The Wolf Of All Streets - Stocks Make All Time Highs - Can Bitcoin Follow? | Macro Monday

Episode Date: January 22, 2024

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1  James Lavish: https://twitter.com/jameslavish  Mike McGlone: https://twitter.com/mikemcglone11  ►► DevvE DevvE is a next-generation cryptocurrency - DevvE addresses Bitcoin’s most significant weaknesses—regulatory compliance, energy consumption, costs and speed! 👉 Follow DevvE on X for Updates: https://twitter.com/DevveEcosystem  👉 Join the DevvE Telegram group to stay in the know! https://t.me/DevveOfficial  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►OKX SIGN UP FOR AN OKX TRADING ACCOUNT THEN DEPOSIT & TRADE TO UNLOCK MYSTERY BOX REWARDS OF UP TO $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘2MONTHSOFF’ WHEN VISITING MY LINK.  👉 https://tradingalpha.io/?via=scottmelker   ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #macromonday  Timestamps: 0:00 Intro 2:00 Stock market: everyone is bullish 5:00 Is recession coming? 9:00 Bitcoin will become the digital gold 20:00 Bitcoin can correct to $30K 21:00 Bitcoin is not correlated asset 27:00 BTFP 30:40 Will the Fed cut rates? 32:30 The best performing assets in 2024 36:40 Extreme debt 41:30 Outstanding consumer debt 45:10 Consumer sentiment is tricky 50:11 Are we already in a recession? The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Stock market continues to make new all-time highs. The S&P finally following and making a new all-time high of its own at the end of last week. The most long-anticipated promised recession of all time clearly has not arrived yet, at least not for stocks. What the hell is going on there? And why is Bitcoin continuing to sort of languish as the ETF hype subsides and GBTC continues to sell? We're going to talk about all of this. It's Macro Monday. I've got James Lavish, Mike McGlone, and Dave Weisberger from the lobby of a hotel. It's becoming a famous thing. You're not really a Macro Monday until you do a Macro Monday recording from the lobby of a hotel. So James

and Mike, you're going to have to do that once. I've done it before. Guys, it's Macro Monday, my favorite hour of the week. 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 and hit that like button. We've got two guys doing this on West Coast time, waking up before 6 o'clock in the morning to make it happen. We've got Dave, James, and Mike. Dave, it takes being on West Coast time for you to make it on time. Three hours early yeah the commute was

to walk downstairs to the lobby instead of to drive to the office so yeah makes perfect makes perfect sense uh so crazy we've got stocks at an all-time high here right uh we've got uh as i was trying to share my screen and failed there at the very beginning. Here's a quick look at the NASDAQ. As you can see on the daily chart, it was right at the new all-time high on Thursday, and Friday absolutely destroyed it, went from 412 up to about 421, 422. And the S&P, which was slightly lagging, made a new all-time high, closing at 482.43, over 479.98, everything gapping up today. Markets across the world celebrating blue sky breakout.

Mike, how are they talking about this on the morning call? Well, our equity strategy, Gina, is as you would expect, everything's up and you know how stock markets are. If they go up, they're going to go up and that's what's happening. So everybody's bullish. That's just what we saw in Bitcoin a couple months ago or a few weeks ago. But the economist, Anna Wong, is very much one-sided. And she has one hand.

And she's impressive. She thinks the regional surveys, the ISMs, the Fed regional surveys are all tilting negative. She expects 100 basis points of easing, the fair value of easing this year, which makes sense. They tightened 100 basis points last year. But that's the key thing. Our economists are still pointing towards that recession. But here's the key thing is it's elusive in one way. So first of all, what's happening with the stock market?

It's priced for Fed to ease. Wonderful. That's great. But why should the Fed ease now? Because the stock market is going up. It's just silly. So what might that might make happen is this elusive recession to get worse. Now, we are already tilting that way in Europe. You see what's happening in China and the effects of these interest rates. Basically, there's getting started. So in the macro, my view is, yes, the stock market's going high. So let's dig into micro. From a commodity standpoint, if copper and crude oil can't go up

when the stock market's making all-time record highs, what happens when it has just a little reversion? And the key place is that, the key indicator is Bitcoin versus gold. Bitcoin's now down about 4% on the year. Gold's giving back about 2%. But that ratio to me has been one of my key indicators that I think it's warning us. Now,

the Bitcoin gold ratio reached all time high, right when we had the biggest pump in liquidity ever in 2021. And those facts have changed. And that was a pretty high peak. So that high was around 35. Now it's dipping down the ratios around 20. And to me, this is my key indicator. And if that Bitcoin don't start getting going soon, I think it's going to be an indicator that this stock market rally, which is great, it's wonderful, it's making us all feel richer, will actually might be, as we say in commodities, its own worst enemy. Because it's taking the Fed easy now in the picture, and it just might make it worse. So that's the tilt. But certainly from commodities, I'll end with this. The number one measure of heat, electricity, and fertilized in this country, U.S. natural gas, has dropped down to about $2.40

per mm BTU. That was first traded in 1990. So from my standpoint, global basis, pretty severe deflationary forces accelerating. Yeah, that all makes sense. You said that everybody is bullish, but I want to actually push back on that because last week or a few weeks ago on the show, we showed sort of the 2024 expected expectations from multiple Wall Street firms. And literally every one of them agrees with you and still thinks a recession is coming. You remember everything was muted. We were wrong in 2023.

2024 will be the year it happens. This is one of the lead articles here. Brevin Howard, top economist, sees recession coming in 2023. 2024 will be the year it happens. This is one of the lead articles here. Brevin Howard, top economist, sees recession coming in 2024. This is pretty much consensus across the board. He says the Fed is playing with fire when it comes to the employment side of its dual mandate to maintain a healthy labor market and steady inflation. And then, of course, you have the Fed to begin rate cut discussions, but avoid teeing first one up. It's exactly what you're saying. Now we're talking about it. It's being priced in, but maybe it's not going to happen. I mean, James, what do you

think is going on? Well, I mean, I read that article this morning and he makes a good point talking about how the labor participation rate really dropped pretty quickly in this last period. And that's an important point. But the other thing is the Fed is saying the neutral rate long-term, they've maintained long-term neutral rates 2.5%, which we've been holding 3% above that for a while now. And so again, we come back to the Fed will hold rates for as long as it needs until it sees something that makes them lower rates or inject liquidity, and then it's too late. And so they always overstay their welcome. So the question is, when is the welcome kind of run up? When is their welcome running out?

And when do we see that drop off in employment, the margin squeeze? Where do we see if we have some sort of credit event? When does that occur? But I do believe that unless something happens between now and March, I think that the market is way overestimating the likelihood of a March cut because we don't have the, the indicators that, that the fed is going to say they need and to have as a, as evidence that, that they're right and they should start rates. So the words crack up boom mean anything to anybody here?

You know, it, it, it feels like that. This feels like, you know, from a stock perspective, this feels like the rally to whatever level it is before, you know, people start to, you know, things start to normalize. You know, the fact of the matter is a lot of liquidity is being put in the system by the treasury. The Fed may be taking liquidity

out and losing money, but liquidity, as I talked about last week, is moving into the world. It's at a higher price, but there's plenty of liquidity there. And so the question is, what are people doing with their money? Well, we're getting our January effect. Look up what happened in January of 2000. And, you know, it kind of feels similar to me. I said this before, but I think that the needle might very well be people having to sell for capital gains taxes purposes in March. Generally, you know, before tax day. To me, it almost feels too pat for that to be the case. I talked about it last week. It doesn't feel crazy now. Look, I have no dog in this fight.

I don't see the stock market as a good value by any stretch. And I think that it's overly discounting. A hundred basis points of cuts, They think, OK, well, that matters. But what James said is important. Neutral rate. If we're above neutral, you would think that Mike would be right. You would think that people would say, OK, I got to get the hell out. But, you know, at the end of the day, it doesn't happen. The market can remain irrational longer than anyone can remain solvent.

So it's really a question of do you fight the flows or not? Now, as for Mike's point on Bitcoin gold, man, the other side of that bet is where I want to be. The fact of the matter is, and look, I think that the likelihood of Bitcoin becoming digital gold is higher now than it has ever been in our lifetime. The network is triple, more than triple now, where it was when Bitcoin last made an all-time high. I don't know the numbers on the ratio in terms of price. I only care about market cap. Bitcoin's market cap is still, what is it, 1 12th, 1 15th gold's monetary value, depending on how you want to look at it. And I don't know that it'll get there this cycle, but I think the likelihood of it getting there

is larger now than it's ever been. And if you look at what's going on in the world of crypto, it's completely unsurprising. Actually, the most surprising to me is that all coins seem to be going down at the end of last week, which is kind of, to me, that if there is an early warning indicator in crypto

to what NASDAQ is going to do, it's the altcoin market. Because that's where really the speculative, the real speculative juices are. Bitcoin's doing exactly what one would expect given the amount of minor selling there was last week, given the amount of open interest decline in the CME, which we know drove a large part of the last rally. And given, you know, the fact is, is with that, all of that, the net inflows to the ETFs are not enough to offset the GBTC outflows and

the outflows I just described. Does that mean much? Not really. We're still in a trading range. We're still where you would expect. And one stat I'll leave you with, which is a very interesting one, and it's been true for a while now, the number of days of rally that Bitcoin actually goes up is so small that do you really want to be on the sidelines if that's where you were at on a long-term basis? And honestly, that's where I'm at on a long-term basis. I think it's the highest asymmetrical, positive asset out there. And we now have a tool for people to start putting money into it. And by every measure of normal, not crypto people, but normal measures of success, it's been a rousing success. And frankly, that's with half of the retail systems, not even allowing their clients

to buy it. So, you know, we can talk about that and dig in more, but the flows are pretty strong and for very good reason. And nothing has really changed yet because no asset allocation models have added it and no RA systems have delved into it. And they're all looking at it and it takes time. So we'll see how it goes. Yeah. I think that Bitcoin's kind of trading in its own little vacuum at the moment. I don't disagree necessarily when Mike says leading indicator at large, but right now, this is very specific what's happening, right? I mean, it doesn't take a genius to look and see $500 million a day in Bitcoin moving from Grayscale to Coinbase to be sold on the open

market to understand why it can't go up, right? So Mike, when you say it's got to go up soon or else, I mean, it just can't while that's happening. There's just not enough volume or buying interest to, which is funny because we've heard about these unlocks and supply shocks and all these things over the years for Bitcoin. This is the first one I remember actually mattering. Like, you know, Mt. Gox was going to open and we're dead and all these things. Well, this time it's pretty transparent. Let's start with gold as an example.

The total amount held in gold ETPs on the planet is about $180 billion. It's not a lot, partly because gold is less than 1% of total global portfolios, typical financial portfolios. And the main thing I've heard since I've been in the business is there's no earnings. Okay, so it's more some of the boomers who like the boomerocks, the people I know who are involved in the gold bugs. So maybe that's an indication for Bitcoin. Yes, Bitcoin's a hot newcomer and there's, what, 200, maybe 25 billion in GBTC, the big GLD of the space. But it's a key thing that people, I think, who are very, very in that unique space of Bitcoin are forgetting about the macro outlook. And that is in terms of long term investment returns, it's compounding earnings

have always the number one thing that gold and Bitcoin do not have. Now Ethereum does. And Ethereum and the rest of the cryptos at least have something to look forward to is ETFs will be launched in those products. It's just a matter of time. Bitcoin's done. It's just made a major, I think, as we know as parents, a major step in adulting. And here we are, you can do all you want with it easily with a push of a button with your Schwab broker. And do you expect the returns and the volatility of the past to happen? No, it's going to get squashed into a trade like gold, in my view. And it's been, I wrote about that five years ago. So here's the fact there. And the key thing is, I look at it this year is, if i'm right in my macro great reset view it should happen this year i'm ready to fill or kill it and the biggest most

significant asset on the planet that was part of wirp and was born in the great financial crisis was bitcoin and it peaked with the biggest pump in liquidity ever if you just study your history that's how these things work and it's been going down since 2021, the biggest pump in liquidity ever. That makes complete sense. Now we have ETFs. So I look at it as the indications I see from Bitcoin gold, from commodities, from the yield curve. You have to be careful and ignore the stock people. Okay, great. Yes, they made new highs, but this stuff usually happens. And then when it usually, sometimes those kinds of things can last for decades. So let's look at lately, I've been watching China. That is clearly imploding.

China is a country that's just in a severe deflationary reset right now. And they just starting to figure it out. So I look at from our standpoint this year, what's going to be the trigger points? It's January. Yes, it's a January effect. They pointed that out. But now what I now the problem I have when people ask me, why aren't your bulls crude? I'm like, well, you kind of look at it lately.

You have to look at everything in connection with beta. Beta is S&P 500. When I traded a hedge fund, we used the S&P minis. If beta is going up this much and these other assets that are higher volatility, typically sometimes high beta, are going down, what does that mean when beta goes down? And that to me is a key risk is, thank God beta is going down. What does that mean when beta goes down? And that to me is a key risk is thank God beta is going up because what would that mean when beta goes down? I didn't say if. Now, here's a key thing. Volatility in the VIX index,

you just look at the 12 week average, you divide by or minus Fed funds. It's the lowest since 2007. Yield curve, Fed funds and one extreme versus 30 are still the steepest since what,, 1980? And I'm like, yeah, okay. It's been early, but we're in the historic aberration of the biggest pump in liquidity ever that's probably just going away. Yeah, I've been early, but I have to admit, if it doesn't happen this year, the great reset doesn't happen soon, then I will cave. But what

I see happening in Bitcoin versus gold is clearly heading that way. You said not this year, though. And I think that a lot of people now looking to the beginning of 2025 because the election will be done. I'll give up. I mean, these kind of things that I see happening are quite historic. And in the textbook, I plan the right. The history of plan the right would be kind of convoluted if it doesn't work out this way. But I'm willing to adjust to what's happening in markets. And this, you know, you can't, key thing you have to watch about the U.S. stock

market is it's just look at versus China. Ooh, not so bad. At least Japan's catching up a little bit, but it's very completely U.S. centric, very much. And yeah, I get it. There's wars going on. It's when people get bearish to the dollar. I'm like, yeah, good luck. Well, you don't want to be bearish to the dollar when there's wars going on. There's only one country in the world that provides open seas and protection since World War II, even before that. But here I'll end with this. A key thing also that still keeps, I think, the people who are still pulling this technology and cryptos need to understand that the most widely traded cryptos, most of them oftentimes, are crypto dollars, stable coins, and that AUM only goes up. It's the technology. Totally agree. James, I mean, where do you stand on what's happening with the ETF and this GBTC selling? Do you think that it stops anytime soon? Because man, if we

were a correlated asset to the stock market, which people have said for years, we should be pretty like 80,000 right now. No, I don't think it stops in the near term. I think it's just going to continue to bleed out because it's got a 1.5% fee on it versus 0.25% on any other, right? So the margin there on fee is just so great that I think it's almost impossible for you to look at that and think that it's a good value, even though they've been in the space. Running an ETF, I mean, ask Dave, running an ETF is not that difficult. You do have to have some trading acumen and be able to make the markets in order to be efficient and match the underlying performance of the asset. But that's not that difficult, especially with all the programs and machines we have

now. It's not something that sets them apart in my mind. So that argument from them is they're going to continue to lose that argument every single day that they keep their rates at 1.5%. So no, I don't think it's just going to stop overnight. It will ease at some point and you'll just run into the core holders that don't care about the fees and they think 1.5%, who cares? This is an asset that's going to go up hundreds of percent, so who cares? But we're not there yet, in my opinion. Also, we just have not seen the inflows from registered investment advisors and institutions

that we would expect. And that's actually, you know, if you step back and look at it, that's actually not that surprising. You know, it's bullish and it's not that surprising because it takes a while, not just for all of these firms to get their pipes in place. You know, they have to, when we went, just for information, when we went to buy the spot ETF for a volatility position that we were putting on for my hedge fund, we had to instruct our prime broker to go and add the QSIPs to their systems in order to settle the trade. That was on the morning of these things opening. And that's not atypical. So you still have people out there who don't have the investment advisors out there who don't have the capability yet.

And then you still have the vanguards and the UBSs and the Merrills who are pushing against it as hard as they can. And so the on-ramps are not there yet. It's going to be slow. It's going to be more like a trickle until it turns into a flow. And right now it's a trickle and it will become a flow. The question is, and I think that Mike brings up a great point, is do we hit the economic skids before it turns into a flow? Because we're still in a slow moving event driven situation with Bitcoin and the ETFs. It's still playing out kind of in

slow motion every single day with GBTC and more and more managers getting access to it. But do we have some sort of event or do we have a downturn in risk assets that Bitcoin, you can say whatever you want. This thing has led risk assets for a long time here, for years. And so it is playing a dangerous game at this point. And it could easily correct. And this is Bitcoin we're talking about. Yeah, it could correct down to the 30s.

No doubt about it. But on the flip side, you could see that the supply side just dry up completely and it run 10, 20, 30% in a blink. And it's just, it's the reality of the way the asset trades still. So there's two bits here. One, there needs to be coherence when one looks at how we value assets and understand them. And I think that we keep playing a game where we lump things together. You can't have it both ways. Either Bitcoin is a correlated asset or it isn't. And frankly, over the last year, God knows the last six months, it isn't. Now, it isn't for a reason. When you talk about the investment case for gold, and now the investment case for Bitcoin, what you're

talking about is effectively the denominator on all this stuff. Yeah, there's no assets, but how many dollars is the Fed printing every week now, James? Pretty fair amount. And that's the denominator by which you measure assets. And so the whole point about gold- You mean the treasury. Yeah, exactly. Treasury, yeah. Why own gold? You own gold because you believe that the fiat currency of wherever you happen to live is being debased. The dollar is the last to go, will be the last to go, and it should not be the one leading Bitcoin higher. The thing

is there's a lot of smart money in the United States and a lot of people who look at this and say, you know what? I need something to hedge my dollar risk. I need something to hedge that. And I also look at it and then you say to yourself, well, wait a minute, hedge what? You're going to use your spending in dollars. That's the point. Bitcoin, every week, I say the same thing. When you look at the price, the issue is, will it achieve digital gold? Therefore, it trades like an option. That's where its volatility comes from. The fact is that will Bitcoin be that denominator that people use to measure debasement? That's really it. When you look at the rest of crypto, which is down significantly more, it's pretty easy to come up the rest of crypto, which is down significantly more,

it's pretty easy to come up with a simple thesis, which is where's the selling coming from? Well, who are the marginal buyers? Generally, in the beginning, they're coming out of Asia. China is getting murdered, as Mike said. It's down another, what, 2.6% today, this tiny stock market. I think that's what's weighing on the crypto market. I think it's pretty clear. Selling begets selling. And I think that's where the correlation is. We tend to be so US centric here. But I think that US is still, you know, is not the driver. Anyone who went to token 49 last fall, and you know this, Scott, the driver is coming out of Asia for crypto until the US gets their act together. And so understanding price action without looking what's going on in Asian market asset markets are probably not so good.

And that also another reason that hurts correlations. Last point, and that is that Bitcoin is in the middle of a retracement. Sure. It went from 25 the day before Larry Fink said, I'm going to do a Bitcoin ETF. It peaked at 48. Well, do the math and look at Fibonacci retracement levels. The shallowest one is at 42.5. The next one, which is the most generally, the average is around 39.5. You're not going to see me even so much as think about sweating over my long-term long position,

even if it goes well below the second Fibonacci level, but we're not there. We're not there in a world where the marginal buyer of last resort, which is generally out of Asia, isn't there. And that's kind of important. So you have to look at everything in that context. As far as the ETF is concerned, the trickle, flood, look, Bitcoin is an option and therefore the narrative matters the last narrative the last gas narrative that's going on right now is elizabeth warren getting even more shrill with the you know having convinced her how the gao to say some stuff that if you read what the gao said they even felt they didn't even say what she said that's right they don't say what she said the fact is is you know i i asked

a very simple thing which is if hamas tells their their donors not to use bitcoin because it's too easy to trace why or how does anybody let her i know she's being community noted like crazy on x but that's still our little bubble you know and news media aren't doing that because news media wants to let her play that game of control. The fact is, this year is all about this election. And, you know, it really is. It's becoming a line in the sand. Does Elizabeth Warren get to continue to run the economic regulatory policy?

It's a yes, no question. If the answer is yes, then the U.S. is going to continue to languish and we'll see what happens. If the answer is no, I wouldn't want to be short this stuff. Yeah. Yeah, I was trying to find the tweets. It doesn't matter. But you are correct that she once again tried to beat the drum on this narrative and was quickly, people literally just showed screenshots of the report, which didn't say what she was referencing.

Literally at this point, she's just counting on you reading the headline and not the article. That's effectively what's happening. It's relatively astounding. But the last point that matters is where Mike and I agree, and it is earnings and what's going on. Look, the fact is, I think the reason that the Great Reset hasn't happened is because they're kicking the can down the road again. And they're going to keep kicking the can down the road again. It's a presidential election year. You know, the odds that the Federal Reserve and the Treasury

are going to let really bad stuff happen, probably not going to. But that doesn't mean that you can't get a, you know, bubble prick, prick like you did in the 2000 presidential election cycle earlier in that year, where you saw pretty severe correction in the tech stock area, followed by a rally back, followed by yet another correction. And as we went into 2001, it got looking ugly on that stuff. But that's possible. There's no doubt that's possible. But a big macro bank failure run kind of thing, not going to happen because they're going to throw a lot of liquidity into the market. Yeah. Well, let's talk about that for a second. So you know that BTFP is about to expire. And so what are they doing is they're conditioning banks to go

to the overnight window. You know, we talked about this last year. I think I wrote all about it. The banks don't like to go to the overnight window because it's got such a negative stigma to it. You know, if you go to the overnight window, it shows that you are a high risk borrower. Desperate. Yeah. And so it puts you on kind of a blacklist with other banks to lend to you. But James, didn't they just announce that every bank has to? Aren't they telling them they have to?

Exactly. So they're conditioning the banks by saying that, yes, exactly, Dave, that they're requiring banks to go and use the facility. It would be like you've got a Discover card and you have to use it at least once a year in order to keep it or else they shut it down. You don't get access to it. And so, of course, everybody's going to do that. They don't want to not have or you have a personal line of credit at your bank that you have to use in order to keep it just in case. Of course, they're going to do it. And so now it gets to the point where, well, yeah, I did borrow, but, you know, it was now it just muddies the picture.

So it's not like, well, Citigroup is not going to borrow. But if you have a small regional bank in Kentucky that needs some money and they go and borrow, then the question is, well, did they borrow because it was under the mandate or did they borrow because they needed it? And then you have to go and dig in. It just muddies the picture completely. And so by conditioning everybody to it being normal, they allowed that liquidity to be injected into the market and kind of hide it. And that's, you know, that's exactly what they're doing.

So they're going to shut down the BTFP program and they're going to open up the window and say, well, everybody's using it. It's not that big of a deal. A few weeks ago here, we were saying they would never shut it down, though. It does look like they are. Well, they've figured out a way that I think they've figured out a way to do it because what they don't want is that black mark of saying, oh, we're just injecting liquidity into the market. And, you know, so they figured out a way that they're probably going to be able to finagle through it and, you know, thread that needle. But the reality is they're not taking away the liquidity. That's what it looks. It

appears to me that they're not going to take away the liquidity. And that's the bottom line. So just go to first principles have they shut off the liquidity or not well it appears that they're not going to right and sorry i was just going to say that it's a big though it with the 10 year at four there's a lot less pressure than when the 10 year hit five it looked like it was going to go you know go back you know really bad uh and so yeah you just watch that watch the flow ofyear hit five, it looked like it was going to go bad, really bad. And so you just watch the flow of money. That's literally what they care about. Yeah. Well, you look at the 10-year though, the 10-year is broken above that downtrend,

right? And Mike, you've shown this chart before. I think it's broken above that downtrend where for decades it was going down towards zero and now it's broken above that. And that's broken above that downtrend where for decades it was going down towards zero and now it's broken above that. And that's a significant move to the upside for the 10 years. So the question is how long does it stay above that? How high does it go? And when we do run out of that reverse repo facility and the treasury is forced to go further out on the curve, what kind of rates are demanded out on that curve to compensate for that risk premium? You know, that's the question. And nobody knows yet, but we're definitely going to see it. Mike's going to, yeah.

Go ahead, Mike. I got to pick you up back on that one. So let's start with if the U.S. cuts rates 100 basis points this year, we'll still be above the rates in the highest, the biggest country in the world. Japan's two-year notes are zero. Germany's are already like 2.6. And China's 2.2. So that's how high rates are in this country, particularly if we have a little bit of slowdown. So I look at that 10-year note trend.

That's part of what got me to New York from the trading pits in Chicago. It's just saying, hey, yields are going down, bond prices are going up. A lot of New Yorkers disagreed. I got right about that one. But what did it take to show a blip in the end of that train? The biggest liquidity pumping ever in the risk three years ago, we're all going to die. Something that was completely unprecedented. Okay, now we're tilting backwards. I see this in commodities. Virtually all commodities are going back to where they were right before the big pump. It was 2019 levels. Natural gas has done it. Corn is very close. Lumber has done it. Crude oil is getting there. They're all going there despite this massive pump in liquidity. It shows all the lessons of history. Boom and bust

is one book. The other one I read in The Price of Time is another one I've read recently. When you get these big pumps of liquidity and assets pumped, they always go back down. Now, we're seeing it happening. There's significant wealth destruction happening in China. The question is, what stops it? Every day I read it, when I talk to my colleagues, it's like there ain't no one traveling. All I see on CNN is everybody from China trying to get out and immigrate to the U.S. They don't have immigration problems, which is a main thing.

But it's the tilt that way. And that's why I think I'm filled with guilt. That's the main thing that's pushing back on that narrative of a global deflationary recession right now is the U.S. stock market. It's awesome if it keeps going. That's my point about Bitcoin. I think Dave's right. Yeah, so far. And James, this is just a correction.

But it's a correction from lower levels after making higher highs in an environment that's completely shifted so this is why i like to tilt over like let's see let's show me the beef stock market's doing but i'm not seeing it in commodities i'm not seeing in data and we have this little bounce in tenure note the yield this year so my view this year is some of the best performing assets will be u.s long bonds gold and um that's those two because it's just the way it usually works in these type of cycles. But I want to end with this. One thing I do really enjoy, Dave, is when you point out Elizabeth Warren. I mean, what better antagonist in the history of mankind than someone who's fussy, not the best attractive person in the world and says dumb things i mean this is if you want to raise your hand and say i want to go down in history as someone who's probably not really

smart enough to figure out what's happening with the world and going the right way it's wonderful people do that but it's the discourse in this country that's awesome you ain't getting none of that in china as part of the problem yeah no i mean that that is that is certainly true look the crypto community wants to make her into the human pinata, and she wants to make us into all speaking foreign languages or being offshore because she wants everyone in her industry gone. But the reason why she wants her industry gone is what's important here. Let's not lose touch with that.

And that is simple. If your worldview is to have eight banks that control most of the economy, that she could put her thumb on the scales when she needs to from her seat on the banking committee to control the economy, the best way to do that is to get rid of all potential competition to the next iteration of banks. Part of the BTFP situation, I am sure, is the same thing. It's like we don't want them to die, but we don't necessarily want them to grow either from the regional banking perspective. And we still, we haven't gotten over our commercial real estate problem. I mean, nothing but, I mean, come on, you know, it, where's all the people flooding back into the offices all around,

all around all the major cities? The answer is, it's, talk about a trickle. There's a trickle there. And that, and commercial real estate is still a problem and it's talk about a trickle. There's a trickle there. And commercial real estate is still a problem and it's not going anywhere. We haven't talked about it in a while because people are like, well, you know, whatever. It's just, you know, I reminded of those cartoons where, you know, the person that says, you know, clean up the house and what do they do? They lift up the carpet and they start sweeping everything under the rug. I mean, these problems still exist, but I think it's exceedingly important for this show to understand my view and where I disagree is I read the tea leaves as the monetary part of gold

is not going away this cycle. It's not going away probably in the next 25 to 50 years, but it's going to get supplanted much in the way that silver did. And I think that in a digital world, Bitcoin has a much better chance of doing that. And I just look at that market as differently. I look at Ethereum and I look at the rest of the altcoins, though, very much the same way that you might in terms of, is there investment going into new infrastructures to do the new future? Because, you know, as Mark Yosko likes to talk about, the internet of information was a big deal. But the internet of value, which is what all of this stuff is about,

is potentially as big or bigger of a deal. And we haven't seen any of that yet. I mean, you see, just compared to the stock market, the entire market cap of all of that is less than any of the big seven companies just in the US alone. So we're looking at a small piece of the economy when we talk about this stuff. And that's why I hate conflating it this way. And nobody talks about commercial real estate anymore because it was supposed to crash and then it didn't. And then you just forget. It's like the banks, right? That's how people's minds work. If they see a hyperbolic title or a prediction and it doesn't happen immediately, then all of a sudden, apparently it's fixed. Yeah. I got to piggyback on what Dave said a little bit. That's part of the reason in 2018,

we launched the Bloomberg Galaxy Crypto Index because our thought was this is a proper way to get in and measure in for investors to be in this space, is use an index. We're not even close to that, but it's common at some point. Rather than picking winners like one, Bitcoin, use an index. Yeah, absolutely. James, did you have a comment? No, I didn't. I don't want to talk about that. So you're about to have a comment because you said they'll keep fighting kind of hidden ways to make liquidity. I tried to bring this graphic up actually kind of when you said it because they

might close that BTFP. But as you said, going to the overnight discount window, there's one thing they can't hide, right? And that's the extreme debt here. As we kick off 2024, the U.S. has already added another $200 billion in federal debt over the last three weeks. This puts annual interest expense on track to hit $1.05 trillion. To put this in perspective puts annual interest expense on track to hit 1.05 trillion. To put this in perspective, annual interest expense was less than 500 billion just two years ago. So we've more than doubled in two years. As interest rates rise and deficit spending soars, interest expense is becoming one of our largest costs. It is the biggest, but there you go. What's the long-term plan here? You guys want to see, this is our interest expense, what we pay in interest on the debt, going parabolic.

Which goes back to what Dave was saying, is that we're just injecting. This is inflationary, the deficit spending. But where does it stand? And you're seeing the interest expense, but we did. We added $2.6 trillion of federal debt last year. And now we're running at $2 trillion of annual deficit, right? So if we're spending $6.4 trillion, our revenues are about 4.4. The GDP is not keeping up. And so that's our tax base. So the problem is if we if Mike is

right and and my suspicion is right, then we run into a recessionary period here pretty quickly in this year. Then typically your your your entitlement spending rises by about eight to twelve percent and then you're because of unemployment, et cetera. And then your revenue decreases by a like amount. So just using 10% on kind of an average for both of those, you're talking about you're spending increasing to over $7 trillion. And then your revenue is dropping to under $4 trillion, giving you a deficit of over $3 trillion.

And so we're running to this. This is the most important part about what you're talking about, Scott, is that we're running $2 trillion deficits and we're not even in a recession. It's absolute madness. It's lunacy. If and when we do hit a recession, that's going to go up by 50%. What do you think they're going to do? You think they're just going to allow the GDP to drop off a cliff? Of course they're not. The playbook does not allow for it.

There's not a page for that in the playbook. The page goes, it goes, go to page 99, which is print again. I just said, can't they just print more pages in the book? And by the way, that's why the stock market is doing what it's doing. Because people are like, okay, sure. That's exactly what's going to happen. And that's why everyone's looking at the level of interest rates. And I keep saying it's the liquidity. Those deficits, that money has to go somewhere. And look, I've said this a lot on this program. If you are sitting in the seats of power, what do you want? You want asset inflation,

and you want capital substituting for labor, because that's what allows you to print without causing a lot massive spikes in CPI and consumer inflation. I'm not saying it's going to be easy, but so far they've been doing a pretty good job of pushing back into that. The problem with the recession is all of a sudden now they got to start putting money in people's hands because they need it. And that's why they're going to fight tooth and nail against it. I mean, look, they've been successful so far. I mean, we can't argue with it just empirically. You know, the fact is outside of the labor force participation rate, which I actually agree with Mike, I think that is a very important indicator. Outside of that, I mean, it doesn't look recessionary at all from the top view. Affordability of life, you know,

that's a different story. But the fact is that liquidity is meandering its way into capital markets. And which is the lead sled dog? The U.S. stock market. It has been. Well, we have been so conditioned to debt in this country, in the Western hemisphere, right? But we have been so conditioned to it. Just look at the consumer debt is running at ridiculous all-time highs.

Now, when does that, you know, of course, the metric that matters is, you know, the percentage of payments on that debt, you know, on your income, which is not near its all-time high yet. But it's increasing. And so you're seeing where the outstanding consumer debt is over, it's $1.3 trillion. It's another chart that goes straight up. So, I mean, and let me see if I can pull up this screen. We're going to try to share a screen here, Scott. You ready? Think we can do it? Let's do it, man. I was pull up this screen. We're going to try to share a screen here, Scott. You ready? Think we can do it? Let's do it, man. I was born for this. Ready. Can you see it? Yeah. There's our consumer credit outstanding. How are we doing? And this does not include buy now, pay later. So, I mean, at some point, we're just conditioned to it. And people are like, YOLO.

I'm buying the Tesla. Get it now. It's going to be twice as expensive soon, right? Yeah, I'm going to get the Apple goggles or whatever. Although Teslas go down every day, actually, in price. So that's an incorrect. Yeah, that's because I bought one. Tesla's doing to automakers essentially what happened a year ago, what Ford did with the Model T.

Even though it was a pretty significant inflationary period in the 20s, Ford still cut prices. And Tesla's doing that everywhere. And it's also happening, like there was a good recent update from BNF, Bloomberg, Newman Energy Finance. They expected average battery price per megawatt hour to stay unchanged this year. It dropped 14%. It's where are the trends going? It's the two lessons to books, the price of tomorrow by Jeff Booth, a very bullish Bitcoin guy. And the price of time is this stuff is just getting started. And think about the narrative we talked about in China a year ago. Everything was fine. Now, everything I see on BI China now is it's tilting towards that significant normal deflationary recession. What you pointed out with that unprecedented pump in deficit spending,

absent a war, absent recession, on the back of the unprecedented pump in liquidity that created make people feel really rich and wealthy in his lessons of history i'm doing reading um finding i'm lagging but reading ray dalio's principles way you know i was kind of delayed on it because he's too bullish china but all those lessons i haven't started it yet yeah he's just so bullish china but he wrote it he wrote in 21 when the narrative changed it's completely shifted now that's my point is what stops these trajectories? You need to typically a significant lag to significant amount of Federal Reserve easing. And not one major country started easing yet. They shouldn't and they won't until markets make them. That's where we're in that. Remember, it's only January. How are we going to be feeling

around August? Of course, we're going to have the election that's going to distort things. The point is, here's a quote I'll end with. I heard from Goldman Sachs is if you look at the history of stock market valuations, as far as they can go back, they're in the top 10 percentile of expensiveness. Dave, you pointed it out in terms of the 90 percent of the time where it's cheaper. And the U.S. is the number one. That's why I say sometimes it's like, yes, I love the narrative about U.S. debt. But compared to China, I hear they're almost three times debt to GDP. That's what I've heard. Japan, obviously, we know that is we can't get other data.

We're this the least, you know, the least worst of the rest of them. And we have the exorbitant privilege. But it's becoming important in the polls now that we can't just have this massive fiscal stimulus. Why? What happened? What happened? What was the lesson of too much liquidity that everybody hates the government for? It's too much inflation. Now, they're not going to remember the fact that how bad it could have been if they didn't do that. All they know is every time they go to buy eggs or anything, it's much more expensive. And the main reason it's expensive is we just created too much liquidity. So that lesson, I think, there is going to to resonate for lifetime. It's a great point. And Scott, if you can bring up my share again. So here's something interesting. So just look at the,

I wrote about the Michigan consumer sentiment, Michigan numbers, right? The consumer numbers. And so what's really interesting is that we hit levels over the past year and a half that would be consistent with a recession, right? So if you see in the recession, we hit levels that's really consistent with recessions, but we didn't have one. Why? Why did we not have one? Because of massive deficit spending that covered it up. It just papered right over it. So people are feeling terrible. Prices are high. They can't afford things. Yet GDP is running. How does that how is that possible? Well, because pushing on a string string. Yeah, you push on a string.

So, yeah, consumer sentiment is coming back. But Dave and Mike will agree with me every single time. Look at where consumer sentiment is right before a recession. It's always right at the highest level of that period. And then it drops off a cliff. So when everybody's feeling great, that's the time to get a little bit itchy and worried. And so we're not quite there, but there's something that just doesn't add up here. And I'm going to contend that it is the deficit spending, severe deficit spending in a non-recessionary period that kind of papered over the recession and made it look like everything's rosy. And so when you have, you have politicians, the white house up there, you know, claiming and, and professional economists and PhD economists up there claiming that people are lying. Their life is good. It doesn't make sense. Everything's great. The economy's run along binomics it it's it's not true and so yeah james i want to add to that the wealth effect i just you said it's the number one thing i think it's the personal wealth effect of any rational what 62 percent of people in this country are

homeowners their home the average price has doubled in 10 years it went up 34 percent since covid because that's money supply did yet they've been able to refinance down below 3%. That wealth effect? I mean, it caught me last couple of weeks, months ago, I was with family on the West Coast of Florida and the point, oh, that condo traded 250 a couple of years ago. Now it's a million bucks. I mean, people are feeling wealthy. Question is how problem is that the wealth effect goes to, you know, from the stock market is a big deal as well. You know, the house effect, yes, but, you know, refinancing that's big, it's been closed now for a couple of years. So it's really the stock market wealth effect. But the problem with the stock market wealth effect is it is owned very disproportionately. And so, you know,

I've made the point that if you said, if you took out a whiteboard and said, okay, I want to create wealth inequality, I want to create wealth inequality, what would you do? Well, you would have a, you would not have sound money. You would have an inflationary monetary environment. You would have fiscal deficits. You would have high regulations to stop smaller companies, which are the engine of growth and economic mobility, and you would prioritize the stock market over Main Street, Wall Street over Main Street. And, you know, frankly, there's a reason why some of the political sea changes you see

going on exist, right? You know, there's all the, if you listen to DeSantis' speech or, you know, talk to desantis's speech or you know talk to vivek speech you know yeah okay they threw in the talons they couldn't beat trump but who are they actually most concerned about they're concerned about the the uniparty they're concerned about the democrats and the old line republicans who actually have done this stuff for all these years and so this is the wall street versus main street rap and look, I spent most of my career on Wall Street, but I'm in crypto because it is the tool to try to reestablish or at least change that imbalance. But that is a very big deal. I mean, just think about $3 trillion deficits with a mild recession. What would a big recession do? Right?

I mean, these are, people need to understand we've had the longest, to put it in Mike's perspective, he likes to talk about, well, the greatest, you know, liquidity in history,

that pump. The truth is, this is the longest bull market in history. I mean, you're going from 2009 through 2023 or 2024 now.

Right? That's why it's hard to bet on them letting it go tomorrow. You know, if anyone's wondering why the recession never comes, it's because, man, they're really good at this. So far, people are really good at it until you're not. Is it possible? Call me a simpleton. I am.

But is it possible that we've had a recession this whole time, but stocks have gone up so nobody is willing to call it that? Every metric you're showing is recessionary. Mike proves it every single week. The thing is, we saw them kick the can. We saw them kick the can on the definition, right? The recession used to be just negative, whatever, two consecutive quarters, blah, blah, blah. Then they said, no, that's not what it means.

And then you can show another metric. They say, it's not really what it means. So if we can't define recession, how do we ever know we're in one anyways? Yeah. Go ahead. Look at, look what I just shared though, Scott. And this is another interesting data point is that, look, and this is just earnings, you know, but this is who owns the stock market. And remember, this 10% of income earners own basically seven, they own seven stocks. That's basically what's going on here. You've got this 10%.

That's my point. But that's my point. Isn't it a recession for you, but not for me kind kind of thing if you're on Wall Street or you're wealthy? And that's what people are trying to argue is that, no, it's not working for me. I don't understand why you're saying that. And that's why you get, in my feed at least, I get a lot of the retweets of TikTokers who are saying, I can't make my payments for my car, my apartment. I can't buy enough food for my kids. What is going on? I have three jobs. What is happening here? Because all three of your jobs are counted in the job numbers that are telling us there's

a recession. Exactly. And two of them are with the government. So, you know, it's crazy. It's insanity. Yeah. So I think my new base case is it is a recession, dummy. Right. And that's my new base case. I'm going to keep saying it. People are going to yell at me a lot. And reread Hayek.

That's a good point. But it's also Bitcoin has never experienced a recession. So let's get through that. And that's my point is I want to see it show the beef of outperforming beta in a recession. And we haven't had that, but it's all tilting the other way. But one thing I want to point out is the number one historic way to create wealth disparity is two. There's two good examples. North Korea.

I'm sorry, South Korea, North Korea, and Singapore. And how have we created wealth disparity in this country? Because it just, we expand so fast, some get left behind. And that's just the way it works. That's what you want. And unfortunately- Everybody gets left behind. Well, not everyone. I mean, that's- Okay, 98% gets left behind. That's a big difference in this country. It's the nature to give back. And it's happening more and more. It just doesn't happen right away. But it's just part of the DNA of this country is to give back once you because you want to keep the system going for everybody. It's just usually the way it works. And the rest of the world. I mean, I lived in Europe for a year. It's that it's that old guard wealth that, remember, it's early in the year. It's January. It's all that great hopium kicking in.

And the realization is what's going to happen towards the end of the year. That's why I say this leading indicator, Bitcoin, it's fill or kill, and it's killing. I can't believe it's not. I was about to ask another question. Go, Dave. Yeah, please. I was just going to say that the old guard in Europe, et cetera., that is literally what has happened in the top of the Democratic Party. And there are people in the Republican Party the same way. I mean, Elizabeth Warren, that is literally her goal is to stop the expansion on the broader base expansion. It's literally the exact opposite of her rhetoric. Because that's a much longer conversation i don't want to go there you know in terms of the showing the beef i mean bitcoin is an option repeat after me uh it's a narrative and we're not there yet and you know it it's going to show it because of what i believe to be is the most likely scenario but you have to remember it that way

anyway scott go ahead. No, we ran out of too much time for me to ask the question anyway. So I love that you can wrap it in a bow there. It just blows my mind that progressives, quote unquote, don't support Bitcoin. And that's the side that should be 100% all in on this rationally. It helps the people, invites the banks, which just lets you know that she's literally like you said, it's wagging the dog. It's projection. It's saying, look over there while I do all the things I'm yelling about. And Max Keiser and Stacey, I don't know if you guys saw, they were on here on Thursday. And we talked about Jamie Dimon. And Stacey said that that's what Jamie Dimon was doing. He said she's projecting. He literally went on a rant. He said, Bitcoin's for money laundering. It's for sex trafficking blah blah blah and he was like he's epstein's banker

they paid 30 billion dollars in fines for money laundering it's like literally like here's all the things i'm doing i'm gonna go blame them and it's it's really an astounding phenomenon it really is right james it's a contemporary you know media playbook that's that's what you do you get out you get out and project on somebody else you know look they're just about they want control they would they would like to we don't have time to get into this and we can maybe talk about it in the next show is they want control by rolling out cbdc They want that. And they're trying to figure out how to do that, whether they do it through bank CBDCs or they do the FedNow program, they do the FedCBD. They want CBDCs to control. And it's a whole other narrative that we can talk,

wrap around a macro on next week if we want to, but that's what they want. It's simple. Let's do a show on CBDCs. That would be fun. I see people even saying it. Yeah. It's already happened. Crypto dollars, the whole world went for dollars and they could have gone through the one UN through cryptos. They went for crypto dollars. It's what, 98% of all stable coins? Yeah, I absolutely agree. Guys, that's all we got 10am thank you Dave and James James always early but Dave you got up you did the lobby you get today's

participation trophy good job okay take care guys guys we'll see you all back here tomorrow at 9am of course but macro Monday next Monday thank you all see you next week. Bye.

Bye. Let's go.