The Wolf Of All Streets - Recession Cancelled? | Macro Monday With James Lavish, Dave Weisberger & Mike McGlone

Episode Date: January 23, 2023

Join Macro Monday with my special guests and co-hosts: Mike McGlone: https://twitter.com/mikemcglone11 Dave Weisberger: https://twitter.com/daveweisberger1 James Lavish: https://twitter.com/jameslavish ►► Sponsored by PRIME XBT! Sign up for a new trading account using the link below & receive up to a $7,000 deposit bonus with “wolfofallstreets” promo code.  https://u.primexbt.com/WolfOfAllStreets ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/  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  Timestamps: 0:00 Intro 1:00 Recession canceled? 9:00 Inverted yield curve 11:00 Hopium bouncing 20:00 Demand adoption 20:50 Bitcoin maxis 25:30 Sell the rumor buy the news 28:40 Volatility 29:30 Can crypto fully decouple? 33:00 Trillion coin 42:30 What makes America great 44:46 The debt problem 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.

J.P. Morgan's model is showing that the odds of a recession in 2023 have dropped from 98% in October to roughly 73% now, with five out of seven of the major sectors dropping below a 50% chance of recession. I disagree, and I have a feeling that maybe all three of my guests today disagree, but we're going to discuss it. I've got James Lavish today, who I know you guys all have been asking me to get back, of course, and Dave Weisberger, Mike McGlone, the Dream Team for Mondays. We talk macro. Let's go. Let's go. Let's go. opinions, when we all know that two to three weeks of price action should mean absolutely nothing when judging the status of the economy, the odds of a new bull market, or any of the other excitable trends that we're seeing people talking about all over the place. As you guys know, before we get started, we are sponsored by PrimeXPC, so check that out.

I'm going to go ahead and bring on all three of the guests today. I love uh four people here it makes it look so good welcome gentlemen james thank you for getting up early on our behalf of course always happy to be on here talking to you scott yeah so listen i'm just gonna show it really really quick but here's that article jp morgan model shows recession odds fall sharply across markets pretty Pretty crazy considering in October, they're pricing it a 98% chance of a recession this year. James, since you're not here every single Monday, what do you think of that claim? I think that it's pretty optimistic.

I have, you know, everything we do here is probabilistic, right? So it's all probabilities that we're looking at. And I just happen to think there's a pretty high probability that the Fed overshoots here. They tighten for too long and we head into a recession. I mean, you heard Powell talk about it a number of times at the different press conferences. And he said the Fed, they cannot let inflation get out of control. They know that they, you know, he doesn't want to be known like in the Arthur Burns era. He wants to be known as kind of more of the Volcker era. Right. So he's going to tighten and he knows. And like he said, he's got tools to deal with over tightening, meaning QE.

They can they can print more money. They can flood the market with capital if they need to with with liquidity. And and I think, Scott, the only thing there's a caveat, the only thing that would prevent the Fed from holding on too tight and keeping rates high, which I think is, you know, over 5% as a terminal rate and keep them there for too long, is if we have some sort of liquidity event, a credit event, and we have to somehow inject liquidity into the Treasury market. I think that's the only way that they don't hold tight to their guns. Mike, Dave? I think we're going to end up with a consensus. And Dave, you're polite for letting me go. So I'll give you that and respect that. And the problem, I think James points out clearly, let's just look at the facts. This time last year, Fed funds were zero,

not even better year. And we've had the greatest hike in the history of mankind from a global basis of, I would say, reducing liquidity from the market. It's January. It's time when humans factor in the human nature. Yes, I want to be excited. Yes, I'm going to go on that diet. And it's already January 23rd and forget the gym. I mean, this is just classic human nature. You've got to fade this. I mean, it'd be wonderful if JP Morgan models right. And it's only 78 percent versus 79 percent. But the fact is, this is just getting started on a global basis. And what's the Fed going to do at the next? I mean, they're still tightening. I just never seen this before. And I have to respect the rules of trading and economics and liquidity. You never want to be wrong. Long risk assets when they're relatively

expensive and the Fed is taking away the punch bowl, not just the Fed on a global basis. So I like to measure here on a one year basis. Copper's bounced this year, but guess what? Copper's still down on a one year basis. Crude oil's still down on a one year basis. You know what's one asset that's up on a one year basis? Gold. If you look still down on a one-year basis. You know what's one asset that's up on a one-year basis? Gold. If you look at gold on a 12-month basis, 120-month basis, and since the financial crisis, it's beating, it beats gold.

Crude oil is down in every one of those measures and copper and gold is up. I think it's a matter of time the gold breaks out. Higher, above $2,000 an ounce. Bitcoin's going to follow that mode and be kind of stuck between gold going up and stocks going down and to me if you're bullish risk assets after you know in january i mean this is a conversation as far as i'll end real quickly as far as the models tilting towards not having a severe recession this is the conversation we should have in june or july at the earliest

on a normal basis of the lag of pulling away liquidity and what happens to markets. Pass it back to Dave, your turn. I think that the definition of recession is very relevant, just like the definition of inflation. The fact that, and it's not getting a lot of airtime, but the fact that they're about to change how inflation is calculated again. And anybody who thinks that the definition of inflation is going to show more rather than show less, I mean, I don't think there's another side to that bet. I mean, anyone who believes that, I mean, please, you know, DM me, happy to make you a bet on that one. But I don't think anyone will take me up on it unless they're suicidal. I think that that's in part going to give them the opportunity to relax probably sooner

than you might think. But the reality is, is the definition of recession that they care about is the one that causes unemployment to spike, which has not really happened yet. Right. I don't think that and they've been very clear about this. He doesn't give a rat's ass about risk assets. He does not care what the stock market does within reason. But when it hits the wealth effect enough that at that point, you're driving businesses out of, you know, businesses to go under and fire people. That's where it gets to be problematic from this perspective. So I think it's really, really important to understand what they really want to achieve. I mean, his nirvana is to have risk assets and cool down, not drive inflation from that side. But the fact of the matter is, the political side of it a recession if unemployment goes from three point something percent to five point something percent? Well, if the answer is yes, then for sure we're going to have that. Is the answer

if unemployment goes from three percent to 10 percent, is he going to let that happen? No effing way. He will pivot very quickly if that starts to happen. So, you know, it'll be really easy for them. Full employment and controlling inflation are their twin mandates. So that's really the thing to watch is unemployment starts taking up. That's when he's going to stay off of let off of the gas that you consider. Well, whichever your metaphor, it doesn't matter. People, you know, it's not gas in the economy. So I do think that it that it is relevant to understand what the definition is. What happened to the definition being consecutive quarters of negative growth?

Oh, that's so I mean, you know, we're all too old for that. I mean, you know, we're not hip enough. You know, look, as I said, I don't really care, you know, what how you define it. I just think once you define it, then you stick to it. If the answer is consecutive quarters of slightly negative GDP, you know, you know, basically GDP contraction, that 73 percent, you know, versus 90 some odd percent seems insane to me, which is, I think, what Mike was saying. If your definition is unemployment starts to pick up, I think they very well might overshoot for that to happen, but that's going to be the trigger. It's interesting that now they're basically pushing the recession back when you look at most of the models and talking about the end of 2023 and beginning of 2024 from what I've seen, as opposed to when we were talking about this last spring and summer that by 2023 would be in recession. It just seems like they're kicking

the can down the road when nothing has effectively changed. What's the difference here between then? And couldn't you argue that we're in a recession? James, maybe you could take that. That's it. No, that's a good question. If you look at one of the primary indicators of a recession, and all these guys know, is the 10-year and the two-year spread, right? So if you look at the 10-year treasury and the two-year treasury, and just for your listeners to simplify it for them, if you look at the yield curve of the treasuries, they're supposed to go up from shorter duration to longer duration. And the

reason for that is that if you're going to loan your money out for longer, then you want to be adequately compensated for the risk of loaning that money out. So you want to get a higher return on that for a longer period of time. And that's a normal yield curve where the rates go up from, say, the Fed funds rate one month, the three month, one year, two year, 10 year. They should all be higher in succession. But if we look at the yield curve today, it's inverted. And, you know, and what that means is that the 10 year and the 30 year, the interest rate on those, the yield that you're getting on those is lower than the yield you're getting on the short duration. The the Fed funds rate, the one month, the one year, the two year.

And so if you if you take that that 10 year and you the 10 year yield and you subtract the two year yield, you're you're getting a negative yield that that that spread between them is negative. And right now it's running at about 70 basis points, which is far worse than it was even in the great financial crisis. And so and and to answer your question about when does the when does the actual recession really hit? When do we start really feeling the pain of that in our in our production and our productivity? It's it's usually a good period after it begins to invert, which happened this summer, right? So if you look a year out, that's about when the actual recession would occur. So it's a pretty good indicator. And I'm sure Mike and Dave have a lot to riff on that, but that's something that we're looking at pretty closely.

Well, I'm glad James brought that in because it's, I think as Rosie said, Dave Rosenberg says, if there's any one metric he would use, it's the curve and it's inverted. And there's just simple rules of discipline in life and money management. When the curve is inverted, you typically expect after the first Fed ease, after the market's well heading towards a positive trajectory, you expect the stock market to bottom. And bond yields typically start rallying prices well before that. That's already started.

So I think the key thing, remember, this is human nature. It's the first of the year. Everybody's excited. But this is just getting started. And yes, we all know that we're in a recession, overhyped. Everybody's expected. I just think it's going to be worse than most people expect. It's what I really enjoy having been on the sell side and buy side, which you hear from sell side strategists. They have a vested interest

in not telling you the worst case scenario. They have to sell products. We have to be careful. People who run real money money which i think are kind of on here or involved with running real money or don't have a bias we'll just tell the truth and to me that's the fact so what's broken cryptos we've had this massive rally pretty much shortcoming i mean how often do they make v bottoms yeah maybe typically you have to go make it painful and if it's that easy among my rules it's that wrong So the fastest horse in the race is up the most. The biggest performer this year has really been the Grayscale Bitcoin Trust.

It was the most beat up. So we have all the tax loss selling from last year. We have the normal hopium bouncing. If it's June and we're trading like this type of in July, these type of levels, I'd be kind of excited. But man, this is just one of those classic things you learn in life and you learn through studying history yeah the stock market 1930 was up about 40 50 from the low of 1929 and the rest was history just look at the facts of the trends and here's a key fact i'll end with global gdp is clearly in contraction yes people are hoping hope about um but china but

they're not a demand pool society they They're an exporter. Clearly in contraction and central banks are still tight in the curves, the curves inverted. That's what's going to take the end that trajectory. And that's where I look at things like gold and long bonds is where you're supposed to be looking to see the best performance. I mean, when it comes to crypto, I kind of disagree. Well, certainly on Bitcoin, I disagree. I think that Bitcoin is fascinating to look at supply-demand dynamics. I think that, and when you look at, and I hate, and Scott knows this, he knows that I am not, I don't worship at the altar of technical indicators. I think that head and shoulders, bottoms are my favorite one to make fun of, or and shoulder tops because when they work, they look beautiful and people only point to the ones that

actually work. And when you actually sell after the fact, you realize that, that, you know, it's not now the reason that there's reasons for it. But the truth of the matter is we saw over in 2022, from May of 2022, all the speculation and many, many, many billions of dollars just suck right out of the market. And so we are at, and we've been, we were saying, I was saying this when it was at 17, 18,002. So let's, let's be careful because we have a great thing about the internet is it's forever. The terrible thing about the internet is it's forever. But in this case, I've been very consistent. The fact is all of the speculation was sucked out. And what you ended up with was Bitcoin holders percentage, long-term holders at all time highs, and we're still there. And so you don't have a lot of long speculators.

There's very few animal spirits. And yes, some creeped in over the last couple of weeks, but nothing close to what you have. You pointed out yourself, gold has rallied. And if Bitcoin has a use case, it's to be digital gold. Now, you've all heard me say that I think that it trades like an option. The market is pricing that option at less than 5% right now, while adoption is at an all-time high. The that in the summer, it was towards when it made its new lows. It is actually back to within a couple thousand of the 200-week moving average, which is now pegged at around 24.5, which by the way, if you look at a chart going back over the last year, you'll see 24.5

is that level that is marked the top of this extended trading range post-Luna collapse. Right. And you can see that here. Yeah. The highs after the lows of the summer were about 25. Right. To 12, exactly. And the 50 and 200 MA are literally equidistant above and below that line. Right. So now I'm going to agree with something that Mike said, though, is time is important here. No, it's very, very rare that candles as quickly as we've had in the last month are sustainable. That is true.

Retracements happen. There's lots of reasons for that, too. People taking profits. There's lots of reasons for that too people taking profits there's lots of reasons but the fact is that i can absolutely understand why people are excited about what the long-term potential could be they generally have to have the rolled up newspaper hit them in the nose on in between here and there but that doesn't mean that that that they'll be wrong it means that, you know, don't leverage yourself, make your, you know, put your position, your portfolio the way

you want to be. You over leverage yourself when you get hit in the nose, you get stopped out, and all of a sudden, kaboom, you get nothing when it goes where you want it to go. So, I mean, I think the time factor is extremely relevant. But if you look at what's going on, the truth of the matter is the single most bearish thing I believe about what's going on in the crypto market is how all coins are performing as well as Bitcoin is right now. And by the way, many of them are clearly risk assets in the truest sense of the word. They are basically they're going to trade on similar factors as as as technology companies and you expect to see multiple compression there so you know to me that's the most bearish thing going on but you know I'm not I know I'm starting to sound very Bitcoin maximalist like and that's actually not fair uh because I'm not but I do think that there is quite a bit of crap in crypto still they won won't go naming them, Scott, because I don't want to have your armies of various people,

you know, inundating your threat. But the truth is, is that there's a lot of reason to believe. I mean, hell, if you look at the one V bottom we did have, which I think was a V bottom, and I think it was very, very relevant, was when FTX failed, you had one more wave of for selling. It was not that big. I mean, realistically, it was trading in the 18s. It went down into maybe just below 16, which I know sounds a lot. But in Bitcoin case, that's not really that big. And that was it.

And basically, the people who had to sold everything that wasn't nailed down. Now you have the opposite. All the people who had money trapped on FTX, and I don't know where the betting market is now, but regardless of whether that money is trapped and missing out on this rally, or they just say, listen, I wanted to have 2% to 5% of my portfolio in Bitcoin, and I thought I did, and now I don't, and look what's happening. I think that was what the biggest effect was, because short covering, while people got all giddy, one billion dollars, if you look over a one month rally, one billion dollars in short covering in Bitcoin, it doesn't even register in terms of compared to the rally size. You do a percentage of short covering versus the actual percentage rally. This isn't even close. But what you do have is billions of dollars that was

sitting on the sideline by force because of Sam's theft that all of a sudden is like, well, you know what? I really did want to own this stuff. So what the hell do I do? Whether or not I get I'm going to get the money back or not. And so you do have a supply demand dynamic. That's interesting. But anyway, the long and the short of it is I think that Bitcoin is likely to bounce around a trading range like this for a while. But when it breaks, I think that the odds are to the upside, not the downside of the trading range. Well, that's the thing. Dave, we completely agree on that in the macro supply demand. I had an adoption into that demand case because I've never seen this.

As far as demand adoption, It's just so early days. It's like Internet 20 years ago. So macro big picture. I mean, I see another zero being added to Bitcoin question the time. And you're supposed to be accumulating just this short term bounce this year in January. And that's what I'm very concerned about in every asset. And just want to be careful that people understand that if you're buying 23, you can easily have to write it down to 15 before you see, you know, and a zero get added on to the back of that number. Yeah, that's a really good point, Mike. And I fully agree with both you guys and what you're talking about there and what you said before that Bitcoin being the fastest horse. You know, the question is, like Dave said, there's some short

covering, sure. But how much of this how much of this move is because, well, you know, first of all, Bitcoin maximalists, they tend to they tend to be pretty well versed in the macro world now. Right. So they're they're they're meat experts or they're stainless steel and, and, you know, what kind of pan you use for, to cook that meat, but that they're actually very intelligent about all this stuff and they're very well read about it. So, and if you go back to, you guys have lived through these, these cycles, you know, we've seen it multiple times in our careers. And it's market psychology.

We have been conditioned ever since long-term capital management and the Fed coming in and making sure that Goldman didn't go under, you know, the New York Fed stepping in there and getting an agreement from all the banks to rescue long-term. We've been conditioned to expecting the Fed pivot, the Fed to turn around and make sure that we don't go into deep depression because of all the debt on our books, the debt to GDP and the problem that we've talked about ad nauseum, Scott. But we've been conditioned to that. So the question is, and what Mike is saying and what's so important is how if if if we're if we're seeing the the market turn on on the perception that there or on just trying to front run that pivot, even if the market knows that they may lose a little bit between now and the time that it does pivot. Because when it does, man, if you look at that chart in March 2020, and you look at how quickly these risk

assets pivoted straight up, you couldn't catch them. And I think that there are managers who are scared of missing that run, even if it means that they're buying a little bit early. Yeah, I just want to say very quickly, we keep talking about the Fed pivot. And I think everybody in crypto is looking for Bitcoin and Ethereum and all these assets to go crazy after this mythical Fed pivot. Historically, the Fed pivot is not the bottom, right? We have a pivot and then the bottom actually comes months. I mean, Mike, you may actually have the data on it, but it becomes then the bottom actually comes months. I mean, Mike, you may actually have the data on it, but it becomes quite a bit later. And even, I mean,

literally I just looked it up and I just get this, you know, BlackRock from three weeks ago, a Fed pivot shouldn't signal the all clear to investors. BlackRock saying that, right? Exactly. Well, let's just look at the most relevant recent example. And I've gone back, you can go back a years easy 50 years because we have good data in the fed since the first was at 2019-13 i think um the um last good example is the fed started easing in september 2007. we all remember that because the housing market started heading lower and we had problems inflation was still heading higher and the stock market bottomed um about what year and a half later march

2009 um it's 666 we all remember the s&p 500 to me that's the fact right now the fed is tightening and so i just discipline myself okay liquidity is being taken away yeah i love cryptos in the big picture but all liquid assets have to subject that and i think that's the key thing dave and james point out this is i like to point out this out, the world has changed with the ease of ease that we've gotten from the Fed and we've grown accustomed to. Now, one cycle I really remember well is 1994, that tightening cycle. That was pretty severe. And that's when I came to New York.

That's when I first started trading treasuries in New York rather than for clients in Chicago in the trading pits. And it was a pretty severe bear market because the Fed tightened so much, but it set the stage for that massive bull market for 95 into the rest of the year. And I'm talking about equities. The key point is, remember, triples didn't exist then. So here's what's happening now is that liquidity is being taken away. We've come from the most elevated equity market ever in many measures.

And it's just early days going down. And it's just the time of year people are supposed to reallocate and get excited. So even in crypto. So I view this as way too much hopium early in the year versus the reality of running money is you're supposed to be careful with this rally. If you've made good money already, like the people who are smart enough to buy GBTC, which we pointed out was just too cheap at 50% discount. They're already up 50%, well, 48%.

But it's still pretty wise. So, yeah, that was capitulation. But now I just see it's basic rules of economics is you're fighting the Fed if you're getting too bullish here. So I'll point out the history of the commodities, which have been very close to equities, too, is they almost always bottom about a year and a half, a little bit less after the Fed first ease. And we're not we're still tightening.

Yeah, I you know, it's funny, you know, Bitcoin is is like bouncing around. I mean, you know, it's well, it depends on where you look. I mean, we obviously at CoinRoutes have the exact data, so I know it's $200 lower than it says on Yahoo. But the fact is, is Tesla is up, you know, almost 4% today. And, you know, when I think that you're seeing it's interesting, Bitcoin's volatility, even though it's been a rally and the volatility of the rally obviously gets measured as well. But the fact is, is Bitcoin's volatility for months has been lower than a lot of the, you know, I don't know what people are calling them these days, but leading tech stocks, you know, the Teslas, the Netflixes, et cetera, of the world. And, you know, the Hopem is and stuff like that.

I mean, it wasn't all that long ago, you who james and i i panel made out in las vegas you know mike alred alfred was calling for uh for tesla to drop you know down to 60 when it was breaking down every day and he was like gleefully tweeting about it now i don't like tweaking mike when he's not here it would be great to have him here actually because he's phenomenal on so many levels but i mean it must just make him grind his teeth, you know, to see Tesla, you know, breaking up through 120, then now 130 and on the cusp of 140.

But that's really where the hopium is focused. GBTC is actually extremely important for why I'm so bullish on Bitcoin. The fact that Genesis has now filed and GBTC is now rallying, it's almost perfectly classic sell the rumor, buy the news. And the truth is, is people realize, wait a minute, this trust isn't going to get dissolved. What the hell? I don't know how much longer they have to wait, but there will be a new SEC chairman at some point in lifetime who doesn't have his head up his ass when it comes to this topic. And I'm happy anytime and where Gary Gensler wants to debate this one, I'll happily do it.

I posted a thread on why Kramer thanking Gary Gensler for the Bitcoin ETF rejection was literally the dumbest thing that he has ever tweeted in a storied career of tweets. I mean, this is the man who called for who literally said in June that Meta has no place to go but up. Just keep that in mind. And this one, this one was so much dumber. And I'll list those those those reasons for anybody who wants to hear it. But the fact is, is there's a trust of Bitcoin and it should never have traded at a discount that big. But the reason was liquidity. I mean, Mike and I always talk about liquidity. People needed to sell something and that's what got sold.

And they knew that it was going to be a long term holding. And so you had to flush that out. And so there's so much of that liquidity stuff sloshing around. You know, we look at the Fed tightening and you say it's historic from zero in terms of percentage terms. Well, sure. You're coming off a 25 basis points to it's going to be there. But depending on how you measure inflation, it's still the interest rate is still negative. Well, if I could follow up on what Dave said real quick before we move on, and that's you mentioned volatility. I love to watch annual volatility.

So annual volatility in Bitcoin versus Amazon is the lowest ever. It's one to one right now, ever. It's never been lower. Of course, you expect that. Amazon's been around 30 years, 20 or so years. Bitcoin's maybe 10 and a little bit more. Lowest ever. So I look at that. I love comparing it to, yes, longer term, I'm biased more towards Bitcoin than Amazon. And with Tesla, it's about, Bitcoin volatility is actually lower. It's 0.8 on the annual basis. It's less than Tesla's volatility, but it's actually been lower.

The lowest ever was right at 2021. In bigger picture, I'm much more bullish Bitcoin than Tesla. So back to you. I think that the much more bullish Bitcoin than Tesla. So back to you. I think that'd be much more bullish Bitcoin than Tesla makes a lot of sense long term. I guess all of this, though, begs the question then, OK, let's say we do get a recession this year. Is it possible, plausible, I don't know, possible that Bitcoin and crypto assets can fully decouple in this environment and actually rise in the face of recession?

Or does that have to happen after the macro changes? I saw Dave shaking his head. Maybe you want to get that one? I mean, look, I think that decouple from what is the key here, right? I mean, I would be I would literally be stunned to see uh the bitcoin goal correlation not i would really be surprised if bitcoin and gold doesn't re-establish its correlation in 2023 i would really be very surprised that that's the honest truth i don't have a particular opinion although i think that it's decoupling from other risk assets i think is that doesn't, I don't know whether it will be, I don't have a nearly as strong of an opinion. But I do think that it is, it's fascinating,

even the gold's correlation to the S&P has vacillated over time. I mean, recently, it's, as Mike pointed out, right in the preamble, and he can look it up. I'm going to guess, although I haven't looked at it, I'm going to guess that it's starting to break, it's starting to go back to inverse again. But, you know, who the hell knows? Not everything's moved this month. But the fact is, is I think looking at what things are correlated to what matter. The fact is, is I'll keep saying it.

Bitcoin trades like an option. Most of crypto trades like an option. Options are risky. Therefore, for it to be they're going to be sensitive to capital flows on the macro side. The difference is businesses that have to borrow in order to build business because they can't get equity financing are, by definition, as rates rise, get choked off from that capital, it's more expensive and they have to slow down, either not hire as fast or lay off people. That's just economics 101. So it depends on what interaction you're talking about. And that's funny because we've seen what, almost 60,000 layoffs from tech

companies in the last few weeks. So, you know, like you said dave i i think that bitcoin is just trading like the ultimate risk asset right now anticipating a pivot but that's kind of what it what it's trading like um will it decouple in this cycle it really depends on how much the fed prints and uh and how how much Bitcoin itself solidifies its standing as a store of value, which I think is going to be difficult in this cycle. It's going to take a lot more capital. It's going to take trillions and trillions of dollars in that ecosystem, in the Bitcoin ecosystem, in order for that to establish itself as a store of value. I think that's true in the United States for sure.

And we talk about this a lot. The rest of the world, I'm not so sure. But you just said something that's very important. Everyone's watching this hand, right? You know, what the rates are. The real question is what's going on back here with liquidity. And you wrote a great piece this weekend about something about, we haven't mentioned debt ceiling once.

I think that listeners would love to get your recap on the platinum coin and what the Treasury might do. And to be honest, I think that if they are crazy enough to do that, that could be exactly the stimulus for a linking in terms of Bitcoin and gold and other assets that that people might want to put into. Scott, you're shaking your head, but I'm just laughing because now I know that the trillion coin is going to be a theme on every single Monday that we do here. As well, it should be. I'm not shaking my head. I'm laughing. I read James's newsletter as well. Until the debt ceiling gets raised for another two years and we'll go through this kabuki theater again you know the next time but that's but what we said is us actually this is a key thing that's happening this year bitcoin's up and everything else is up great um i do my base case is at some

point bitcoin's going to trade more like u.s treasuries long bonds and gold and that's more likely to happen to a recession. And I think Bitcoin was a great leading indicator last week. Remember, it was up, breaking above 20,000, 21,000. The S&P stock market was still going down. What followed? Stock market. What's the leading indicator? Bitcoin. Still, it's becoming more and more the global leading indicator.

It never stops trading. And every day I see that, I'm like, wow. You know, from a guy who's into trading pits and used to get customers used to sue the exchange because when exchange would shut down i've just never seen this so it's revolutionary but if you look at the correlation of gold i was just check as you're speaking 50 i always go weekly 50 weeks 100 weeks it's like nothing 0.1 the r squared is just because it doesn't really matter so the actual correlation isn't there but there's a higher correlation, I think, to the broad stock market

because you know what happens. Stock market goes up. Or tech stocks. Yeah, and it's liquidity. Tech stocks, yes. But that's the key thing, not roping in Ethereum too much to the max was that what's been very shocking

is that Ethereum-Bitcoin ratio has stayed strong despite the bear market. That to me says, yeah, you want to just not be sticking with Bitcoin. You want to be buying an index and put those alts way down there and way overweight the top big ones. Let an index do that. And to me, that's the way to get access to this space. And I think that's what the institutional money manors and hedge funds, endowments, family offices, pension funds are getting. They're way far away, but they're all getting that.

Don't want to miss out too much in this asset class. And they're getting access, I think, through equities and other alternatives too. So James, are we going to see the platinum coin? Oh my God, I hope not. So yeah, Mike and Dave know what this is. They've seen it a few times before it's come up. But to just recap, Dave, thank you for the tip off. So I write a newsletter. It's called The Informationist. And this weekend I wrote about the trillion dollar coin idiocy that we have going on. So what is it? Is it actually is it a godsend or is it a joke? Right.

So first of all, we just hit our debt ceiling technically, and that's $34.1 trillion. And Janet Yellen came out and had to do some extraordinary measures, you know, cut meaning they, they cut putting more money into certain pension and health accounts that, that are, that are tied to the government. And so she can hold off for another few months, but they need to either raise the debt limit or figure out how to cut expenses. And so you've got this battle going on in Congress and with the White House and the Senate about whether they should cut expenses or if they should raise the debt ceiling again, yet again.

Every few years, we just keep raising it. And so McCarthy has, I guess he agreed that the talk is that he agreed that he would not agree to raise a debt ceiling without some concessions on spending from the Democrats. But the White House said that they're not going to negotiate. So here we are. All right. So back rolls around the idea of a trillion dollar coin. What is that? Well, you know, it actually was first brought up a long time ago from a presidential candidate. And I forget his name is, I want to find it here so I don't forget. It's Bo Gritz in 1992.

He brought up the idea of a coin that they could mint to pay down the debt. Okay, so he would hold up this five inch coin on the stump. Long story short, he did not get elected. And then flash forward. And once again, the Simpsons, they, they predict this by having a trillion dollar bill. And why not? Because they, they predicted Walt Disney taking over 20, 20th century Fox and, and Trump becoming president. Right. So anyways, again, it's it seems like just a joke. But what it is, is there is a technicality at the mint.

The mint can the U.S. mint can can make coins. They can mint coins in denominations on any metal that are certain denominate denominations, 5, 10, 25, 50. And usually like gold coins, they make $50 worth, right? So, but when you buy a gold coin, you're buying an ounce of gold and it trades what an ounce of gold is, $1,900 right now.

So, but there's a loophole where platinum is kind of carved out of that and they can make platinum coins in any denomination. So somebody came up with this genius idea that, hey, why don't we just make a trillion dollar platinum coin? We'll mint it. We'll make the Fed deposit it. Then the Treasury will be able to borrow against that and we won't have to print money. We you know, and we won't have to raise the debt ceiling. And that way we can get around this negotiation of whether or not we should cut expenses or whatever we need to do in order to,

you know, fix that debt ceiling problem. And so, of course, it's ridiculous. It is money printing because now you're not taking liquidity out of the market in order to float more treasuries or float more bonds. So that's number one. Number two, it just looks to the rest of the world like we're a clown show. It doesn't make any sense. We're just going to print a coin and put it in from the treasury to the Fed. And it's just like a magic trick, a sleight of hand. So hopefully Yellen says that she's not, she's not in favor of it. I don't think the Fed would ever be in favor of it. And so hopefully the White House doesn't in fact send troops to the Fed and force them to accept a coin. So it's laughable. I'd like to hear what Dave and Mike have to think about it, because it just seems like

it would just plunge us into, you know, it would accelerate. To me, it would accelerate the lack of confidence or the loss of confidence in the U.S. Treasury as the over-reserve asset, just because it just shows that we don't really care about how much debt, how much we print, how much we devalue the U.S. dollar. And it disincentivizes anybody to buy a treasury as a store of value. That's just my that's my opinion. I mean, my opinion is that what's going on in Congress between the fact that the White House says they won't negotiate and the fact that we now have 20 people in Congress who have the power to force them to

either negotiate or, you know, it reminds me of the game of a game of chicken, except it seems pretty clear that the lunatics in Congress are taking the two by four and they're stuffing it onto the steering, onto the accelerator and they're tying the steering wheel straight ahead. And they're basically saying the White House, okay, here we go. And if it happens on both sides, then I don't think the White House is going to have a choice. I think this is the only way they can actually do, you know, what they want to do if they actually don't want to go to the bargaining table. So I mean, look, we'll see. The story in January is we can laugh about it. If we're still in this situation

in May, it's not a laughing matter. And by the way, I'm really curious what Mike thinks, because you've seen how many of these showdowns and whatever. But it is true that as debt ceiling breaches have gotten closed, we have had issues. We did get downgraded by S&P once before. There are all sorts of things that are going on. You know, I think the rest of the world looks at this and just says, oh, yeah, they're at it again. You know, it's sort of like, you know, the crazy upstairs neighbors screaming. It's like, OK, you know, they're at it again. Now we got, you know, it's Congress and the president. But it's not a great thing for our confidence or confidence in the dollar.

And and people always keep underestimating it. You know, in every in all spheres, the U.S. gets a huge benefit by the dollar being a reserve currency. And, you know, while they can't really talk about it as such in Washington for fear of disturbing it, it's a big deal. But there have been a lot of stories, a lot more than in the past. In the past, when the petrodollar was under attack because people in the Middle East talked about, you know, denominating oil and something other than dollars, we went to war. Now it's getting talked about again at the same time as all of this it's it's not trivial uh i have no particular opinion but it's not true so the um it was newt king rich

we all some of us remember 95 remember he was him versus bill bill clinton the big shutdown but this there's there's certain things that i've learned the hard way and certain things I've selectively deliberately ignore. And this is one I've selectively deliberately ignored as we dig into the discourse of the shutdown. It's annoying. It's happening. But the thing I have to admit is I deliberately ignore the details of once I heard about FTX. Once I heard they collapsed, that's all that matter. That money's gone. Move on. And that but the press will focus on it. I work for companies involved in the press, but I'm not. They might quote me. But the key thing I like to point out here is this is the macro of what makes America great. And most people won't get that, but there's very few countries in the world where you have open discourse and we have people deliberately publicly disagreeing with

others. And we come to a conclusion, as Churchill says, after we exhaust all options. You do not do that in Russia and China. And they had that unlimited friendship. And look what that did just almost a year ago within a month, what that did to the world. So to me, this is part of what the strength of the U.S. is having that open discourse. Where do you want to put your money, in U.S. treasuries or Chinese treasasuries z could take that in a heartbeat with one little decision in a heartbeat in the u.s we're going to have a debate over it if we want to you know take your money but yeah the the the thing about this is we have to get over this we have to stop doing this we have to change how we do this debt ceiling because most other countries just don't debate it every couple of years like we do.

At least we're in the open, we're working on it. But it also shows to me the value of alternatives like cryptos and gold. And part of, I think, the macro, which is the pale risk that we don't get through this easily, and we virtually always do. Is it fair to say the thing that has no ceiling though i mean that to renegotiate a debt ceiling and raise it every single time

oh great that's a problem but compared now what's where the churchill says about democracy what country is doing that better what major countries better doing that in the u.s it's certainly not europe certainly not china certainly not russia any major country maybe swissie certainly not Europe, certainly not China, certainly not Russia, any major country, maybe Switzerland, certainly not Japan. They're what, 300 debt to GDP? I'm sorry, three X. Yeah, yeah. So to answer that, look, we need a ceiling, you know, or else we will lose confidence.

The world will lose confidence in the dollar. OK, that's number one. Number two, the problem is that we're beginning to crowd out balance sheets with the just sheer amount of debt that we have here in the United States. We can't go to 60, 70, 80 trillion dollars of debt. There's just not enough. There are not enough balance sheets out there, excuse me, to actually take that debt and and and as an investment in whether it's in the corporate treasury or it's on a pension fund it's it's in uh you know a sovereign it's in a on a sovereign uh balance sheet there's there's just only so much we can we can take that so much higher we can take

this on real terms you know and And so that's the issue. And as other currencies devalue against the US dollar, that only makes it worse. That only aggravates the problem. So you have to have a ceiling. The question is, you know, can the world keep up? But isn't the ceiling... Yes, we do have to have it in name but mike to your point we've said every single time this is just kabuki theater dave said that but that it's you weren't even

paying attention to it when i brought it up last week you said forget about it it's gonna one way or another it's gonna shake out and they're gonna raise it because there's no other way. Yeah, exactly. Well, we might do the short term shutdown. The key thing is, if you look at the the biggest spike ever in money supply, debt to GDP went from just around like 100 percent spike to 134 percent. I'm looking at chart. We've dropped 120 percent. Yes, it's improved yes i completely agree with james and dave said um it's just there's i i'm it's just the way our system works at least we're having the open discourse we got to get through it and it's here's the example what's happening in france with just raising the uh retirement age from 62 to 64. everybody knows this has to happen just question how you do it and doing it properly every it just has to happen. I

mean, when we first started, people lived to 85, now we're almost 80. You have to raise that retirement age. Question how you do it. You bring it in, you just put it in increments. You have to have probably a second term president, but it's just a matter of time. And if you don't do that, you know, you got a big problem. It just has to happen. Right. And, and, you know, we were watching the debt to GDP drop a little bit, but that's again, that, that, that has to do with just how, how much inflation we have in the system. Right. And that's what we need. We need inflation in order to pay down the debt. It's, it's, it's just pure math. Right. So but the problem is, what are you going to cut? Just like Mike said, like, what are you going to cut? You're not going to, you're not going to cut? Just like Mike said, like, what are you going to cut?

You're not going to cut all of these entitlement programs. You're not going to cut Social Security. You're not going to cut Medicare, Medicaid. And so that's $3.7 trillion annual right there. You can't cut those. Our interest payments on our debt have doubled from $400 800 billion dollars a year. It's the same size of a line item as our military spending now. But the problem is, as we go into a recession, and Scott, you and I talked about this, you know, a couple of months ago, and it's gotten worse since you and I talked

about it, right? So the problem is, as we go into a recession, your tax receipts are going to go down. They're going to go down between 8 and 10 percent if we go into, you know, just a regular recession here. And then as you go into recession, your entitlement programs go up because you have to pay out unemployment benefits. So that that's a you know, that's a maybe a 15 percent delta right there. And so it only gets worse. And as the Fed holds those interest rates high, then you're having to pay down old debt with new debt that's more expensive. And so your interest payments go up even further and it's just self-perpetuating. So where's the limit? That's the problem. And that's what we're that's what we're facing. Truly long term. That's our that's the problem is that we're facing this long term issue that's structural that I don't know how we get out of. Truly. We're turning Japanese. Well, I mean, let's let's be honest.

I mean, I hate to be a tinfoil hat kind of guy, you know, with conspiracy theorists. But if you actually look at what would be helpful, what you would be helpful would be to make the measures of inflation look more benign, which would then make people think that a nominal rise in GDP is actually a real rise in GDP, which is what you need to pay off debt. And you would then want to crank that delta as high as you possibly could, because it is exceedingly clear that there's only one of two ways to get out of a debt to GDP number that we have here, if you include long-term entitlement programs, for sure, which are excluded because they're off balance sheet of the U.S. government. I mean, you look at Social Security and Medicaid, Medicaid, yeah, Medicaid obligation. Yeah, Medicaid, it's $200 trillion that we have. Right. So when you look at that together, the only way out is inflation or a default. Default

is not an option because that would actually trigger the loss of the U.S. dollar as reserve status and so other things. So the only real answer is a form of inflation. And obviously, you know, there's only so much you can do. So that's one of the reasons they don't want to see consumer inflation going out. I will continue to say that economically speaking, the single dumbest thing that the U.S. government has ever done was initiate the stimulus checks because it took decades of inflation and assets, not in consumer goods, and immediately focused it all into consumer goods and services. And, you know, I'm not saying it was dumb in the sense, in the

overall sense, because, you know, you can make an argument that people needed it. Although down here in South Florida, I can tell you that the, certainly anecdotally, the spending didn't go into saving for a rainy day or paying down debt. It went to renting, you know, whatever, you know, Lamborghinis and other sorts of things andlling around South Beach. But the fact is, is when you, they literally let that genie out of the bottle and now they got to cram that genie back in the bottle. And no matter how you want to slice it, that's not easy. And so when Mike talks about what he, you know, very eloquently describes the removing liquidity from the system, it's not because they want to ask the prices to go down. They just don't care if it happens. They need to put that genie back in the bottle so they could

resume what they were doing, which is get asset prices to continue to go up while debt prices for and debt service for the U S government goes down and then make inflation look as, as low as possible to make nominal GDP rises, uh rises look like they're real ones. But that's the most important historical aspect, I think, when we talk about macro right now in real time is let's not underestimate the history of that, the magnitude of the pump we had up to the peak in 21 and the dump we're getting now. And it made me, my wife even bought me this book, boom and bust. I could have, you know, it was, I think was that Turner and Quinn and just reminds us. So those sets happened every time in history is when you have the punch bowl

pump too much and you take it away, you usually get major issues and we're just one, what are we? 23 days into this year. And which is bouncing. That to me is the macro. I got to focus on that macro. In other words, it's that liquidity pumping that's probably early dates. And it's like, and on the back of a day point of the biggest pump in history, most notably in this country. Right. So the question is, are, you know, and this is exactly what we're looking at. Are they going to revise that, that CPI number, that, that, that measure enough to hide it completely? Or are they going to, are they going to just accept a higher nominal, a higher long-term inflation rate as kind of normal, you know,

a three to 4% instead of two to two and a half percent? Is that what they do? Or they do a little bit of both? I think they just do a little bit of both. I think that the Fed says, you know, we're in a period here where inflation around 3%, 3.5% is normal. And they have to do it, like you said, in order to pay down that debt. They need real rates to be negative

for a sustained period of time to get this under control. Otherwise, it spirals out of control and we just we lose a handle on it. So I think there's a good chance we go to what's normal in these situations historically. I use the example of 1920 and 1930. I think we're entering a pretty significant historical deflationary period. And Japan's been in it for a while, but now it's global. And it almost always comes on the back of these massive pumps in not just liquidity, but crude oil. We had a pretty good one after 2008.

Crude oil pumped to the highest level ever. It's still below that price. And then it dumped. And I just want to point out one fact about inflation, CPI, and everything. I'm a commodity guy. And if there's a most significant place you don't want to be, if there's major order correlation towards deflation, it's in everything you can't grow. That means except the metals. So if you look at crude oil, the price on the screen right now was first traded in September 2007. It's unchanged. Yet you look at the CPI index, it's up almost 43%. PPI is up almost 50%. That's where that inflation is showing in the measure. So when people really push back at their

artificial numbers, I'm like, okay, well, I'm a commodity guy. Here's deflation. This is real deflation. The average producer of crude oil in this country is getting the same money they did, what, 15 years ago. And I look at examples of where the inflation is. It's the book I'm reading right now called Super Abundance. We can create so much with less. To me, that's what's accelerating. I think that's what people are missing. And just one good example is look how Europe got through this energy crisis. Germany was able to bring on LNG in 200 days and typically take two to three years for that. Right. And then, you know, Mike, I think you quoted one of our good friend, Jeff, Jeff Booth. Yeah. Yeah. I mean, you have this deflationary

force against this inflationary force. And at some point they're going to clash and they're we're literally witnessing it as as we speak. And you've seen Japan, like Japan has been doing this for, for a decade longer. Right. So, you know, so, and we finally see in Japan, the, the turn of now there's no longer any free money. Like once they turn off the spigot, that's it. There's no free money in the world anymore. They're the last ones. And so you're seeing it happen real time. And that's the question is, you know, how painful is it going to be? That's the question. And, you know, because we are we are in a period now that is without question, there's going to be a change. Just like Mike said, there's structurally there's a change here. It's happening. And that brings us to time. And I agree. So I think that we can all agree that the recession is not canceled, as J.P. Morgan said, and that, Dave, it sounds like your point was that what we're going to have to do is just lie to the American people a lot and readjust expectations and create a new normal, which seems to be actually what we do generally in this country. But it is what it is. But yes. Yeah. You said I'm going to put on my tinfoil hat and we'll just we just keep redefining things. So it's OK. And that that seems to be the ongoing trend. So guys, everybody in the description, you can follow Mike McGlone, Dave Weisberger, James Lavish,

James, especially he mentioned his newsletter. You can find that on his Twitter. Absolutely a must read. And I think my favorite part of this entire stream is that James started in the dark and ended in the light, which shows just how early he decided to wake up for us. Guys, I will be back tomorrow, of course, I believe with Christopher Inks from Texas West Capitol. But don't quote me on that.

9.30 a.m. Eastern Standard Time. Hope you guys enjoyed Macro Monday. I know I did. Thank you, everybody. Thank you, James, Dave, Mike. You guys are legends. Thank you, Scott. Thank you, Dave, Mike.

Thanks, guys. Bye, guys. Let's go.