The Wolf Of All Streets - Recession Risks Double | Can Fed Pause Rate Hikes And Still Stop Inflation?

Episode Date: June 19, 2023

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Bullard, Williams, Goolsbee, Mester, Powell. Does that sound like the lineup of the championship Denver Nuggets? No, that is the list of five Fed speakers that we have to look forward to just this week. Powell will be in the House and Senate floors testifying, and all of those other Fed governors will be speaking in some capacity this week. I think Bullard is speaking both on Tuesday and on Friday. Do we really need to hear what all five of these people think about what is happening at the Fed just this week? Or do we think that maybe it's just going to confuse people further and add more uncertainty to markets.

We're going to talk about that and a lot more. Of course, it's Macro Monday. I've got Dave Weisberger and Mike McGlow. Let's go. What is up everybody i'm scott melker also known as the wolf of all streets before we get started please subscribe to the channel and hit the like button down below smash it tap it hit it pound it whatever you guys want to do with it i didn't realize we had so many Fed speakers until Mike McGlone and I were speaking just before the show. I looked it up over here because you guys know if you read the newsletter every day, I take a look at the market wrap from Bloomberg and it gives you

the key events of the week. And half of these are Fed speakers, presidents, all the Fed presidents. I don't know why we need so many presidents of different Feds. Maybe I can get some clarity from the guest today. But as I said in the intro, I can't imagine what they possibly have to say at this point. We saw Powell, we saw FOMC last week. We're going to definitely talk about the Freudian skip, as I like to call it, where he said skip instead of pause and then corrected himself. Went back to pause. I'm just going to go ahead and bring on the guest. Mike, I need you to make some sense of this for me. Why do we need to hear five Fed presidents speak in one week?

So, as Dave's response, I think, is a thousand words. They're all going to say the same thing. It's a big difference how the Fed is now versus the past, where they were people who, like me, worked at primary deers. They didn't say anything. We were just supposed to figure out what to do, and now they just won't shut up. But the key thing to remember here is to point out here is they're all saying the same thing, that they will be vigilant. They're all talking about tidy hike, more rate hikes. We just look at what at happened last week the week before bank of canada surprise rate hike federal reserve um we're hawkish ecb raised raised bank of england raised race the only key countries that are key countries that's

cutting rates china because they're in a secular decline and they're going to be facing a recession from the rest of us so the key thing is let's look at the next meeting on July 26th. We're at 70% that they're going to go 25. And that's the key point that I think the market doesn't get yet. This is the big cat and mouse game between the stock market and the Fed. And the Fed is not going to ease, in my view, ever, probably ever, until the stock market tells them to. Why should they? Because everything's fine. Inflation's going down. The economy's doing fine. The stock market's great. Then there's signs

of things breaking, which as I point out, like commodities collapsing, credit crisis, housing dropping from the highest ever, things like that that's all built in. But this is where I think it's a bit of a worst case, kind of a delusional stage where the market hasn't figured out yet. So I like to point out a few facts. I went back and just figured out a little bit. You know, you watch markets versus a 200-day moving average, and sometimes it gets too cheap, and sometimes it gets too expensive. So right now, the NASDAQ is 23% above its 200-day moving average. And that's since 2000 when it had that all-time high.

It's only happened on three separate occasions. It almost always comes after it goes down a lot, moving average, till it's lower, and then it points back out again. The point is it virtually never stays that high above a 200-day moving average. It's never happened with the curve this inverted. So that point to me is what the market doesn't get yet. It's priced for all this normal human nature, optimism, and hope that just forgot that the last almost 30 years, every time the market went down, the Fed was there to save you. This time, it's going to

be pointed out clear from all these Fed governors that we're not going to save you. We're focused on inflation. My forward-looking measures like PPI are collapsing. Commodities are collapsing. But we're focused on our measures. And I don't see a win-win here for risk assets. Yes, I've been wrong. But no, this is the way it always happens. You have to battle.

You have to get that periods where people have, I think, irrational exuberance with a lack of fundamental understanding, meaning this is an economy that's just tilting towards recession. The Fed's going to make it go that way, and it's not going to save you until the stock market goes down. Dave, you did the, I asked why we had to hear all these Fed people speak. You gave me the beginning of the chicken dance yeah i mean look the fed's best tool their favorite tool to use the one that that has the least economic consequences to it is jawboning has always been that way and will continue to be that yeah uh it you know powell has been very clear and i kind of understand where he's coming from uh that what he the measure that he's looking at uh that he wants to look at it's not all the fed governors that way by the way but

powell for certain he cares about inflation expectations and those polls and what's going on there a lot because he realizes that what he's doing with interest rates is there's two aspects to it the aspect number one is that everyone focuses on is if you put a lot of people out of work, then labor costs will go down because companies will be able to screw people. That's kind of a nice way of talking about supply and demand, but it's a Monday morning,

so I kind of feel very cynical today. So that's thing number one. And he doesn't really want to do that, but doesn't feel he has a choice. The same thing is true about Mike's favorite point, which is the wealth effect. If you knock the stock market down, then people will feel less wealthy. They won't spend as much. Once again, you won't get as much demand. So those two things are true with regard to interest rate hikes.

And we've seen them time and time again. But the other part, which he actually does focus on, and he's talked about it several times at several meetings in the past year, is he cares about inflation expectations. And the fact is, people expect inflation to go up, then they buy things quickly, causes demand to increase, and it becomes a self-fulfilling prophecy. Similarly, on the way down, if people expect inflation to decrease, then they don't buy as much. They think that their savings might actually be useful, and so they save and inflations don't get driven higher. In wage negotiations, unions with high inflation expectations push harder, yada, yada, yada. So what does this all mean? Well, all I would say is that the inflation expectations measurements in polls is trending down.

We had kind of a strange one this last month where the longer term rose up a tick, but the shorter term came down a tick. I'm not sure what to make of that, but they're watching it. The fact is that we're looking at a Federal Reserve who skipped in order to give them time to look at data. And so what does that mean? That means for these knuckleheads that if there's a short-term blip in data that makes them think they need to fight inflation, they'll hike rates next month. If not, they won't. It's pretty straightforward. So more than most months when we start getting the, the, the inevitable flood of data before the next meeting, it's going to matter because they basically gave themselves an extra month to look if PPI rolls over, if CPI comes in at a muted level, uh, you know, if, uh, and I hate the unemployment rate because it's bullshit but if the labor force participation rate and unemployment rate signal a cooling economy then i think they will continue to skip and they will do so until they but but i think they like that word skip because it gives them the ability to jawbone and so they did he will raise you guys go do anything wrong but but he didn't mean to apparently okay i listened to it uh he didn't mean to say skip or did he right but for someone who's so deliberate about his words and the tone that he uses he corrected himself very very fast it like i said 40 and skip it seemed like a 40

and slip that he said skip and then he very quickly said i mean pause so are we now embracing the skip language because he happened to let it fly or it's this is william faulkner sound so stupid by the way that we're talking about this but we have to because that is what the market's talking about it's a bunch of bs at the end of the day it's the same shit which is to say that if they can justify not raising rates by the data they will justify not raising rates now the biggest single problem that Mike points out every single time and is correct. And I want to be clear about that, because while I'm not as, I'm not as McLooney as Mike, uh, the fact is he's right about, they're looking at the wrong data, but that's a totally different problem.

So Mike skip, pause, pivot. I mean, what, what are the meanings here now i i think i've been on the uh i will die on the pause is not a pivot hill i think we've uh litigated that this is not a pivot obviously much to do about nothing clickbait and for people like dave and i have been following the fed for decades move on they are not going to be there to save you this is something i've never seen they clearly stating we're not going to be there to save you. This is something I've never seen. They clearly stating we're not going to be there to save you if the market goes down. So it better not go down if you're long. Next, I look at it as a strategist, two-year notes, US government two-year notes, 4.7%, put them away and leave and wait till something happens. If it doesn't,

you say, okay, it was a good period. So next subject to me is what's the data showing? So let's look at on a global basis, what did people get wrong a year ago, starting with crude oil? Initially wrong right away, and then it turned out that way. Why did the vast majority of people expect to go above, stay above 100 and it's at 70 and still things like natural grass collapse because they miss the demand pull side of what's happening globally now when's the last time we heard an upward revived vision of demand pull estimates from China it's all tickling tricking down so that's a a secular um decline in this economy that just blasted off in the last 20 years it is we all know it's a wayue. Every single economy in the history of mankind,

when it goes up that fast, has a significant correction. So that's just getting started. So let's look at its two main places, what exports to. Now they're high now, but the thing I do on weekends is, you know, some of us do is I study and listen, read everything I possibly can. I hear a major divestment. Everybody's doing whatever they can to get out of China.

And China's even doing what they can to get their manufacturing over to Mexico. So their main two clients, U.S. and Europe, not only did they obviously get them upset with this war, but they're going to a recession. What stops this? Well, they're all raising their rates. Why is China cutting their rates? So that, to me, is the beginnings of a global economic slowdown. Now,

probably the recession, it's just getting started. The key thing is there's nothing here to save it at the moment. And then I look at things like, well, Bloomberg Commodity Index, it's collapsed. You look at producer pricing, they say it collapsed. Copper's going down. All these things that are really supposed to relate to that global economy. And then, so to me, the Fed, the fact is they're still priced for tightening. So I just look at it as a risk, some in running risk of how expensive our risk assets. Well, the NASDAQ's 23% above its 200-year average. It's very expensive. And it's not going to go down. And I mean, it will go down, but even when it does go down, maybe those rate height expectations will lessen a little, but they're not going to be cutting.

Mike, I need to ask you a specific question then. Okay, so we've talked about the labor market quite a few times, right? You've made the point where people argue historic lows as if that means it's going to go lower. And obviously, you know that the mean reversion is that they've already tightened enough labor markets. Unemployment will rise, right? I've seen people making the same argument for commodities. We keep talking about the fact that commodities are falling off a cliff, PPI at the fastest level ever, Bloomberg Commodity Index, the price of oil

now. But people are saying because it's now fallen off a cliff, the mean reversion there will be that they will rise again. And then therefore, we will have to talk about inflation and not deflation. So I guess the question packed in there is with them falling off a cliff, is there still room for them to continue down? Or is it much like the labor market where the only way now is up? Lots of room to continue down. They typically have to get cheap. And there's only really one commodity, two that got cheap. And that is natural gas went too high, back down to two, that got cheap. It's back up at 260 now. That's what's

supposed to happen. Lumber got too expensive, got too cheap, it bounced. But it might take, if history's a guide, 10 to 20 years to get back to those old highs. And it's only because of the basement of currency. The fact is for commodities to bottom in this environment with the number one source, demand pool source for the last 20 years, China hit picking lower is you basically need a long and variable lag to Federal Reserve easing. That means you need basically a weaker dollar. You need the Federal Reserve, that lower plateau. We're so far away from that if history is a guide. So I ask people, then if you expect commodities go up so what's going to cause that were you the people were bullish last year that's what's happened

where's in the early days of the supply and demand elasticity kicking in we still have massive supply of all the production signs are still kicking up because they were to sell forward on the curve we're saying things like crude oil and the demand is is kicking still ticking and downward it's just getting started like i said the bottom is is kicking still ticking and picking downward it's just getting started like i said the bottom line is right now virtually every risk asset in the planet most notably commodities are completely subject to that stock market it has to go up just for commodities stabilized and what's the risk stock market goes down and everything falls like crypto so that's the problem is it's all about fed and monetary supply right now

and they are still tightening at least they're still expected to tighten it's not just the fed the most coordinated central bank tightening in history is still going on so when people talk about the end of the banking crisis like what caused it well rates are going higher what caused what really trick and that's the key thing i'll end with, what really sparked part of this tilt towards still this fight for inflation is that the war in Ukraine spiked commodities and they're just starting to come back. I'll just give the example. In 1980, the commodity index peaked, and then I think it took until 2003 to take out that high. I can look at it now, but it's usually how these things work. It takes a long time.

So as far as commodities are concerned, I have nothing to add. I think that disposable, consumable commodities where production is extremely elastic, and not just elastic, but technology has improved production and brought costs down dramatically i think mike has it bang on uh i'm not sure that what that says for nasdaq stocks uh in era of a technological revolution i'm not sure what it says about uh crypto uh projects which i think at some point we are due to to a decrease in correlation and i think that that is kind of important. And I want to talk about AI at some point in this hour, because I think that it's very important for people to understand an emerging narrative here. And I certainly don't see what it has anything to

do with Bitcoin, which is really at its core, and I will continue to say it every time we talk about it. It trades like an option on its own adoption, and its adoption is predicated upon distrust in government institutions, which is right now at an all-time high. And that divergence is one that I think matters. People are disgusted. Here we have the leading nominee on one side indicted and potentially could be behind bars as he runs his campaign. And the other, the incumbent president saying, God save the queen and looking like Mr. Magoo on stage. I mean, you can't make this stuff up. If you had woken up 20 years ago, if someone had said, you know- I think the sad thing is you could make this stuff up, by the way, and it would be a great story. 20 years ago, if you had said, you know, know you're gonna have a president who looks like mr mcgoo on stage and has decided he wants

to run again and he's gonna go up against a a ex-president who literally is under federal indictment and more than half the country hates with a toxic passion that borders on psychosis people would have said oh oh, come on, that can't happen. I mean, this is America. We're not that dumb, but yet here we are. And so you have to put that backdrop on virtually everything that's going on. It is a crazy situation. In the meantime, we have this huge battle going on over a narrative. And that is what's going on with crypto. I think if you want to talk macro, yes, the economics. And look, I love economics and Mike and I can talk about what's

going on all day long. And frankly, we're beating it to death because the reality is that's changed. We said it at the beginning of the year that this year was going to be Fed tightening and doing everything they can to overcorrect on the economy and push it into recession, despite what they say. But that by the end of the year, we'd be into an election cycle, and they're going to have to ease off the brakes or whatever the hell they're doing at the time and let the economy kind of go. I still think that's true. And the market is a discounting into the future mechanism. And I think that's why you see some of the things that you see. But there is a huge narrative going on. Is crypto evil and bad?

Or is a technology that is potentially revolutionary incredibly important going forward in the future? And that narrative is what's playing out on the macro side. Because what we've seen, the stuff that we saw this past week, I mean, oh my God. I mean, I counted news stories in the macro thing, you know, between the Hinman paper, the SEC basically flipping off the court in terms of their response to Coinbase's writ of mandamus. The Binance case, what's going on there?

The, you know, the SEC Stabilization Act is another way, you know, of Congress basically saying the SEC has gone too far. We need to rein it in. The Promethean nonsense that's gone on and why that happened and the BlackRock ETF application are all huge news stories and all have a lot to do with the macro of sentiment and narrative in the crypto case. And all of those for crypto are going to be more important. As far as the NASDAQ is concerned, what's going to be more important there is the macro ai narrative on one side you have people thinking it's going

to change the world and it's going to be a new big force which is why nvidia is where it is i know every company that embraces it you're going to see the ai version of long island iced tea for the next six months multiple companies saying well we're using artificial intelligence to sell soda or whatever. He doesn't bubble. Yeah, exactly. You will see it because people love to chase that crap. And there's all sorts of reasons. On the other hand, you have a lot of respected scientists saying it's going to end humanity and Skynet's going to become sentient and wipe us all out. So, you know, that macro narrative is very important. I mean, we could laugh, but these are not dumb people. I mean, this isn't the people who Gasparino feuds with from the AMC apes. These are like respected PhDs and scientists saying, be aware and ethical AI and making sure it's ethical. It may be the most

existentially important thing in human history. So, I mean, there are big narratives going on out there and I think we should unpack some of them. But when it comes to the commodity super cycle, look, not only do I think Mike is right, but I think it's actually dumb to argue that this time is different. I hate this time is different. Everyone, someone says this time is different. They better damn well have a good reason for it. And usually the reason is because I'm long. Well, that's one thing I want to pivot over to Bitcoin. And I'm glad you mentioned this BlackRock ETF seems to be somewhat significant. It obviously bounced Bitcoin about a thousand bucks on twenty five thousand, twenty six thousand. But I've got it on the tip of my fingers.

One thing I want to publish maybe next week, if Bitcoin is so great, how come it can't outperform the Nasdaq? And I say that facetiously because it's a fact the first time bitcoin right now is a ratio about 1.76 to the nasdaq it was first traded that in 2017 okay so here are six years if you bought bitcoin in that day and you bought the nasdaq in the same day you have the same return yet you get much less volatility in the nasdaq you have this broad index and by the way typically you get support from the us government you have the ai explosion i'm bullish bitcoin particularly by what you said about all commodities every single commodity in the planet history commodities people can create more with less every day and the only really time

they go up in the long term is when the currency they're based in is the basis i.e the dollar and i can show you how the price of crude oil now is the same price versus gold since 1931 i think i can double check it just fluctuates but the key thing about bitcoin it has that definable diminishing supply which i obviously point out a lot but that's unheard of never seen before in anything i've ever seen obviously it has that low adoption and early days now i completely believe that in the big picture but if i'm right which i think i'm going to be by the stock market it needs to go down for the fed to lighten up then everything is going to go down cryptos will go down the most they're supposed to they've already lead and already kind of telling us there's a problem going down yes there's other reasons the fed's cracking down why the fed's cracking down well

because ftx went under why the ft go under? Because cripples went down. You see the connection there? But Bitcoin should outperform. It's just not there yet. And that's why I think we got to get through that period. We can see a decent bear market in the stock market. I mean, that's going to happen in our lifetimes. Maybe not this time, but it should happen probably by the end of this year.

It should kick in. And to see Bitcoin outperform. And it's not. Right now, it's going down more. So I still look at it as I tilt back to see Bitcoin outperform. And it's not right now it's going down more. So I still look at it as I tilt back to us government trade outs until I see that divergence. I think that, that you, you, well, look, I, what happens to the stock market? I think that I still believe, and we can say this every week, I still believe we're going to have at least one, two to three week challenging period this fall. Uh that's 10 20 i don't know what it's going to be but i do believe that

will happen it will be if i did decide to finally buy puts it will be the week after i that my puts expire um i don't or if i'm you didn't happen a couple of weeks before it will happen before i get a chance to put them in and i'm looking at a 35 ball instead of a 15 ball and saying, well, what the hell did I do? So I'm not going to bother trying to time it. But the fact of the matter is that, you know, I do think that that's true. I'm going to say it again, because I want to say with emphasis, Bitcoin is a fricking option. Its commodity value is 20 to 30 times its current price. It hasn't gotten there yet. It may never get there. The market is pricing that probability at three or 4%. I believe that it's decoupling will happen when as people are allowed in. Here's a fun fact for you.

50% of the world's capital market dollars emanates from the US And there ain't nobody in the US, I hate to be folksy, who's allocating a crypto at this instant in time for two reasons. One, they have mandates don't allow them to let that sink in. They literally are not allowed to because the investment communities, and I was just in New York last week, and we saw multiple large institutions like the biggest money managers, the biggest banks, the biggest hedge funds in the world that are US-based and every single one of them made us sign NDAs that we can't talk about what they're doing. And all of them have the ability to say more or less the same thing, which is we would love to, because we think this is a historic chance and we can't because we are not allowed to invest in this stuff with the regulatory fistfight that's going on right now

and with everything that's happening so that is a very very big deal and explains a lot about what's going on so you're not going to get a crowded buying FOMO buying out of 50% of the money in the United States. That is literally going to end at some point. And that is why the BlackRock story is such a big deal. And by the way, even those who can invest are still incredibly gun-shy because they worry about custodial issues post-FTX. And yes, there are companies out there that are making great strides in improving safety with custodial issues. I mean, Mike Belshi was on with Scott,

was it last week or the week before? It's all a blur, Scott, I don't remember. I don't even know at this point what week it was. Maybe the week before. It was the week before, yeah. To attract people. But the absolute reality is you have 50% of the money in this world that's investable that's sitting on the sideline.

So that's why I think the BlackRock story is a big deal. It's a big deal because they're signaling that they're part of that 50% and they've made multiple differences with the SEC. So that's one point that has to be made. I do not believe that we have a FOMO rally until we have some sort of regulatory clarity, but I do believe we have a floor, as it were, not a floor and a hard floor, but we have natural buying interest and we have this every month. It's the same thing.

It's rotation, speculators selling and long-term holders buying. That has been going on now ever since ftx and in the beginning there wasn't enough speculative sellers they were exhausted and so we saw this rally we then saw it settle back down and now we're back into another one of these trading ranges or not and and when you're in this trading range you're watching what's happening this literally looks and you said it yourself on one of your either newsletters or YouTubes, we are literally forming the right side of an inverse head and shoulders. And that's what bottoms look like.

Now, could we have a breakdown of that because the stock market absolutely pukes? Of course. Or we could just rip up to like 35 or 40 before it goes down. I mean, you know. But I honestly believe we are watching. And the problem with this show is we do it every week. And I'm going to say the same thing for probably three months as we watch the paint dry of this market that's stuck in a very tight range. But the reality is I believe we are watching a very long-term bottom forming. And the fact that it's forming a year before the halving, the fact that it's forming two years or 18 months before

we get clear indications of a change in regime in financial regulation, I mean, I honestly think the most bullish thing, and you would see that 2017 comparison look foolish, is if the Biden administration, whoever's running the country, and frankly, I have no idea who's running the country. I just know that it's not the president. It's people advising him. If they decide that Gary Gensler is a political liability,

which considering the Republicans are making him into a campaign issue, that chance is increasing. That is the biggest message, by the way, in that act. That act is one that I think you could probably find, if it wasn't being politicized, you could find bipartisan support for. Most people believe in the financial community, and frankly, a lot of regulators. I mean, there are other regulators that aren't partisan-led, that a depoliticized SEC is good for the American economy. That is true whether we have a Trump administration next time, a DeSantis administration next time,

an RFK administration next time, a Biden administration or a Michelle Obama administration. I think most people are sick and tired of a politicized SEC. So you could find bipartisan support for that bill because it actually makes a lot of sense. The problem is, is to admit it now, if you're a Democrat, is impossible because it will look like people will focus on hashtag fire Gary Gensler and not focus on hashtag depoliticize the SEC, which is what the act is trying is really about. So now it's political, but I would expect that that will actually pass once there isn't Gary Gensler sitting in that seat. I think that that's the kind of thing that people are just fed up of.

Let's talk about the BlackRock ETF then, because they have a hit rate of 575 to 1 on ETF approvals. The one they ever got rejected was 10 years ago. Okay, so I think we can make a case that BlackRock doesn't take a shot unless they think it's going to hit, right? They're 575 out of five seventy six. Right. That said, the SEC has rejected 22 different ETF spot ETF proposals already and more than 22 times. Obviously, 22 products, 50, 60 times, if you consider how many times they've kicked them down the road. That's two big forces meeting here, right? And so I don't like to put on the tin hat, but do you think that BlackRock knows something? I mean, it feels like if they already think they just think this is good timing and they're getting in line and their record is irrelevant.

I mean, maybe it gets rejected, but if they think this will pass at some point, get in line. Because there's people saying this can be fast-tracked within a month. I don't see that. No, I don't see that either. But I do think that it's important to note two critical differences between this BlackRock ETF and every other ETF that's been proposed. Critical difference number one is they make the comparison to GLD razor sharp. The SEC has to literally, because it will be argued, the SEC literally has to say GLD should not have been approved. Meanwhile, it's one of the largest ETFs out there, and this is structured identically. Moreover, you cannot compare the gold market to

Bitcoin's market for spot and conclude anything other than the fact that the Bitcoin spot market is much more transparent, much less manipulated. And they're going to allow Nasdaq to track that, which in their opinion will eliminate the, this market is manipulated and we don't know what the real spot price argument is that the SEC has continually made for rejecting these. That's right. That's the second point. So sorry. Well, no, that's right. You're right. So if you look, that basically leaves the only argument the SEC has left in their, in their rejection, you know, triumvirate of arguments, is the one that's completely bullshit. And even the judge in the Grayscale case has told them more or less that it's bullshit, which is that foreign Bitcoin exchanges dominate the price and that manipulation in spot is

problematic, but in futures it isn't, which literally is dumber than, it's one of the dumbest arguments ever made. I mean, it's so- You know what's crazy? I feel sad for the people who actually had to write it on the report and nobody would want to put their name to that. I'm trying to remember if you guys were on when it happened,

but it's happened multiple times with Yusko, who literally laughed off every ETF proposal, said that the futures ETF would be the top and said that futures trade, all these things, right? He's been spot on. And he literally said repeatedly on my show, on Rands, everywhere we go, there won't be an ETF until BlackRock applies for one. He's like, no spot ETF in the United States until it's BlackRock that asked for it, because why would they approve anyone else? He's been saying that for years. So that to me is the key thing is that we're

we're this is inevitable there will be an etf tracking physical cryptos and an index of cryptos and bitcoin just a question of time and when now obviously this is a good sign from blackrock i'm just reading my latest comments from our my colleagues er Beltrunis and James Seifert. And they still, obviously much more to go, but it's still, I look at it as I just don't want to be putting on bullish outlooks based on hopium. I mean, I want fundamental sub background and supply and demand indications that this is going to go up over time. That's what I see. In the meantime, what I see is all assets are subject to the stock market going up at the moment, even if we have this. And so I think as far as FOMO, if we're right, if our Bloomberg economics team is right, that this recession really starts kicking in in the next month, like I will see with some of the

inflation that sees shown deflation, then I fully expect We're going to see FOMO in gold because it's already started to have the deepest pockets on the planet are some of the biggest buyers of gold ever in the last couple, two years. I mean, there you go. I mean, central banks.

And obviously Chinese have some Russians are, well, a different story, but the key thing is they've been buying about three times in the last two years, about three times as much as retail has been selling through ETFs. Retail has been selling gold ETFs.

I think part of the reason is because either stock market's starting to go up and they can buy, get that to, you know. So to me, this is one of those things that only thing that's going to bring on more higher prices for gold is higher prices. It's just that kind of setup. And it's got a fundamental background behind it.

And it's got a potential U.S. recession behind it. It's almost always how it works. We don't have that going for Bitcoin at the moment. We have the hopium that BlackRock's going to get ETF. And then it has to face this environment that if I'm right about this stock bear market, that's not just, this is a classic bounce in the bear market. Then there's so much longer to go. And we keep focusing on the hopium things, all the halving. Well, halving is a no, no. I mean, it's just one of the things that never matter. It's a no, no. It's things that

you don't know. The key thing is the market's price where we're not going to get a recession. Yet, I think we're going to. That's the thing that's really going to matter. I mean, if you look at the four-year cycle really quickly, Mike, even with the halving in 10 or 11 months, you don't really see the price action from the halving until four to six months after that on those cycles. So we can still have a monster recession and have the habit narrative play out in 18 months. I want to make it clear, Mike, if we're going to, we can put a line in the sand, say June 19th, that that ratio that you were describing, the NASDAQ, I would love if I were a macro strategist, the trade I would put on, and it's the same one Mike Alfred has been talking about for whatever,

it's long Bitcoin, short S&P or long Bitcoin, short NASDAQ. I prefer a short S&P like Mike. How about short NVIDIA? Well, if you really want to get down to it, that's probably a big trade. But I want to be clear about this. The issue is going to play out on the narrative. And I know I sound like Ben Hunt from Epsilon Theory. I don't know if you read him, but Ben and Rusty do an amazing job. One of my favorite dinners ever was at Dallas

STA sitting down with Ben and talking about all sorts of stuff. And he and I are not on the same side on the political spectrum, but boy, do we look at the world the same way. It's just some different values. But the truth of the matter is this narrative battle is the battle. If the anti-crypto army is unable to crack Bitcoin in the next few months, and you get to a situation where people are starting to see through it, that is a big deal. And I fundamentally believe that the watershed week, that the invasion of Russia in the invasion of russia in the winter week

was last week i think that the sec went and the anti-crypto army went way too far overextended themselves and they're in deep trouble on the narrative side by putting this promethean guy who looks like a character from central casting out of an 80s wall street is horrible movie uh i couldn't give up there to try to make an argument which was fundamentally not just untrue but obviously untrue i mean literally they put their hopes on some guy that looked like a character that gordon gecko would have slapped around on wall street to say that oh you don't need new rules, admitting... He was reading a script. He was reading a script. Crypto can't be traded there.

Moreover, the denominator for cryptos couldn't be traded there. And moreover, there's no path for registration of any of the coins that people care about. It's ridiculous. And that was a big, big problem. At the same time that BlackRock and the rumor this morning that Fidelity are now seizing the opportunity in the narrative space to now push for a Bitcoin ETF. That is a big deal. Now, I want to make it clear to your audience, Scott, why the Bitcoin ETF thing is a big deal. Because there's so many people in the crypto community, the Bitcoin community, that have their heads up their asses on this topic. I want it to be clear. They say, well, not your

keys, not your coins, therefore it doesn't matter. That's fine. But let's be, for people who are technologically- It's fine for them. Fine for them. And it's fine for the 0.1% of the population in the US, 1% or 2% of the population outside the US that has by necessity figured out how to do Bitcoin. So my brother is a financial advisor. Okay. And I talked to him for a long time and he, look, he follows us. He watches your show. He watches me. He understands this stuff. He has conversations literally half a dozen a week with people who ask him about digital assets, despite the fact that he is not allowed to do anything. He can make zero dollars because there's no product that is allowed for a registered investment advisor

or a financial advisor to be able to put people into Bitcoin. They're not allowed. Their management would fire them if they discretionarily put people into GBTC. And there's nothing else. They don't want to use futures ETFs for obvious reasons. So they literally can't. What he said to me was prophetic. And Adam, if you're watching, this one's to you. The fact is people don't understand the narrative. They say, why can't I buy this in my brokerage account? If I can't, I think I don't want to touch it. That is the big deal. The day that they were allowed to buy it in the brokerage account, that narrative changes. That is why it is so important. It is not that

there's a wall of money who's going to jump into Bitcoin on day one. It's that there is literally double digit trillions of dollars that are unlocked when that happens. Does it happen on day one? People would say that that was the case with GBTC to some degree. I agree with you, by the way. But just playing devil's advocate, your average investor doesn't understand the discounts and premiums to NAV that have been problematic with GBTC and just these Bitcoin trusts.

You know what? GBTC went to a discount for a bunch of reasons, not the least of which was when retail demand ebbs and flows and it flowed and all of the people on the professional side were assuming that it was going to and it ebbed excuse me uh all the all the professionals had on the trade because this was this ridiculous arbitrage trade this was the if you ever watched monty python the dennis moore trade of stealing from the poor and giving to the rich, which is what our current SEC facilitated, literally because accredited investors were able to, for years, to charge the premium and capture that premium in GBTC because accredited investors are allowed to deliver in kind to the trust after six months and retail investors had to pay the premium. Once that reversed and the retail investors no longer wanted it and there was no ready, but nobody there for them to sell it to,

well, that then it went to a discount. That dynamic, which should go down as the biggest black eye of Jay Clayton's administration by not approving a Bitcoin ETF, nor allowing for accredited investor rule reform, nor allowing for a safe harbor in crypto. That literally was harming the exact people that our progressive leaders want to help and helping the people they want to harm. So we had that. But the bottom line here is it's a narrative space. We really have to watch it. And the narrative that's going to win the argument, honestly, for crypto is going to be artificial intelligence. That's going to be the winning argument because there's not a really good answer.

And I want to make that exceedingly clear. And that's because crypto is... There's more bullshit in crypto than any of the three of us want to care about now let's just wipe away 99 of crypto tokens and say they're bullshit i don't know what the number is 99 98 i but it's i okay but the market structure of being able to use blockchain technology to crowdsource to have ver verifiability, to incentivize people who participate in networks is an innovation, a financial innovation that is literally what is needed in order to get ethical AI. Because the only way to get ethical AI is to be able to crowdsource and verify information and have verifiability in what the data is,

because to anything, garbage in, garbage out. And if corporations are allowed to tilt the data the way they want to tilt it in AI kind of search, that's going to be incredibly problematic. People might've said that that can't happen, but imagine if a company, if the new Google or Google themselves is allowed to charge advertisers for tilting AI search results. Just think about what that could do. I mean, it literally is an incredibly important use case and deserves an entire show talking about it. I would love to participate in that. But my point on the narrative, Mike, is that there is a delinking coming. I think you're right that there could easily be that stock market blip. And there's no doubt whatever price Bitcoin is at, it will be correlated. I just think that you won't see the beta to the downside for exactly the reason you pointed

out, which is 2017. So here's the key difference, too, is we're talking about there's a big difference as you and we agree a lot in the crypto market. There's 25,000 of them. Most of them are speculative, highly speculative digital assets. I can see people like Elizabeth Warren focusing on that. And then there's Bitcoin and Ethereum, most notably Bitcoin. So to me, that's where Bitcoin really comes out of it ahead. But question for you and your audience is when's the last time you sat through a true bear market in the stock market? And it hasn't been since bottom in 2011. We have not had it.

Why? What's changed? That's changed. The Fed is not there. That's why I think this is the best setup in my lifetime I've ever seen for a true bear market, meaning one that goes down and stays down and gets everybody bearish, takes a couple of years. But last, let's look at the peak of the NASDAQ in 2000. It took 13 years

to take that one out. Maybe we take out a new high soon, but then you need a good 10-year period where it doesn't make new highs. It always comes after, never forget from where you're from, it always comes after big pumps of liquidity that dump. So to me, this is where we are and Bitcoin's right in the center. I completely agree. At some point, it's going to come out ahead. And that's one thing I have to point out on this show and be careful about is everybody who listens to us wants to hear things bullish from us about cryptos because that's what they're involved in. Now, let's point out facts of what we're doing here. My job is to focus on the macro. And sometimes I have to take the risk to say, no, I disagree. It's not bullish. And here's why. So we have to put

ourselves into this form and say, what's my position? What do I want this person to say to help my position, help me feel good about it? I'm going to just point out facts, what we should expect. We should expect a true, real recession where everybody loses money. And it's one lesson I learned from a hedge fund manager. You have to just eviscerate money. I think that's a term I've heard guests use before. And the Fed's focused on doing that right now. Like I said, Bitcoin is just the fastest horse in the race. And here's what I think we're going to look back at six months from now and say, oh, cryptos went down a lot and they warned us that everything was going to go down.

That's what I think is we're in stage right now. And then I point out, okay, what's the nasdaq above its 200 week 200 day moving average it's the most in you know rarely stays this high and then i look at fed tightening they're still i gotta see that sign of liquidity it's not even there from the fed mike would a black rock etf approval in the next few months change your opinion on that or do you think that macros driving all in liquidity because i could see i'm not saying it would happen but crypto is still i mean bitcoin is still exceptionally small versus anything else we're talking about. So naturally it follows macro, but if it had a catalyst that separated it somewhat, couldn't rise in the face of the narrative that you have set.

Here's what I expect. And Dave knows this happens every 10, 20 years in markets where you have to have a lot of people lose money and they can't buy anything because they get stopped out and they only can buy things that they want. It's not the need. It's the God of sellers. So my point is when you eviscerate money from the system, you don't have money to buy anything. We're overdue for that. The Fed is telling us they're going to do this. I mean, that's what I'm hearing.

And that's what you see in the WIP function that you see from all the essential banks. So yes, there will be allocations to Bitcoin from traditional assets. But if traditional assets are going down, let's say the NASDAQ drops a normal 50% from its peak, the S&P 500 drops a normal 50% from its peak. In a normal recession, normal bear market, it's done it twice since the beginning of this decade, this millennium. Then there's nothing, virtually any risk assets go up. Now, is Bitcoin more like gold and treasury bonds? It will be someday. I'm just pointing out facts. I'd love to see it. Yes, a BlackRock ETF makes the difference. It helps make the difference, but not when everybody's losing money. And yes, that's a bad case scenario. But my question is, if you study the histories of cycles and booms

and busts, what stops us? I'll tell you one thing that does. If I heard right now the Fed is going to be easing a lot soon, I'd say, yeah, then we'll be okay for risk assets. But it's the opposite still. Just one thing. We're still fighting the Fed if you're bullish risk assets. I agree with that really quick, Dave. I just want to say, though, it's interesting that markets refuse to believe that, Mike. Right? I mean, we still see cuts being priced in by the end of the year. It's like nobody literally listens to anything the Fed's saying, no matter how clearly they say it.

This is the classic double dog dare of human nature the fact our market going going up i mean come on when i was six we all did double dog dares when you have four brothers and we'd play double dog dares out in the field and dog okay it's a classic double dog there in the market that's making it worse because if let's put it this way if the stock market was down 20 in the year where would be would be Fed hike expectations? They would be towards cutting, guaranteed, but it's not. That's what's making it worse. The market, it's just classic human nature. You buy the dips. You're told you do that. Every manager in the planet knows you got to do that because if you don't, you underperform, you get fired. It always comes to a breaking point,

always. It's just a question of when when i just have never seen a better example i mean the financial crisis was a good example because people just got it to extend it this case it's the money the liquidity is being pulled the rug pull is still there and they only save like the banks when they need a problem and my point is the liquidity is still being pulled so etf makes a difference the bottom line is all the histories of liquidity in pumps and dumps are that this is a pump like 1920 to 1930. Stock market was up 50% and then the rest was history.

I think that there's a very that is a very rational way to look at what's happening. I think that is true. There's no doubt. Stop thinking, Mike. I think that there's a very good chance of that. I feel like there's just a lot of other cross-currents here.

Markets are, unfortunately, if you look at what is going up and driving the market higher, it gives you a hint to what's going on. You're talking about people buying in, you call it hopium. Hopium. That's a crypto term. People are buying stuff that they think will outperform when everything crashes and the Fed is forced to cut. They're trying to buy that stuff. But you didn't say if.

You said when. Well, I think every... You have to keep saying. No, I don't disagree. Look, let's be really clear. I will be really surprised if at some point in the next, you know, probably some point in the August through November timeframe, if we don't see a 10 to 20% correction, that causes everybody to freak the hell out and the Fed to change policy. I will be surprised. I think that one of the things that we're going to find out here is if China, you called it secular as opposed to cyclical. I don't know whether it's secular or cyclical, but they're undeniably slowing down. If that is enough on the global liquidity side for the Fed to basically say, we can't afford this. But who the hell knows? I don't know.

And I don't want to take a position on it because there are so many cross currents. I mean, people that believe that the markets are still on solid footing, they're saying that because they they're discounting what's going on on main street. I don't want to do that. What I'm saying is that, that, that we have a very small market that should be, or be, in my opinion, based upon what's going on, a much, much larger market. And I think that there will be lower beta to the downside of Bitcoin. I think that you could make an argument that the crash has already happened in the rest of crypto. I mean, even projects that people have, you know, like, and projects that on metrics on the projects are doing well, are down 70 some odd percent over any reasonable time period and 50%, you know, over the last several months.

If you look through Scott and my portfolios, you see lots of stuff down, you know, much more than you're talking about, Right. So, you know, it's already happened. The point is it literally has happened already. The reason Bitcoin hasn't done that is because of the supply demand dynamic of most of the holders don't want to sell because they're in it for a 10 to 20 X gain. And they believe in the story and the Bitcoin hash rate tells that story. And, you know, which we bring up every time. That's the difference. That's where you and I disagree.

We don't disagree on the mainstream stock market. I certainly didn't disagree with you on the PPI, what's going on on commodities that we are getting faster, better, cheaper producing. But I think that it's important to understand that a lot of what you're already talking about has already happened. And so it's really important not to beat a dead horse. And so you need to, I think that, you know, Scott, you in one of your things last week talked about how Bitcoin's always the first to see it. And it was always the first to see it.

I think that it's really important to understand that a fundamental D-link, NASdaq is still around its highs and crypto is way the hell off of its highs even even on what i would call the second tier uh but but probably but within that second tier of i don't know which of the layer ones you you you think are going to survive but let's just say the top 10 ones two or three of them two or three of them will survive and be buys the you know generational wealth gaining opportunities mike is this now when you point out that we have the major correlation on the way down and not so much on the way up anymore because that's been the data we've seen is that when the when stocks dump bitcoin goes right with it when stocks go up's indifferent. Well, that's what's the problem lately is Bitcoin, as we know, the fastest horse in the race,

it's telling us in Q2, there's a problem. It's down 7%, S&P 500's up 7%, Nasdaq's what, 20%. The curve's inverted for a reason. There's so many things you can line up here. Since history's going to look back and say, I'm sorry, it was the most obvious thing ever. Curve's inverted for a reason. Commodities are not falling. They're collapsing. PPI is not falling. It's collapsing. Highest pace ever. Okay, back to 1948. So yes, it's a dead horse. I admit that. But then we have to point out, Bitcoin should be first, and that's what's really getting me scared. It's first, and it's telling you there's a problem. Cryptos are telling you there's a problem. You can't ignore that the single most powerful senator in control of U.S. economic policy has published on her website the anti-crypto on.

You can't ignore that the policymakers who are running the economy are doing everything they can to crush this market. And this is the best they could do. I mean, seriously, it reminds me of Rocky IV when Rocky was trying to beat Ron Waddle and Yvonne Drago was beating the crap out of him and he basically was like, that's all you got. That's all you got. By the way, I will not call that a great movie, but it is one of the... It's a great movie.

It's one of the... It's a great movie. ...music videos masquerading as a movie ever. Living in America. The beginning with Apollo Creed. It's literally that. The most powerful people running the USC economic policy

are trying to drive it down. That is what's been happening. And so, yeah, it's underperformed. Of course it would. I mean, it would have to be incredible for it not to be. Until people believe that that policy will fail, you're going to be stuck in this range. So we know that policy will fail. You and I know that from MS lessons of history, all the best technologies always have the idiots to come out and fight against. What

are the Lord of the Luddites? We know it will will thank you very much for being the uh aaron burr of history and that's going on but this is um the point is it's not in a vacuum i said i yes i understand that it's not in a vacuum like i said this is an inverted yield curve effect that's still tightening commodities are collapsing there's a reason that's just part of that narrative it just hasn't and the key to remember is remember why are they doing this? Partly because the FTX collapsed. And we all know this. FTX and Lehman and Bear Stearns didn't collapse because everything was fine because the tide was going out. That's why. These are just parts of the tide going out.

Yeah, guys, we're at 10 o'clock here. So we got to move the conversation to spaces, which is inevitable. There were actually two pieces of breaking news that broke while we were on here. Interestingly, one is that crypto.com operates internal proprietary trading desk. This is from the block, but referencing Financial Times. So we have a claim now that we have another exchange that's effectively counter trading their clients. For anyone who's wondering that they're running an internal market maker. This is the old BitMEX playbook. They know where your stops are and they're sweeping them uh so gonna be interesting to dig into this like i said it's uh from the financial times and then uh doquan got four months in montenegro but just to be clear this is just

for faking his passports not for any of his actual financial crimes let me tell you something i learned in the trading fits we used to do this thing like hey where's the stops where the stops you'd ask the guy in the pit so it carry the deck, where are the stops? It's just all electronic now. I mean, it's the way it was. They knew where the stops were. is we have a smart stop policy, a smart stop algo that allows people to keep their stops in our system triggered by a variety of exchanges. So one single exchange can't run them. And every time I see one of these stories, I think that the, by now multiple hundreds of people that I've mentioned this to, this is why you don't use stops on individual exchanges, particularly in crypto. And why, if you're not using something like our product and you have stop losses, you're going to get your face ripped off. And so it's funny, you know, if you noticed, I smiled when you put up that story. It has nothing to do with crypto.com. I don't know the details of the story. No, it's just this can actually be prevented.

This could actually be prevented if you're an institution and you want to trade crypto and you use stops when you're trading. If you're an active trader, DM me. You know, it's really that simple. We have, we've had this, the antidote to this for a long time. And the fact is, is it's crazy that people don't use it, you know, very much. I mean, people look at it in crypto and they just don't care about these things. The only people who care about those stories, Scott, are regulators. Yeah.

That's what I'm saying. That's why I said it's just another story of it. It's another potential black guy, right, if this comes out. There's so many of those things, which is why. That's why the real narrative is most of the industry that matters, the serious companies, want forms of regulation that are based on principles that can be on principles that can be done, that can be workable, but that guarantee fiduciary responsibilities, among

other things, this is one of them, managing conflicts of interest, this is one of those. And then of course, obviously protecting investors and making full disclosures, etc., etc., etc. The fact is every one of these stories points to the need to regulate, but you can't regulate by enforcement. You need to regulate by rules. Yeah. Regulate by regulation. Crazy, crazy notion. I know guys, we got to go.

It's 10 Oh two. Obviously I got spaces. 13 minutes. Thank you. It was a really great one. I learned a lot and great perspective. Can't wait to see what the 500 fed governors and presidents say this week we're truly looking forward to it thank you guys

thank you everyone okay yeah hey will see you in the morning bye guys let's go let's go