leadlagreport.com. I try my best to be opening and communicate. And unfortunately, because Twitter is getting bombed with bots, I know you've seen that too. If you don't want to respond to my tweets, yeah, it's like it must came out. It's like, oh, I solved all the bots. And then today, bots all over the place.

If any of you do want to follow, want to engage, just send me a DM. I'll follow you so that we can just do it bot free. guys i highly recommend the lead lag report of course and also michael hosts some amazing twitter spaces you were kind of ahead of the uh exploding twitter spaces trend actually yeah although it's funny because i don't i don't like to run it the way most people run it where it's like a bunch of people yelling at each other it's like that's not interesting to me that's not fun i mean let's make it thoughtful yeah i, I think you're doing an exceptional job. So everybody, guys, go follow him, lead lag report. I'm going to stick around for a couple of minutes, go through a couple of crypto charts that would bore him to death. So, Michael, I'm going to let you go, man. Thank you so much.

And you're welcome back, of course, anytime. I appreciate you, Scott. Thank you. Thanks, man. Yeah, guys. So as I mentioned, I just happened to have a bunch of charts pulled up here, and it's probably worth running through them because we saw that big move this morning and it's kind of been stifled since the market is actually open. Of course, here, let me show you. This was the DXY chart. Look, I mean, this is a weekly chart, but I mean, look where it's trading right now, right? Dipped slightly below and now sitting exactly at 103.83 with that line being 103.82. If you want to see a continuation of any of this bullishness in markets, we need to see the dollar break support.

Asked you. Yeah. Yeah. Ruben, everything says, LOL, we had questions for Michael. Didn't I ask him one of your questions? Well, man, the guy had to go. It's his time. We have 45 minutes with the guests. Let's take a quick look at Bitcoin. So this, and this is the thing that keeps me kind of bullish for now, the weekly chart, right? So obviously massive bearish divergence at the top, but we have massive bullish divergence. Now we have canceled out this hidden bearish divergence at the top. We have massive bullish divergence. Now we have canceled

out this hidden bearish divergence. But this descending line, I know, whatever. People don't necessarily agree with drawing lines on indicators. It's something that I've done forever. One, two, three touches, almost broke there. This is not confirmed, by the way. But if we break out clearly above this line and hold it as support, you generally see price follow. So with bullish divergence on the weekly, we've only been oversold three times ever in Bitcoin's history on the weekly and a potential breakout here. If we can continue up, it's only Tuesday. We got five and a half days left. I think we could be starting to see some potential bottom signals. Of course, you have the weekly here. MACD, as I showed you before, still looking good with a rising histogram. Not so great on the EMAs. These are exponential moving averages.

The 50 looks likely to cross down below. But if we can break above and hold the weekly above that 17,592 level, that, of course, was the June lows. But this is what's happening here, right? See, that was the June low. I believe that we would have held that if not for FTX, but broke below. The two days after we tested it, I told you guys that this did not look like a recovery. It looked like the reactionary bounce

that we always, always, always get from any major drop. I haven't even looked at the fibs, but usually you get about a 50% bounce. There you go, almost a 50%. 18,566 would have been 50. It made it to 18,155. But as you can see, even though trying to break 17,592 for the first time since early November, right at the 50 MA, right? And that's been a very tough nut to crack consistently on the daily. So it's hard to start to get super excited yet. But I would like to see at least the daily, potentially the weekly hold $17,592, maybe do one of these. And then we can

start talking about heading up. But as exciting as this move is, we know that it's happening because of inflation and what's happening right there. Somebody just said $18,200 is key. Yeah. I mean, the reason that you would view 18,200 as key is obviously this, right? You could pull it up to here. That's probably closer. 18,183. But yeah, that's the lows of this entire sort of consolidation in the last few months and right where we're bumping into right there. So it's definitely fair to draw that line. Say a quick look at what Ethereum is doing. Ethereum, Bitcoin. Interesting because you take a look at dominance, although we've sort of discussed why dominance is broken.

If you take a look at dominance, it's looking extremely bullish off the lows, but it is coming up to overbought again. But dominance is looking very bullish, but that's strange when you see ETH, BTC actually outperforming, Ethereum outperforming Bitcoin on that pair, right? Bouncing right off the support, holding this level, kind of starting to move up. So it's interesting that Ethereum is outperforming Bitcoin right now, but Bitcoin dominance

actually continuing to rise. But right now, listen, if Bitcoin is going to make a big move, historically, you want to be in Bitcoin when it makes its big move. Wait until it goes sideways after the big move up and then start talking about altcoins. JS, I happen to see your comment. What about Litecoin? I should have it pulled up here somewhere. Here we go. Here we go. Litecoin. I don't know. For me, I know a lot of people are very bullish Litecoin right now. I've seen it. It is interesting. It went to oversold. You should expect it to come to overbought. But right now, if you're looking at this range, uh, that goes back to 2017, basically highs at 370 lows at 22, it's a big ass range, but you are coming into the key resistance, which is the

center of that range. And you can see how that's played as a support before. So, I mean, I think the upside right now is to 91. And then you're going to probably have some trouble doesn't mean it can't flip it. And if it does, you start talking about those 300 and something dollar top targets. So a lot of potential there. But right now, if you think Bitcoin is going to move, I think that's where you want to be and then worry about altcoins afterwards. But that doesn't always work that way. Christopher Bednarik says, how's MongooseCoin doing? It's CobraCoin with the MongooseCoin.

And you guys might remember the Brad Sherman. Yeah. Flynn's Arcade would like you to know that USCPI came in lower than expected at 7.1. Thank you. We've talked about that 407,980 billion point seven times today. Thank you for reiterating it. Yeah, guys, I mean, right now we want to see Bitcoin just make a stronger move. Right. We don't want to see this sort of fail and peter out at that resistance at around 18,200, the 50MA. Because right now this just looks like you would see this, you unless we really get a clear big volume move we do see volume rising it's not as

exciting as it would seem i mean spy that was the longer let's see what the dow jones is doing yeah i mean all these uh everything gapped up but now kind of looking ugly uh on the daily if we don't see more follow-through throughout the day if If we see these candles with long wicks up, if that's what we get, yeah, hard to get too excited. I mean, Tesla sitting right at support. I'm just going through the charts we have here. QQQ is the NASDAQ.

Again, gap up, but now dropping since the open. So I guess we're going to have to see what it has for us. Give yourself a FUD vacation, dude. Seriously, LOL, me? Who am I FUDing? Who am I FUDing? I don't know if it's me or someone else you're talking to, but I pretty much, I try not to pander in FUD. See, I haven't spent much time today talking about Binance and their theoretical insolvency because I feel like it's just yet another attack by Bitcoin maximalists to try to cause a bank run and test the solvency of the platform. And maybe that will happen.

But yeah, I don't know, man. I don't know. Mastakilla, a member of the Wu-Tang Clan, forgotten member of the Wu-Tang Clan, says long-term Fed must not be happy with this run the markets. Maybe hawkish tomorrow because of that. Yeah. Jerome Powell, a puppy dies every time the market goes up for Jerome Powell, one of his puppies, because he just wants to see things crushed. He wants everything to go down. He wants to break things. Scott, how do we get year-end tax data out of FTX? You probably don't, man. I don't know. I don't know. But also, if you had assets on the platform, I'm not sure what the taxable implications are. I've been trying to sort through that with Voyager myself, trying to figure out what is owed. I mean, I paid taxes last year on all the interest that I'd earned on Voyager and all of that interest was sitting there compounding and is gone.

So is that fair? I don't know. Yeah. Sly Fernandez says they tried the same with KuCoin and failed. That's correct. And with Crypto.com for now, right? Crypto.com seemingly was able to sustain throughout that bank run. Yeah. Michael Otis says write it off as 100% loss. That might be true, but I guess you might get some of those assets back, but I doubt it. But Michael, I think the real question is if you had traded and taken your coins off FTX, there is a profit and you need to be able to calculate that. So, yeah. I'm not reporting anything this year on those platforms. Yeah. I don't have that money.

For me, like unless you took it. But if you took it off and it was a profitable trade, they're going to want your tax money. I hate to tell you. I hate to tell you. It's the way it is. What do we got tomorrow? What do we have tomorrow? I'm checking my calendar. It's going to be something exciting. Dante Disparte. That's who we have tomorrow as guests. I think Thursday is going to be a huge

roundtable. Raul Paul, Mike Alfred, and Lex Oakland. So, I mean, Mike Alfred yesterday tweeted, get all your coins off Binance. I'm going to ask him about that. I want to know if that's substantiated or just generally because why have your coins anywhere? And of course, Raoul Paul, absolute legend.

You guys are going to want to do that. You guys aren't going to miss any of this. How do you work it out though? I don't know. I don't know, man. You're going to have to figure out the profit on those trades or I guess take your best guess. I'm not an accountant and it's jacked up.

Yeah. Anyways, so we got a lot going on in the next few days and you guys are going to want to show up i'm gonna be gone next week skiing down the side of a mountain gracefully falling down the side of the mountain so enjoy it this week while we've got it guys that's all i've got for you today i will see you on zimoro peace Peace.