The Wolf Of All Streets - Risk On: Will Bitcoin Break $70K? | Macro Monday

Episode Date: October 21, 2024

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Gold made a new time high. Silver is breaking out. Equities are up. Crypto is showing some promise, but Bitcoin still under 70,000 and yet to make a fresh new all time high. Is this the time when it's finally going to happen on the tail end of October? There's so much going on in macro. I'm lucky to have James Lavish, Mike McGlone and Dave Weisberger to unpack it all here on Macro Monday. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Before we get started, please subscribe to the channel, hit the like button. I'm going to bring on the team Let's go. Well, I sold some. So, you know, in trading speak, that's called throwing. Well, it's kind of a bad term. Throwing something into the volcano is what they say. So I sold some a couple of weeks ago. So I pretty much always guaranteed, you know, whenever I do a liquidity based trade that that's what the market time. Can you sell some Bitcoin? Yeah, but that's what exactly that's what.

I draw the line. I draw the line. We thank you for your sacrifice, right? Throwing it into the volcano. You did it for the greater market and we appreciate your altruism. But here you go. Silver price surges. Banks face billion dollar losses is one of the more heavily shorted assets. Five major U.S. banks face billions in losses for massive short positions. But I think the real story is a 6% move on silver in one day, Mike. Yeah, it's telling us it's it's called the devil's medal for a reason. Dave and I both are ex traders of silver. Dave's kept his hair. And it's just I'm it's just one of those things. I've held silver forever. I like there's a product when I used to work at a firm called Glitter, GLTR.

It's gold, silver, platinum plate. And to me, that's just always been a good holding. And people trade it more tactically. The problem I have with silver is it's basically just catching up to gold. Managed money net positions are way long, like 23% of total open interest. That's near the upper end of the range. And it does this all the time. It gets people excited and then it rips their faces off.

So I'm not bearish, silver, but I think it's more on the back of gold. It's catching up. Volatility weighted, it's still way underperforming on a one-year basis. It should be up more than 50, about 50% because gold's up about 40%, actually closer to 60%, but it's catching up. The problem I have with macro silver, it's not a, and Dave crushes it all the time. It has been demonetized by gold forever. Gold is winning. Gold's at record highs. And silver to me is more like copper. It's more of an industrial metal. Yeah, it's about 20% of demand now from solar. That's only going up. But I think it's more on the back of what's happening in China. In China, yes, we're having this bounce. We see all the bounce in stocks. We see major fiscal monetary stimulus, but you got

to expect that to continue. And then then of course, silver will just figure out ways to mess you up. So yeah, I don't say short it. But what you said is kind of strange. I can say, unfortunately, if banks are short, here's my violin, because hedge funds manage money. They're pretty long. Yeah. They're historically short. I think 1.3 billion underwater at $1.84 per ounce look at look at the numbers though the thing about silver that's fascinating is it is literally the number one long-term stat arbitrate gold and silver the ratio in the crust of the earth is 15 to 1 gold because of the monetary component is trading you know what what's the

what's the number now mike you know i'm not following it's around about 84 so i'll check it right now yeah yeah somewhere in the 80s uh it has vacillated over time between 100 something and 60 something in the modern fiat era and there are a lot of people who think that silver outperforming gold will be a sign of the fiat era coming to an end. I personally think that the fiat era coming to an end, the bigger sign is that Minneapolis paper from the Fed and what the ECB said. We'll get to that later. But the reality is, is that if you like silver and you like gold, buying silver, if you're a hedge fund or if you're an asset allocator in proportion to gold is a perfectly reasonable strategy. And the fact is, is if silver is taken up again in portfolios, there just isn't enough because it plays very close to the edge of its demand. Because as Mike's mentioned, it is used in solar cells, it is used in batteries, it is used in industrial and industrial applications. Yeah, I mean, Dave, check this out. Military consumption of silver could far exceed industrial demand. I mean, this was literally just written three days ago, you see all the things the military uses for from rockets and missiles to fighter jets to night vision goggles and torpedoes.

Right. I mean, it's pretty wild. Not a fan of the military industrial complex, but one has to understand supply and demand before one invests. Now, if the banks are actually legitimately this short, that is a huge, I mean, huge problem. It also means that silver has it for everyone who understands and and you can get James's friend Lawrence on the talk about manipulation of gold any time you want If you think gold is manipulated, it's a joke Of the silver market the silver market has been manipulated for forever you know the funny thing is the only people ever to be prosecuted for it were the Hunt brothers who tried to make it go up. And that all-time high of $50 in today's dollars

looks really, really cheap. And so, you know, silver, because it's been created much like an industrial metal, it hasn't gotten into it. And this is a very long-winded way of saying that other than manipulation, and by the way, that is a huge other, there is no reason the world white silver shouldn't be trading somewhere over 50. I've thought that for quite some time. I think there are a lot of hedge funds who think the same thing. normal reversion of the mean if one goes back and looks at its pricing over you know over its period of time and understand the rate of inflation and how it has not kept up with inflation whereas gold is is starting to you know keep up with inflation and maintains purchasing power parity so i personally am more long silver than gold i made the joke about selling some which i did but i still

own more silver than gold obviously i don't have more Bitcoin than both, but look, we have portfolios for a reason. Yeah. Sometimes it was overall. I'm sorry, James. It was really learning training because you need to sell something to make it go higher. It's a sacrifice to the gods. Exactly. Yeah.

But that's a good segue into look at gold. I mean, gold's ripping to all-time highs here. So, I mean, you've got inflation supposedly coming down. You've got interest rates coming down. And gold is ripping higher. So, it's just not. And you've got assets still ripping higher. You've got equity still going higher and gold going higher.

It seems to be decoupled from its history. So, I'd be interested, Mike, in what you think about this. I know what my opinion is, but what do you think about the price action here of gold and what's going on? I think we got to get through this event in two weeks. It might be the most significant election in history, particularly if Mr. Trump is reelected. And right now the market's pricing for that, the volatility and inflation of Trump 2.0. So I think that's the key thing. I think the worst case scenario, at least short term for gold would be if we have Harris win the presidency

and most of the legislative branch tilt Republican, which would be a great check and balance for the budget, a little pressure on gold. But right now we're pricing for, certainly bond yields going up, as you mentioned, gold going up. Despite the Fed easing, the market's telling you that was a mistake, that Trump's going to be elected, and we're going to have volatility. But yeah, I'm still really bullish gold. It's just at some point you got to say, well, it would look really great when it broke above 2000. You just don't want to be overweight here. The good news about gold is we see a major shift in ETF holdings that just started

to switch upward and they're still down almost 20% from the peak. There's a lot of room for them to make an all-time new high. And hedge funds, managed money net positions, which got way overweight just a few weeks ago, are pulling back a little bit. I think they're just lightening up and probably using maybe more derivative strategies. But overall, it's just a raging bull market that's getting a little expensive. But don't you think, I mean, you've seen and we've had reports of central banks surreptitiously buying gold for their- Oh, yeah. Well, I don't use the term old news, but it's kind of a known-known that's been deep in the market. They really started deeply two years ago, and I'll give you the specific date, February 4th, 2022,

the unlimited friendship. So big picture macro, yes, very bullish gold, still am. But it's for a guy, for anybody who's been watching the show for a while, I've been saying for too many years, it's going to bump above 2000 and get to 3000. So I just want to be a little more circumspect because I said it clearly why I'm looking at GLD, which obviously is still flying. But like why? What ETFs are underperforming? And why? That seems like a huge opportunity. You mean, well, GLD is gold. I mean, it's basically it's the benchmark. It's the net. It's the most it's the biggest

commodity ETF there is if you you consider gold a commodity. It's in the Bloomberg Commodity Index. And to me, this is a bull market and the macro just getting started. It's just a question of what's the next step of the bull market. One thing that's been notable is it hasn't had any kind of normal correction. It's just been what gold oftentimes does when it breaks out, does stair steps. It goes up, consolidates, goes up, consolidates. Typically, you need a little pain in a bull market.

And so far, it's just going straight. I would say it's a stair step rally. Yeah, that makes sense. But honestly, I think that's not the perception of demand, but that's the actual demand of the central banks out there just continuously buying, just standing there at the bid every single day. Yeah, that's what I've heard. I was at the LBMA Metals Conference last week in Miami. I had a show up there and there. I was impressed.

They're quite circumspect about gold. But one thing that I was somewhat impressed, it's record highs. It's all they really care about is precious metals, record highs, and everybody's kind of trying to pontificate what's going to happen next. But one thing I was impressed with at the money show that I went to last week in Orlando, it's a big kind of more retail focused show. There's a lot of booths, even at ETF concerts for gold. And I didn't see anything for Bitcoin. And I'm like, yeah, it's kind of seemed odd, but maybe there's one or two I missed, but gold was everywhere. So, you know, it's a bull markets question where it goes from here.

And I'm trying to just lay back a little bit because this is one of the few I got right. And I don't want to mess it up. Yeah, it's interesting, though, because, you know, and I'm not going to nudge you here. But the one that has been difficult is the 10-year yield. And it continues to hold here above 4%, it's at 410, 411 this morning. And I read an article this morning that Mohamed El-Erian wrote,

and it's confounding. It's the question of gold and the high interest rates that people are expecting. It's this is really an interesting moment that that we're seeing in the 10 year. And so are the bond vigilantes really back? Are branches of Congress and the presidency, the White House. And there's just going to be an unchecked spending, unlimited spending in the government. And with just ridiculous deficits already, 1.9 trillion deficits that are going to go over 2 trillion. I mean, is that what we're seeing? Because that's what I think we're seeing. I think we're seeing that there's a high

expectation of long-term inflation. You nailed it. First of all, as someone who started at a primary dealer in 1988 in the trading pitches, the bond market's telling the Fed was wrong. They should not have cut 50 basis points. When you cut 50 basis points, as Eric Edelman pointed out, our mortgage strategies and mortgage rates go up and make some, it contracts the mortgage market. That's not good. So number one, bond market's telling the Fed's wrong. Gold's breaking out, but we have this significant event in two weeks. The market's priced for Trump's red sweep. If we don't get it, if we get that natural check and balance, which to me is more the base case, Harris presidency, Republican legislation, that is a natural thing that the market's not priced for yet. So big picture, I'm still seeing pretty significant deflation. Let's put it this

way. From a commodity standpoint, significant deflationary forces. Crude oil is down 20% on a one-year basis. The grains are down 20% on a one-year basis. Gold's up about 40%. Look at China. The 10-year note yield in China is 200 base points below the US. So I think after the election, it's more likely the US is going to grab it that way, unless Trump's elected. We've already priced in for some of that. So then it's, to me, what's the next big trade? So I stick with it, but we'll see how the election, if Trump's elected, that questions how much has already been priced in. But then I also like to point over to, when you point out the deficit, I don't disagree with that. But if you look at the other top five countries in the world, their bond yields

are, the US 10, you know, is almost a hundred base points above them, their bond yields, which means we've priced in some of that already versus before the great financial crisis, it was the opposite. Yeah. So I have to push back on a couple of things here. Like three. Let's talk first the legislature a bit. The Senate map favors Republicans for two years. Years later, it flips. The House map, Rasmussen, Scott Rasmussen,

who is probably one of the better pollsters, was definitive about this. He said whoever wins the presidency is winning the House. He said in particular, if Harris wins the presidency, the Democrats will win the House. Full stop. So you're going to have the power of the purse, and you're going to have the presidency. You might get a Republican Senate, although it's not obviously guaranteed if Harris wins. So let's be extremely clear about that. That's what professional pollsters are saying. That's not Dave Weisberger. That's Scott Rasmussen. And I tend to think that he's pretty damn smart. Now, Nate Silver has been out this weekend basically starting to say, you know, that's less likely. So, you know, we'll see what actually happens. I don't think the

markets are pricing in anything when it's basically a coin flip. I mean, you get to, if polymarket starts getting over 70%, okay, maybe the market will be pricing stuff in. But in the crypto markets, very little is priced in, that's for sure. And this notion that Trump means bigger deficits than Harris, I think is just total la la fantasy land no it's a dave what my point was he has the opportunity of sweeping both the both congress and the white house because of the senate map but keep in mind that the house of representatives is more important when it comes to the senate is a blunt instrument. By the way, Polly Market has that at 81% for the Senate to be read. Yeah. The Senate map is very, very, it's just the Democrats. And then the House is just 51% Democrats, so toss up.

Not really aligning with Raskin's, what he's saying here, but of course, this is Polly Market, not a poll. Yeah, yeah, whatever. Look, it doesn't matter. All this doesn't matter. Two weeks from now, we'll know. For people who have been waiting for now in two weeks market yeah we'll have some good ideas but we'll have some good ideas uh but you know look the simple fact of what's going to happen people are confounded they don't know you know if just you go back to the last election and the election before that,

most importantly, the election before that, when Trump won, the markets got crushed for two or three days and then went on a sustained rally once his policies became clear. I don't put anything past markets. I really don't. I mean, you know, I think Mike's right about volatility, but there are some markets that will do better. There's undeniably true, and some markets that will do worse, depending on who wins. Paris wins, and the green companies, the boondoggle wind manufacturers and all that other crap, most of those are foreign, but it doesn't matter. But that entire Green New Deal nonsense, killing whales, be damned, they will all do very, very, very problems already about headphones on seals. Look, it matters to me, right? You know, I actually think that that causing the extinction of the North American right whale matters.

And that is what the Green New Deal does. I mean, it's, it's, you know, anyone who wants to read about it, go to save LBI.org. And you can you can read all about it. But the fact is, there are sectors and sector plays and rotations that have not happened yet. It is undeniable that American, you know, centric, smaller company, you would expect the Russell 2000 to outperform the S&P in a Trump administration, because he's telling you, if you manufacture in America, you're getting tax breaks compared to people who are global, multinational. So you'd expect that. Now, the counterweight to that is tech. So you have to use a NASDAQ hedge to get to that specific. But there's lots of trade ideas that we're going to be talking about in two or three weeks, depending on which one wins

because of the specifics. But I don't think that anything points to the market pricing in anything with this. I think that what you see, on the other hand, is both parties. The one thing that both agree on is deficits until or unless under Trump, Elon Musk is actually able to help him cut government spending. But as James points out, that's pretty damn hard with the deficit as big as it is and defense spending as big as it is. So an entitlement's not being reformed. So you pretty much are stuck and you're going to have deficits no matter what. So that's the second thing to push back.

And the last bit in terms of the bond market is more of a question. You know, I read that Stanley Druckenmiller is basically the lead bond vigilante of the modern era. I don't know if that's true or not true. But if- 20% of his book apparently is short. Right. So if he's basically telling you that, and we don't know what he is, if it's short, naked, just US, or we don't know- Yeah, what's he long against it? There's always something against it.

That's right. So we don't know. But the simple point is that this Bitcoin paper from Minneapolis is making an assumption. Lots of people are making an assumption. They're making an assumption that Mike is wrong. And it's kind of amusing. I personally think Mike's right. But in terms of US bond yields versus the bond yields of Greece and the bond yields of China and Russia. You know, but the fact is the U.S. being a reserve asset comes with the need to keep it to keep that spread high. That's what people are saying. Now, whether that's true or not, I don't know. I'm curious what you think about that, Mike, because that structurally one can't really make much of an argument argument that the U.S. should have higher risk. But one can make an argument that the U.S., that investors keeping the U.S. as the reserve currency might be demanding a higher interest rate.

And maybe that's what it is. But I really don't understand how that could be that way. But it's been that way for, well, you know, many years now. Go ahead, Mike. But it's been that way for, well, you know, many years now. Turns upon you. Go ahead, Mike. And then after that, I need to jump on the Fed, the ECB and the Fed after that. Go ahead, Mike. Yeah, we'll do that.

You mentioned Bitcoin because I want to tilt there a little bit. To me, it's just that fact that the world's always, it's a smaller every day and the world's always going to go to where yields are the highest and safest. And right now, the dollar is unstoppable unstoppable particularly when you look at the most widely traded crypto it's not bitcoin it's tether crypto dollars so i think there's some point when people talk about a weak dollar and and things like that like against what maybe gold but versus the rest of the world the only way you're really going to get that if you look at the last 10 years of trading is the u.s stock market has to go down because that's what's been part of it. They're all related. It's the highest ever versus the rest of the world, but it's still doing that.

But I want to tilt over the Bitcoin a little bit, partly because of the facts to me, I find very disconcerting. Now, you know, I started pointing this out a month or two ago, but now the facts are there. The 60-day correlation of Bitcoin to beta is 0.57. That's the highest ever in an up market. It's never been that high. And you can go back to 2020. That's when that correlation measure picked up. That, to me, is a big problem. That means to me, the key thing, I have the same indiscriminate view of copper. The 60-day correlation of copper to beta is the highest in I don't know how many years. It's just that means to me the biggest risk for all these assets that I watch is beta has to go up. And if it just has a normal

back and fill, they'll go down lower. And this is a trend been lasting for a while, but we tilt over to wherever you want. But to me, for the key leading indicator on the planet, that to me is still the key risk I say and view on it. And I'll end with this. The price on Bitcoin is the same as 2021. It's been kind of underperformed beta for a while. I'm starting to concern when it's this high of a correlation, you see where the risks are. Of course, everything might change in two weeks. And that's where that's what all matters. Now, this is kind of I think most professional money managers are doing everything they can to tilt towards maybe more dribs to protect themselves and take a little risk off the table. So I just want to make it clear.

2021 was the peak FOMO, peak enthusiasm of a cycle. Bitcoin today is not even close to that. Funding rates were 5x where they are today on a steady state. The Bitcoin ratio of the price of Bitcoin to all of its network metrics were one fourth to one fifth of what they are today. So measuring to 21 is, as I said, that's just a terrible date to try to pick. You're picking the, you know, it's like, it's effectively, if you want to do that, you have to assume that there is no such thing as a cycle. There is no such thing as FOMO. It's like measuring internet stocks to the peak of the bull market in 2000 and seeing how long it took to get back there. And the truth is, you know, the ones that actually made money. The truth is that in 2000,

there were lots of companies, trillions of dollars of value that was complete nonsense and went away, literally went kaput. And then there's other companies like Amazon, which we've all seen what it's done since then. So, you know, I hate these cherry picked. It's not cherry picked. That's just the, you have to go back that far for the same level. It's not, it's just on the chart. You can see it's not cherry picked. You did the same thing on the NASDAQ, however, based on the, you know, the 14 years it took to the NASDAQ to get back to where it was in the high, and you pick then to short, you have a tin cup on the side of a highway. So it's not a really good idea to do that.

And I think that shorting Bitcoin now is more or less would be the same result for the same reason. Now, as far as 60-day volatility would go and 60-day correlations, I mean, anyone who's traded a portfolio, and I ran market makers, right? We had 15 different correlation matrix ways of, I'm trying to dumb it down a bit to make it understandable. But basically, there were 15 factors that we used to keep our portfolio in balance because we were taking the other side of hundreds of instruments against retail. And the simple reality is beta is notoriously unstable and you can have confluences

of factors and we can talk about it. But the one factor to bring it back to what Scott was saying is that the premise of this paper in Minneapolis is fascinating. Their premise- Let's start with the ECB. It's up to you, but just so people know, I want to give context before you go, because you're going to go. Perpetually rising Bitcoin prices will lead to societal impoverishment. ECB, that's the European Central Bank Economist, claimed there's a great threat on this by Tordemister, if you guys missed it. But they're basically saying that if you got in early great but uh if there's any meaningful bitcoin adoption everybody else has fun staying for they're basically saying oh the cantaloupe effect and it's one that we're not benefiting

from but some other people are right so i mean you can go even though even though the cantaloupe effect is really it's controlled by a few people. Anybody could be doing this. Anybody could have been in Bitcoin. Correct. It's a free market. But it also says that they should advocate for legislation to prevent Bitcoin prices from rising or to see Bitcoin disappear altogether in order to prevent the division of society. I mean, if you want the then they fight you phase,

pretty much laying it out. But then, Dave, what you were bringing up, and I'll let you go, we obviously saw Cash Carry recently say that Bitcoin is worthless. Now you have the Minneapolis Fed jumping in, and they have a new paper claiming that the government can run permanent deficits if consumers don't notice and adopt new money like Bitcoin. They fantasize about legal prohibition again and extra taxes on Bitcoin to ensure government debt remains only risk-free security. If you go into the quotes on this, it's incredible. So you have the ECB and the Fed of Minneapolis effectively saying, in kinder words, we need to ban this thing before it gets out of control. So here's my hot takes. I have three hot takes. They're totally unrelated. Six hot takes.

No, no. There's three. I want to point out that people who are supporting a system that instantiates wealth inequality are complaining about a free market solution that helps with wealth inequality. So we had famously the Harris administration, you know, Harris go out and speaking to and making the claim that, well, Bitcoin should be available to black men. And the reason that she made that claim is because, as we've said on the show many times, the actual ownership of Bitcoin is higher on a minority basis than any other asset. So we understand that. So let's just understand that that is true. Let's also understand that the current system is rigged in that we have this thing in the United States called the accredited

investor rule, which effectively says if you're not rich, you can't buy early stage investments, which have been the highest performing. And then when those investments go to the public markets, the retail then can become exit liquidity for the rich people who bought it early. And, you know, you could talk about this however you want to talk about it. That rule is literally designed to be like the Motten Bailey castles of the feudal lords keeping the peasants away from the castles. That's what it does. And now we have the Minneapolis Fed saying, well, you know, wait a minute, there's this thing that consumers, those people, the masses can do, and that's bad. We have to stop that. And, you know, the irony there is

unbelievable, because basically what they're doing is trying to protect wealth and equality. So that's thing number one. Thing number two is the simple fact that the paper itself, which is clearly from advocates of modern monetary theory or MMT, which believe that there's no need for fiscal anything. It's just print money and we have the guns and people will use it and people will just be okay with it. You know, it's basically fiat infinity, are actually writing a paper that focuses on Bitcoin as opposed to focusing on gold. Think about that for a second. That's a good point. Gold is going, is it 27 something or other?

2734. And the Fed is basically telling you, yeah, we know we can manipulate gold if we need to. We got that. We got that under control. No problem. So effectively, they're saying, well, we can manipulate gold, but we can't manipulate Bitcoin unless we pass laws.

So if you want to get the most bullish single thing out of this article, you have a Federal Reserve paper effectively telling you that Bitcoin is something that, and they don't pass laws, they can't manipulate it, but obviously they can manipulate gold because they don't worry. These papers literally say Bitcoin is going to go up and you're going to get left behind, so you should probably buy some. I mean, it's crazy. The third point is if you ever want to know what people are doing, look at what they complain about. I will end with one of my favorite quotes, although it's been bastardized a lot from

William Shakespeare. And the quote is, the lady me thinks protest too much, protest too much. And people have taken that quote many times, which is almost always a sign. And I think that that's what's going on here. I mean, you're talking about the ECB, which we know they want. We know they want a central bank digital currency to control everything. And we know they want to distract people from the cost of goods and services that that central bank digital currency is going to do. And we know they want to be able to tax and understand, get fund deficits, but that's not surprising. You said you could also stick Elizabeth Warren in there too.

Well, clearly she is, and Cash Carey, Cash Carey is from Minnesota, isn't he? Yeah. I'm pretty sure that he read this paper or saw it before he made his comments. The simple fact is that they want to control fiat. They want to say, this is what things are worth. You people just deal with it. And that is the fact that they're picking on Bitcoin, to me, I see as very, very bullish. Worrisome if you end up with an administration which re-empowers Elizabeth Warren, which, by the way, I still would be, regardless of the verbiage, unless there's some sort of break, I can't believe that anybody would believe that a Harris administration would do it's hard to imagine both of those things happening, would probably just put her in the Treasury Department to be more specific on focusing on this. But this is literally where the lines of war are. effects of fiat world unraveling? Or is the government going to do what they've been doing

in banana republics for time immemorial, which is before their currency actually starts to fall apart, they create rules and you end up with black market. They had a prohibition law against alcohol. Did alcohol go away? No. I mean, like, you're not going to be able to. There's no way you're going to be able to police the entire world and shut down every node. It's not going to happen. I mean, I used to own a bunch. I now have one pre-1933 gold coin, which I keep as every once in a while. I use it as a card protector if I'm feeling very safe.

I tend not to want to do that anymore because the price keeps going up, but a one ounce coin, that coin theoretically should not exist, right? Because they were all confiscated and melted down, except for the hundreds of thousands of gold coins that were shipped offshore, kept in and kept away from the government. So,

yeah, I mean, you know, it clearly there's the, you know, there's something that can go on there, but look, do we really think that you could get in a world where we're I think we're depending on who you listen to? Some fairly significant number of percentage of America owns some Bitcoin.

And we're BlackRock is just a Bitcoin ETF. You really want to try to pass something? No, this is just not in that. You really want to try to pass something? No, this is just... There's too much political support for Bitcoin already, in my opinion. It's just too much. You know, it's going to be very difficult. They'll have to figure something else out. Right.

Yeah, I mean, I don't know if you guys saw this story, but BlackRock right now is pushing to have exchanges use BUIDL as collateral. I mean, you know, this is BUIDL as collateral? BUIDL obviously is their tokenized treasury asset, which is on Ethereum, and now they're pushing for that to be collateralized for derivatives. We'll understand something if we do, and I feel skeptical one way or another. We will be talking about second-order effects

of a Trump presidency. One of the most obvious ones is derivative market overhaul. You will see derivative market innovation come to the United States. I'm not definitely about this. Having talked to it with both Republican CFTC commissioners, they're basically like, please, someone other than Sam Bankman-Fried, make a proposal to us, and we really want to evaluate it. And so there's a lot, there are many, many second order effects. Certainly, derivative market modernization is one of them, which would explain a lot of the money that's going to Harris, who's raising enormous amounts of money, because there are a lot of people who don't want to see markets modernized.

They have a lot of money with the way the markets are. They like the inefficiency, yeah. And that is true with the root of markets, it's true with spot markets, it's true in a lot of markets. And so there's a lot of potential disruption that may or may not happen. And we got two weeks to find out whether or not it's going to happen.

Mike, I have to ask you a question. Mike, so I'm looking at this Fed report, right? I'm going to show you guys because this is blowing my mind. In the economy with incomplete markets and consumers who are sufficiently risk averse, we show that the government can uniquely implement a permanent primary deficit using nominal debt and continuous Markov strategies for primary deficits and payments to debt holders. But this result fails if there are also useless pieces of paper, Bitcoin for short, that can be traded. So we can run our deficits as much as we want based on a Markov strategy,

which obviously looks at the market as it is and not how it got there. As long as there's no other useless paper. But it's useless. It's useless, but also destroys the government. It's useless, so we better ban it yeah that's so mike i mean is it really can the first of all can the government literally if bitcoin doesn't exist just uh continue to run deficits uh no it's silly it's silly it's like that well we're gonna have that platinum coin to solve the deficit and it's just this silly stuff you hear but i i just it's not my idea i don't i it's silly i mean they i think james might be able to comment on better i actually

on my di list i deliberately ignore i just think it's crazy that you even see that but james probably uh has some strong feelings i'm in 100 agreement i think it's just ludicrous and it's in i think stephanie kelton has gotten into his brain i mean it's just ludicrous. And I think Stephanie Kelton has gotten into his brain. I mean, it's just- I mean, why even write this? Is it just like a think piece? And oh, by the way, are they seeding doubt for some- Listen, I'm not hyperbolic. I don't think this means they're trying to add Bitcoin. But even being in that paper specifically,

they could have listed a thousand things. Let's walk it back. Let's walk it back. Because people have to understand, we talk about the government, we talk about the Fed and the fed and the treasury and the white house like they all operate independently and have their own you know drive and initiatives and they have their their own reputations that they're worried about the treasury manages the amount of spending that's

coming out of congress congress is driving spending spending, okay, and the White House. They're driving spending. The Treasury just has to deal with it. They don't tell them how much to spend. They actually put out papers and say, hey, y'all got to slow it down a bit here. Tap the brakes, please, because we are issuing so much debt here

that we don't know where we're going to stuff it. We got to stuff channels with this stuff because we don't know where we're going to put it. And then you've got the Fed saying, well, we're trying to raise rates and handle inflation here. Y'all are running massive deficits that are just flaming. They're just fanning the flames of inflation. You got to tap the brakes a bit. And so when you see something like that, a paper like that, it's almost like, okay, we'll deal with it. We'll

find ways to deal with it because it's obviously not going to slow down. And so it's just the crazy talk that comes out of, well, it's not our fault. We'll find a way to deal with it. And just all the Fed is trying to do, if you get down to first principles, all the Fed is trying to do is maintain confidence in the US dollar. That's it. They to do is maintain confidence in the US dollar. That's it. They're trying to maintain confidence in the US dollar. And they do that by keeping inflation in check. That's it. Consumer inflation. Consumer inflation. Correct. They don't want it, but they actually need asset inflation. Yeah. That's right. And so that's a big difference. And the monetary theorists are like, yeah, well, we like asset inflation, too. And we don't care about the distortions, because interestingly enough, the distortion, the most important distortion that happens with asset inflation is a prioritization of capital over labor to get all Thomas Piketty on people. But on this, we agree. Because in fact, when it turns

out that you can make investments and put up capital to outsource or to build new factories, or, you know, supermarkets to have self checkout rather than hiring more checkout people, and you can afford it because capital is cheap relative to labor, you're going to do it. And so it creates these things. And it's, I don't want to go all populist or political on it, but that is been a policy. The only person, the only politician who has coherently made the argument that this is bad and that it may seem good, but it is bad. The only one who's done it is J.D. Vance. And you could hate J.D. Vance for any one of them. I think it was.

Right. But I'm saying the only one who's an actual nominee in a major party. I don't think I've ever heard Trump coherently talk about any of this stuff. But Vance is very coherent on this point. And you could agree or disagree. It's like, you know, there's a there are tariffs. You know, people there's a lot of people talk about tariffs and they don't understand a very simple point that he makes, which I've been making for years. And I had to explain this to a team, a group of high school debaters at Brooklyn Tech last decade, which is that, you know, if you if you're looking at worker protection, environmental protection or or all of those things, and you

want to equalize it, then the only way the United States can actually do that is to create tariffs based upon environmental and worker protection rules. Because if you outsource a factory, you lose all of that. So there's all sorts of stuff. And we may not like that because it costs us money. But we make the decision in the United States to do it. So why wouldn't we make the decision to do it? Interesting question. And it's all theoretical. All this stuff doesn't matter. What matters is this. You have a research paper being trumpeted by a Federal Reserve Bank that effectively says Bitcoin is the enemy, which has been the quiet part out loud. It has been exactly how i have theorized elizabeth barn why she hated bitcoin since we started this show and you can go back into the archives and

read it it's they don't want a measuring stick which is what bitcoin would be that they can't control against deficits full stop that is why what scott said is right the then you fight then they fight you uh and then you know we're then you're getting closer to the then you win, and then they fight you. They've been fighting for years with Chokepoint, et cetera. But that, to me, it matters. So this is the kind of thing that people should be looking at as telltale signs of, uh-oh, Bitcoin is getting closer to that acceptance level,

which, by the way, is the optionality that I always talk about, right? Bitcoin, for it to be at digital gold or just gold or something that is really concerning to the Fed, would have to be at a substantially higher price point. And that's what they're afraid of. Yeah. Taking in, actually, I think we can pivot because I want to talk about, James, your newsletter from this weekend because it's awesome. Here we have, let me just show the tweet. I guess we can show it a little bigger. I've never seen a situation where the market soared as more and more people suffer economically.

Misery index is off the charts. Something is just off about all of it. Usually when the economy is strong, everyone is prospering. That's just not the case this time. That was your inspirational tweet. What gives, man? Yeah. Well, I mean, so what QE is talking about here is, you know, he says the misery index, it's not off the charts when the actual misery index, it's just the feeling of misery. You could tell that people are struggling here. And so,

you know, I wrote a short tweet kind of summarizing this and then built it out here. The bottom line is you've seen expansion of the money supply and you're seeing the Cantillon effect in full effect. I mean, basically, you've got you've got the higher demographics that are that are spending money that are driving the economy. And we live in a service economy here and they're driving the service economy and um if you go back and we we look at you know when the stimulus checks came out and there's a there's a great chart there that's from bloomberg um that shows it uh right keep going right i didn't log in one second you got to be a paying subscriber scott i thought i was was. I am. I just didn't sign in. One second.

But here's the thing. Just to set it up so people understand is that stimulus checks came out. You had two under Trump. You had one under Biden. There was thousands and thousands and thousands of dollars that went into people's bank accounts, depending if you were single or you were married and filing together or you had dependents. And those checks, they enabled the lower demographics, people making under $100,000 a year to pay off some credit cards and then just go out and spend. And so what studies typically show is that if you're a lower earning and you're in, you have your struggle to, um, to, uh, gather assets

to, to invest, then you're just going to spend the money because it's, you just, you're not in that mindset of saving. And so you could see this spike. And if I can actually, I'll see if I can bring it up here, Scott, see it. Nothing's working for me over here. so let me let me see if i can if i can bring this up so just hold on one second and then it'll uh it'll uh show you exactly what i'm talking about so and and i'll i'll attempt to not log out this time there you go. So what's important here is that the, you see this? Okay. So you can see that that white line is the lower, that's people making under $60,000 a year. You could see that when those checks came out, they spiked, right? That spending really spiked. And so then you could see that it kind of dwindles. And then the higher demographics, they keep spending. Okay, so what's going on?

What's going on is that you've got that lower demographics, credit cards, they start charging things and they can't keep up because of what Dave is talking about, which is really important, consumer inflation. And so now they start struggling. Now you've got credit cards that are ticking higher. The delinquencies are ticking higher. This is from over a quarter ago. So this is only likely worse. And this at 11% is above where it was before the great financial crisis. And so you're seeing it in real time. But on the other side, you've got this massive QE and money printing that occurred that everybody knows about. We've talked about over $5 trillion was printed and the Fed went out and bought assets

in the open market. Well, what does that do? It causes asset inflation. And so you've seen the S&P rise to all-time highs. You've seen home prices rise to all-time highs. And then when you look at the net worth, the top 10% demographic, it went right up lockstep almost with the money supply. And the net worth of the bottom 50%, it did go up. It went up a little bit, but it's shared by 50% of people versus just 10% here. And the top 1%, the numbers are all in here in the newsletter, but it's mind-blowing just how much of a cantaloupe effect that we've seen over the last few years. And that's what people are feeling. You're seeing the stock market go to all-time highs, yet you're seeing the lower

demographic struggle saying, I can't pay my bills. I just can't pay my bills. We need to, you know, have somebody help me here because this is not working. And so, you know, yeah, inflation, the inflation rate has come down. Prices have not come down. We've not seen deflation. And unless we have a hard reset here, we have some sort of hard recession that we do get into, which could be driven, as Mike has pointed out before, it could be driven by a strong asset sell off because we're so financialized. But, you know, until we see that prices are still high and the lower demographic is struggling because they're there, even if their wages are catching up, they're lagging. And so they're already in a hole and it's just been difficult. And so the high interest rates are hurting consumers who are depending on borrowing at high rates, like on credit cards and auto loans. Whereas the higher demographics, they buy their cars for cash and they pay off their credit cards every single month. And the asset

inflation is only helping them because now they're actually making more money because they've got a bunch of cash sitting in money market accounts that they're just spending at discretion now. And that's kind of what I see going on. Mike, you love to say, what stops this? I mean, what stops that? You're muted muted yet your mic's muted mike mike's mic sorry about that i was thinking loudly um the uh the one um thing that i think from this from the macro is once the general population figures this out and realize that this person who says he's going to make their life better and make America better is going to create a lot of inflation. It's the worst thing for your average

wage earner in a country, which is 55% of the population. Once they figure that out, that's why they typically vote Democratic. But they've switched it over to Trump for this great America thing for now. And they realize everything he says is very inflationary. And we're seeing that right now. And that hurts your average person who doesn't own property, Bitcoin, stocks, and a lot of people don't. So the good news for them is they might make, unlet a gas go lower, which is right now about the average price it was 10 years ago. So that's not a big deal. That's deflationary. But to me, that's the key thing that remember, and I like this way to look at it. Everything went up 40%. Basically.

And anything that didn't go up 40% is underperforming. Has it gone and go back down? No. Is it going to go back down? Maybe potentially, but what's it going to take? Go back down. That's why I tilt over to the stock market and have to go down first. I think I find it absolutely impossible to understand how you took what James said and

made it political. He was, I don't think I heard James mention Trump. I think, you know, the whole thing. Everything's about this election. Two weeks. Everything might change. That's why it's all about political. And there's an issue that matters. I mean, you know, you got you have people who are who are voters, who are legal voters, who are being asked to subsidize, what, 20 million people in this country that are not here, where basically the data from the Federal Reserve, Bank of St. Louis, says most of the wage gains have gone, most of the new jobs have gone to non-Native-born Americans or non-Native-born jobs. You know, that adds to that misery index. You have New York City, you know, they're trying to get rid of the mayor because he actually had the temerity to criticize the federal government.

And you know that that's true because anyone who knows anything about de Blasio, you think that Adams is more corrupt than de Blasio. I have a bridge to sell you. I used to have a view of it. The fact is, is that the budgets of city after city can't handle putting, you know, like you heard John Deaton in the debate, you know, with a little bit more. He made the point about Massachusetts. They literally can't afford because they have these sanctuary right to housing rules. And so they can't afford all the new shutting down. They're shutting down elementary schools instead. Right.

So it's bad. And that is is adding to all of this. We're talking about the feeling of misery. It's about the individuals, you know, who are impacted. But I really didn't want to go down the political road. I don't think it matters. I mean, I have not seen a policy. I mean, Kamala is basically- What would be helpful, Dave? What would be helpful is if the deficit spending was actually useful.

It was actually productive, you know? That would be helpful. If we were building nuclear reactors, if we were building the pipelines, if we're not just wasting money on Green New Deal nonsense, then that would be helpful. Or losing 70% of the money

that goes to the military budget into the ether and an accounting. You don't know where it went. Sorry. However many billions of dollars for internet. I don't think nothing that into the ether and an account. No, no, where it went. Sorry. You know, however many billions of dollars for internet. I don't think nothing that the only, it is very unlikely that anything that happens in November changes any of this, which is why we have the federal reserve basically like trying to hold,

you know, hold up the economy by saying, okay, look, we're, we're trying to manage everything while we're running $2 trillion peacetime deficits. And $2 trillion peacetime deficits in America is a real problem because it doesn't even count unfunded entitlements,

and neither party has the stomach. Don, you're making me more bullish gold. Yeah. I mean, I am bullish gold, Mike. I just think I like the extra optimality when people realize all this in Bitcoin, when people realize that the reason the Minneapolis Fed, and I love Lawrence's tweet. I mean, I guess we could say it. He goes, the reason the cope is so bad right now, ECB, Minnesota Fed, is that this is existential. We are playing for all the marbles. We have known it.

They are becoming aware of it, and they are scared shitless, as they should be. be Minnesota fed is that this is existential. We are playing for all the marbles. We have known it. They are becoming aware of it and they are scared shitless as they should be. And, and that is the point, right? You know, and there goes your PG rating, Scott. It's right out. Oh shit. I'm reading it off the board. It's been on the show and, and, you know, I tend to agree with on quite a bit and that's the issue really. It really is that. I mean, what's the end game? Absent a restructure of debt after fixing structural deficits, there is no other end game. Now, will that happen? No. I mean, you and I, we all know they're going to do everything they can to kick this can down the road. And my guess is they're going to be able to do it for a fairly lengthy period of time certainly traders don't have the have the time frame to do anything about it but yeah like i am bullish gold there's no two ways about it i just have bullish bitcoin also

and think that the positive optionality will overwhelm it but that doesn't mean you're wrong right you know it's it's that's why i keep talking about inflation. As Milton Friedman always says, it's a monetary phenomenon. But it's inflation that they're trying to engineer. And as long as people let them do it, OK, we're going to get it. And, you know, Druckenmiller is saying they could do it with some things, but he's saying they're not going to do it with bonds. And that's actually very scary. His bet is basically. An increase in James's misery index, isn't it? Or am I missing something? Yeah. Well, let's not forget, we talk about manipulation markets a little bit. I really don't want to go down the gold path too much because

gold way preceded the US government for thousands of years. And it's a global market, but we have our own treasury market. And there's few entities who can manipulate it more than the Fed, and they will when need be. And they have been. History is all over that. But the history of being able to manipulate gold on a global basis is very sketchy. Yeah. Go ahead. Here's the thing, though.

What we have to recognize, though, is going back you know this is important because they're red flags the red flag is central banks buying gold is a red flag you know why are they doing that um you know russia has cobbled together some sort of strategy here to to take payments to take cross-border payments after they got kicked off a swift swift in 2022 it's working is it beautiful is it beautiful? Is it more expensive? No. Is it more expensive? Yes. Is it inefficient?

Yes. But it's working. And so it's not that the BRICS is coming together to form this great currency that's going to be backed by gold or Bitcoin. That's not going to happen. You're not going to have a bunch of dictators get together and all agree that what they say is the truth and they don't have to go audit each other every single month.

That's not going to happen. But what can happen is they can cobble together strategies like this and avoid having to buy U.S. treasuries, which is what they want to do. They're trying to avoid it. Why? Because they could be shut down and they don't trust that our deficits are not going to be run out of control to the point where we need so much inflation that it's just going to eat away at whatever they hold in their treasuries. That's the bottom line. And that is a red flag to me. And gold is showing us that. And Larry Fink has been effectively profitizing from his place at BlackRock, telling people that, yes, and this is why you want to own Bitcoin. And I think that's why the fear is really there.

And I think there are people in the government who are like, yeah, okay, fine. Let's figure out how to control it. And honestly, I think that's where it's going to go down, regardless of who wins. I think that there's clearly going to be desire to do that. Fair, fair. Or get on board, you know?

You know, like Cynthia Lummis board you know you know like synthony uh and cynthia lummis and uh and you know um you've got if trump's administration and they do add it to the treasury i mean like get on board you know that is one way to do it so what's but in that world gold still does very very well so it's tilted over to that i think that's we all agree on gold and Bitcoin. I just think there's times to overweight gold and underweight Bitcoin. And it's been the right trade to overweight Bitcoin and underweight gold for about the last decade, certainly the last five years. Now I think it's slipping the other way because we got to the point now volatility is so low in the stock market, prices are so high that that high volatility asset is greater at risk than that low volatility store value. And I'll stick with that view. I still think that gold,

Bitcoin to gold ratio, it takes right now 25 ounces of gold for one Bitcoin is more likely to go to 15. That's a normal mean. And then at some point, then I think it might be time to re-overweight Bitcoin and the volatility adjustment base. And to me, this is the risk right now is people are way too overweight Bitcoin in an environment where volatility is more likely to go higher, which means gold will outperform. And it has been for a while. You're talking shorter term in trading. Well, it's a bigger picture. It could be a couple of years. I mean, for that rate to go back to 15 will be a shocker. And it's just normal. It's what it's been doing for at least the last seven years. It gets up and gets down and just a normal reversion.

Same thing with S&P 500. The Bitcoin to gold, the S&P 500 ratio is around 11. It can easily get back down to seven. That's just normal. Unless we expect it to blast off in a high volatility environment with volatility going up. And volatility is so low. It could, unless you get more and more people who have confidence and are adopting Bitcoin as an alternative asset that they can store their money in.

And that's what the Fed is basically telling you they're worried about. Right. And that's what can decouple it here, Mike. And that's- I agree. It could. I want to see signs of it. Right.

Hey, Scott, can I make the quick plug that I put in there in your chat? Sure. I didn't see. decouple it here mike and that's great it could i want to see i want to see signs of it right hey scott can i make the quick plug that i put in there in your chat that's right i didn't see right for anyone who wants to trade and are overseas because not for us investors because right now our platform uh we have something called crx scott's posting it right there uh that we are taking applications and looking actively for beta testers for a free trading platform for anyone trading. It's definitely biased toward derivatives, but spot as well on OKEX and Bybit and Darabit and HTX. So anybody in the audience who is actively trading on any of these those platforms, We are looking for beta testers. This will be a major launch sometime in the next year. But now the platform is up and operational. We'll be adding exchanges

and adding functionality. But this is free software. And just so everyone understands it, we will be making our money by referral fees from those exchanges rebated back to us. I'm going to have Misha, the producer, put the link so people can see it. referral fees from those exchanges rebated back to us uh just one i'm gonna have them i'm gonna have misha the producer uh put the link so people can see it but it's terminal.com yep see you later okay see you guys um yeah so we've got to crx terminal.com question mark a equals dave w but we're going to put it in the description because i'm sure you guys can't read it whoa our hits just got really big oh Ooh, yeah. I don't need that.

Amazing conversation as usual. I would test that out if I was not having fun staying poor in America without my Bitcoin. Yeah, me too for that matter. Yeah, I really enjoyed the show today. A lot of great insight, especially, obviously, discussing silver and what's going on. Today, we have Bitcoin actually down 67.3. It's down about 1.5% in the last, I guess, hour since we started. I guess we're a jinx because dollar and interest rates are raging. So there you go. We'll see what happens. One day we're going to get some final conclusion as to whether our theories are right in the debates between Mike at all, but it won't be today.

Guys, that's all we got for you today. Check out CRX Terminal for Dave, for sure, if you're not in the United States and you can do so. Otherwise, we will see you next week on Macro Monday. Bye, guys. Outro Music