The Wolf Of All Streets - Wall Street Clash: Bond Titans Predict Recession Despite Bullish Market | Macro Monday

Episode Date: June 13, 2023

Mike McGlone and Dave Weisberger discuss the the recent news in macro. Follow Mike & Dave: Mike McGlone: https://twitter.com/mikemcglone11 Dave Weisberger: https://twitter.com/daveweisberger1 ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $10,000! 👉 https://www.okx.com/join/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/ ►►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 ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/ 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 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.

The United States stock market, by definition, is back in a bull market, up 20% off the lows, which has a lot of bulls celebrating and throwing out I told you so's towards those people who have been saying we have an impending recession. First of all, I think it's important to note that the economy and the market are not necessarily the same thing. But the very fact that we're seeing it reported that we are back in a bull market is causing a lot of people to shake their head and say, no, no, no, including some very large bond investors. I have a feeling that maybe today's co-hosts, Mike McGlone and Dave Weisberger will also have a different take on that. It's an absolutely huge week. I'll give you a list in a bit of all the

things that are happening, but there's a lot to talk about on a macro Monday in a week like this. Let's go. What is up, everybody? I am Scott Melker, also known as the Wolf of Wall Street. Before Let's go. These are the key events. This is from Bloomberg's market wrap, which I look at every single morning, obviously. Key events this week. Look at that list. U.S. CPI Tuesday. FOMC begins two-day meeting Tuesday. Eurozone industrial production. PPI. FOMC rate decision. Blah, blah, blah, blah, blah. It goes on and on and on. Then you jump to crypto. I wrote this in the newsletter today. Of course, we have the Binance decisions today. Some pushback there.

Then tomorrow alone, SEC has to respond to Coinbase's rulemaking request. U.S. District Court in D.C. has the hearing on the restraining order against Binance U.S. That's the one where they're going to try to freeze all customer funds. We can go on and on and on. Guys, the bottom line is there is so much happening at one time. It's absurd. But Mike, listen, we can start. I mean, we can literally just start with a chart that you posted this morning. I want to just go here. This is in your newsletter. Deflationary bodies in motion, Fed still hiking.

You look at that white line, that's PPI. Absolutely falling off a cliff as we're coming into PPI, CPI, FOMC all this week. What does this mean? The means we're coming into PPI, CPI, FOMC all this week. What does this mean? The means we're heading to are severe deflationary recession, economic reset, probably the biggest of our lifetimes. If you want to blame someone, if it doesn't happen, blame me. I'm happy to take that risk. Now, there's certain times in your life you have to do that. I'm 58 and I was going to just say

what I think. I'm not worried about it. It'd be wonderful if I'm wrong, but that's the key fact is bottom line, it's all about liquidity. And when you see stuff like that, something that's never happened, commodities dropping at this pace, PPI dropping at this pace, banking crisis, leading economic indicators dropping at the fastest, most significant pace since 1972. And then there's always all little things. And the central bank still has their finger on the tightening button.

It makes you think you should be rational and a good, prudent investor and say, OK, did the market give me an opportunity to do something prudent in this environment? It did. So let's look at this bull market and the stock market. Yes, I've been wrong about the bounce, but I've been wrong about other bounces too. I remember similar in 2007 and 2006, and then 2008 paid me off. But then that was just a one-off. The Fed saved the world. What's happening now is the opposite. So one thing that I got from my strategy session meeting this morning I really enjoyed was our FX strategist, Audrey Child Freeman said something

very simple but profound, the surprise hike from the Bank of Canada. You should not expect in this environment a bottom in things like commodities and highly speculative cryptos and even the stock market from a macro standpoint until you hear a long and variable lag to surprise cuts. That's the key point is the Fed's on their finger. They probably won't hike this week, but they're on that trigger. Their trigger finger is on tightening. ECB, trigger finger is on tightening. And what's it going to take for that to not happen? Typically a decline in markets. Now you're seeing that yields. Yields are picking it up. Bond yields, inverted curve, 30 or 386 in the front end at five and a quarter or so.

That's showing you deflation picking up. You're seeing commodities. They're plunging. And you're seeing cryptos. And I think that makes a lot of sense that cryptos, I'll kind of tilt over a little bit to this, are facing a complete double whammy from a macro standpoint. Now, obviously, you know what's happened with regulation. And Dave's going to fire up on that. I'll let him.

And I sure enjoy listening to those. But also the macro is horrible for cryptos at the moment. And what's the relative price? Now, last year they got too darn cheap. They're just they bounced. I mean, 30 and Bitcoin is holding. Ethereum 2000 is holding. And what's the macro? It's still very bad. So I look at it as I want to be a bullish person. So this one week, I did put out something bullish on week. And again, I pointed out bullish gold. I still think gold and long barns are going to do well out of this. But it's the key thing that number one, what are we looking forward to? Still looking forward to Fed hikes.

Now we have all these other things kicking in. And the key thing also I enjoyed from my colleague, Anna Wong, who pointed out we should get 4.5 unemployment, I think within a year. And currently it's 3.7, which means a recession kicking in. If the recession starts in July, which she expects, and she also pointed out the owner's equivalent rent at 8% is very high. That's a key thing I look at in CPI. This is what made me really bearish in 2006, is you can't go anywhere but down when levels get that high and the feds really fighting against it so i want to end with the question and i was thinking about this weekend for you uh your audience and for dave and that is what is so bad about just coming out and say okay

these highly speculative digital assets of which there's almost 26 000 of them on coin market cap just saying yes they are securities regulate them as securities trade them as securities and move on of digital assets of which there's almost 26,000 of them on CoinMarketCap just to say, yes, they are securities. Regulate them as securities, trade them as securities, and move on. What's so bad about that? That's what I want to leave with you. And I look at, I just, I heard so much about- I don't think it's bad, but there's no way for them to register as securities or trade as securities once they're already launched. That's the problem. I mean, listen, a lot of them should die, but that's a death sentence because of the way that this is structured and the inability to come in and register. That's the thing. I don't think at this point there's much debate that a lot of these

assets are securities. I just don't know why security has to be a four-letter word that kills the entire asset class. Let me answer that, Scott, because the Securities Act basically focuses on securities, which are more or less, the only two types of categories of securities are actually covered in the act. This is a problem because now we have a third type that isn't covered in the Act. I will explain. So in the Act, the idea of a security is a company that issues equity, i.e. a percentage of ownership in a corporate entity with a board of directors and financial history. And remember, this law was passed in the 1930s. Now, I say that because there was no such thing as an internet. There was no such thing as information that human beings can get on their smartphone. Every one of our kids has

more computing power in the palm of their hand than the U.S. government did writ large 20 years after these laws were passed. So what does that mean? That means they said, you know, there were these things called, and people should read reminiscences of a stock operator just to get used to this. There were these bull and bear syndicates that looked a lot like telegram groups that were pumping up crap companies that had nothing. And so they said, you know, if you want to sell a security to a retail person who had no way of knowing what was behind this security, we're going to create these rules. And we're going to create this thing called a prospectus to IPO. And we're going to create

secondary market disclosures. And we're going to regulate broker-dealers. And we're going to basically make all of our rules be based upon two types of instruments. One is an equity, i.e. a percentage of ownership in the company. And two is debt, i.e. a financial obligation the company takes on. Now, there's a couple of types of debt, more or less. There are bonds and there's preferred stock. Preferred stock is sort of a hybrid where you're essentially saying you will have a percentage, either a coupon or a minimum or a percentage of something, whatever it is, but it doesn't have unlimited upside. That's the point. Bonds are limited upside financial obligations. So what's happened? Well,

in 70 years, a lot of things have happened. The internet has come along and made the prospectus system completely obsolete. No human being reads them anymore. Yet John Reed Stark, you had on your thing, essentially waves the prospectus, says, you see, it's in the S1, you see? No one's read it. It's completely absurd. It's sort of like, you know, the auctioneer who is not quite as fast talking as I could talk if I really want to go faster. But the fact of the matter is, who says this stuff at the end of these commercials on the radio that nobody listens to or hears the words? We have a practical problem in that the SEC's rules don't work anymore. But the worst part is, what's also come along is six, seven years ago, people started talking about this stuff. And we had the ICO boom in 2017.

Now, you know, because I've talked to you about this, that in 2017, the three words that made me want to throw up in my mouth were non-dilutive capital. The entire idea of an ICO creating this token that can fund something that doesn't dilute the management team really annoyed me. It's ridiculous. And if all these things are securities, that wouldn't be possible. But there is something different in most of the tokens that I do care about. And in fact, the ones the SEC attacked, they didn't attack the thousands of meme coins. They attack things like Solana, Polkadot, Cardano, whatever you believe about the teams of doing it. They were basically done for a reason. These tokens were listed and traded in order to do two things, bootstrap the network from a funding perspective.

And now you could say, well, look, that's a security. If you're funding something, we should have regulations. I agree, except for the fact that there are no financials, there is no board of directors, and there's no way to fit them in the forums. And what does matter for tokens and network tokens from a token is something we used to, we call tokenomics and we toss the word off. What are we really talking about? We're talking about understanding its supply and having rules and full and fair and accurate disclosure of can they mint? How do they mint? What is the supply schedule? How many are being created? What is the overhang? All of

that stuff that is important. And if you actually force the foundations who created these things or whoever created these things to disclose that and you held them to it under penalty of law, that would be a good thing. And I don't think anybody argues with that. The second thing that these things are that care about tokenomics are what rights do they give you? Is it bullshit? Or are these tokens are going to be used for what? What are they being used for? They're being used for discount tokens and they get burned on a schedule. Well, that could create value because people are going to need them at some point. Now, of course, that's self-defeating and you need to understand it, but there are lots of things they could be. Could it be something to do with fees that are calculated at a different date? Is

it just governance of the network? Do you really want to own a piece or the ability to say what happens in a network with no value? I don't know. But making these things clear is something that should be done. Can't do it. So here you are in a situation where American entrepreneurs are now being frozen out of a market for being able to bootstrap a network. Because the second thing that these tokens are used for is for incentivizing both programmers who contribute code to the network and users and participants in the network. Imagine a world where your webcast, where your advertisers and sponsors pay you for that, you had the ability to take a piece of the income stream and give it to Scott Tokens. Now, I'm not suggesting you do that because they'd be carting you out in an armed jumpsuit. And we understand that. But you understand the point.

The point is, it's an innovative business model that never existed because it only exists because of the existence of the internet and because of social media and because of monetization. I mean, when they did the SEC rules, was there ever such a thought as something called an influencer? Are you kidding me? No, there were actors who were under contract to Hollywood and had no rights. Baseball players had no rights. Nobody had rights. There was no free market in the information economy, even slightly. So that's the problem. That's why they can't, quote, register. Now, flip the script for a second. Now we have all these things that people are doing around the world that people believe in, that people are participants in, etc. Who can actually, let's say someone said, because I know John Reed Stark and others would say, Reg D or Reg, you know, Reg crowdfunding or Reg A and all this stuff.

Not one of them, not one allows any of these things to be usable by the general public and investable by the general public. They all fall under the accredited investor rules and the seasoning rules. The seasoning rules? What's that? Are token stakes? No. What it means is that if you have a token and if you decide you want to list under one of these things, it has to season for six months to a year before a non-accredited investor can trade in it. So all your programmers, all your users can't use it. So what am I describing? I am describing a situation that over five years ago, Commissioner Peirce, myself, I'm on public record in February of 18, explaining all this to the SEC,

trading and markets, investment management and other committees. There were 40 of them in that room. And I guarantee you, 30 of them are probably still working at the SEC. So none of this is new. This is something they've known for five years and have steadfastly, they literally have ignored it. Now, let's look at the trading thing. Now, let's look at Coinbase's point. So Coinbase comes along. They're a public company. Now, I agree with John Reed Stark, and I'm going to continue to pick on him because I want him to debate me in an open forum where I don't have Bruce Fenton shouting over me saying blithering stuff that really is besides the point, which is what happened last week when we had him on the Twitter spaces.

I love Bruce, but sorry, the S1 argument is terrible because in fact, Coinbase disclosed in their S1 that the SEC coming after them was a risk. The problem with the SEC's argument that, yes, it was disclosed, so we were okay with it, is that only works when the SEC doesn't pick winners and losers, except for they have picked winners and losers. Gensler slipped. And I don't care if he says it's only his opinion, because all his minions have been saying the same thing. Plus, he also put out an advisory in one of his campy videos that he likes to do, warning investors about crypto in a way which basically said there's no use for them. And the problem with that is that betrays something. Frankly, I don't even think he agrees with what he was saying based on his class at MIT.

But the reality is that is them picking winners and losers. So it's a bad argument. But what is really interesting is the Coinbase side. My monologue is getting close to done. Sorry, guys, but I think this is important. Coinbase went into the SEC 30 times, 30, to ask them what can they trade, what can they list. Here is our process. We turned down 90% of all the applications to us. And frankly, of your 26,000, probably 98% never bothered trying to list with Coinbase because they knew full well they wouldn't get

through. And they said, okay, here's what we think. We think that if it is fully distributed, if it's this, if it's that, if it is no corporation, you know, whatever, and the SEC refused to spend, refused to talk about it. So they basically attracted investors. So now we have millions, and I mean literally millions, six, eight million, 10 million crypto investors in the United States, more, most of which are tilted towards non-accredited, generally more minority, poorer investors that have invested in these things without the SEC saying, boo, for five years. The SEC is culpable on that. Had five years ago, they said, you know, we're going to shut you down. Had three years ago, they said, we're not going to approve this. Investors wouldn't have put as

much money in, but here they did. So now the SECU's charter is to protect investors, is going to protect them by forcing them to sell all of their holdings that they bought at a loss. And why are they losing? They're losing because people do not believe that with half the world's liquidity and investable assets, that these things are going to be worth as much. That's why the market dumped 30% over the weekend. Let's not kid ourselves. I'm not talking about Bitcoin and Ether. They didn't say not the whole market. But a lot of the altcoins, the ones that were named, dumped over 30%. Why? Because they believed, the people believed they had to sell them. Not because they wanted to, because they had to.

So the SEC is directly harming investors. This is why Richie Torres, and I point on Richie because he's one of my favorite congressmen, and I know people identify me as a Republican, and I guess theoretically I'm registered that way, but I would vote for Richie if I were in the Bronx. I agree with a lot of his positions. He called Gary Gensler's action that past week contempt of Congress, not the legal contempt of Congress where they're going to haul him in and throw him in jail, although that would certainly do wonders for regulators that step out of line. But the fact of the matter is he basically said, listen, my committee just passed a law or just passed a bill for discussion that says it made

it very clear that Congress does not believe regulation by enforcement is a good idea. In fact, that is why Gary Gensler is going to have a huge amount of problems. And he knows this because of something at the Supreme Court that John Deaton has been talking about probably well in spaces this morning, if he's on it, called the major questions doctrine, which is when the legislature says X and clearly makes their intent known and the administrative state goes against it without legislative backing. That is a no-no. And so that's what's going to happen. Okay. Enough of a rant. I'll stop there. Are you sure? But that was epic. I was typing with Misha, the producer on the side. I was like, maybe we should just end it after Dave's done.

That was epic. He just closed it down. Maybe the lesson is we should not have Dave in New York when we fire him up. If he's more kind of subdued Florida, he wouldn't be as fired up as much. He probably had a lot of coffee this morning too, huh? No, I had none. I spent 25 hours in the car this weekend driving my wife and our car up from Miami to the beach in New Jersey. And you heard about the truck fire on closing I-95.

Let's just say when a piece of I-95 is closed, the rest of I-95 doesn't work too well. So we went backstreet half of the route. So you're double angry. I get it. Just a brief comment before we move on on what you said like i had anatoly from solana on my podcast three weeks ago or something and i asked him the simple question that both of you alluded to which was like do these assets need tokens i mean do these platforms do these protocols do we need all of these i might

agree he said 99 this is gone but the one place you definitely need them is layer ones right like ethereum and solana because that is literally how the network is secured they clearly have utility and it's nonsensical for these to be the ones that are targeted so i think that there's truth on both sides here as usual the sec should be attacking 90% of this stuff at this point. And we've thrown it in their face. Let Mike go for a second. What's a thing I see

common with people in cryptos? And I've enjoyed learning things from cryptos and teaching other people things like boomerocks. I listen to so much, I didn't realize your average metal person didn't know what a boomer rock was. I'm like, oh, I guess I'm too deep in cryptos. But the key thing we need to get past here is let's stop complaining at the SEC and deal with it and deal with how we're supposed to act accordingly in markets. That's why I look at it as a macro strategist. They're going to be around. This is going to be the case for at least another year we have a pretty significant election coming up it's going to be horribly

mudslinging it's going to be very bearish and let's look at the macro there's a headwind on all cryptos related to sec there's a headwind and all cryptos related to the macro in that environment you probably should be selling rallies pick out the ones you want i obviously i focus on the macro and then the indices i don't trickle down into i just lose my hair with all the rest of them but the key thing i need to point out is the big picture here is what's happening in all markets that we've had this big marks bounce in equities if that does not continue and we had in divergent weakness in commodities and cryptos most most notably in Q2. If this stock market does not continue rallying, let's say if it drops 10% from where it is now, that's normal in a recession. That's just starting kicking off.

Of course, we've never had a recession like this with the Fed still tightening. But look at that. What does that mean for the high beta cryptos? That's my point. As a strategist, I say you're probably better off thinking the market's more likely to go down and down hard. I hate to say it, just pointing out facts, unless something changes, and I'll end with this. Then you look forward to the big picture future, and I like to ask the question, you think about Mr. Gensler and how he's going to view from the future, and I ask myself, well, why is Alexander Hamilton on a $10 bill and Aaron Burr isn't? I think Gensler's going

more likely being looked in history as Aaron Burr. But in the meantime, we have to deal with his effect on markets and act accordingly. I would say that we're going to have we have like five Aaron Burrs on the list right now, and he's not the only one. Powell's probably going to be lined up right next to him. I think that none of these people are going to be looked back favorably upon. But it is important, I think, to realize that we are in a bit of an echo chamber and bubble and that we are very passionate about our thing. And that happens to be the thing that they're coming after. I mean, look, I think that it's really, really critical to understand a couple of things. First of all, what should happen?

And I want to be very clear because there have been a lot of CEOs that have been talking lately. I am far from alone. And we at CoinRoute stand for principle based regulation. There are many things that are important. And the biggest single problem with this narrative, well, he's going to be around for a year screwing up the American economy. Fine. That's possible, although we'll see what happens with the courts. And Tuesday, as you pointed out, is kind of a big day. But the truth of the matter is crypto is global. And at some point, the fact that U.S. people can't invest in it, there's an enormous amount of U.S. liquidity that ultimately ends up going through feeder funds outside the U.S. And all that's going to happen are individuals in the U.S. which make up a happen are individuals in the US, which make up

a dramatically small part of the trillions of dollars of wealth that gets invested out of the US are going to be screwed. Because when we do get to a tradable bottom, and unlike Mike, I actually think we're close on the crypto side, but I want to nuance that in a second. I think that what will happen is the money will just flow out of the United States. That great sucking sound you hear is the engines gearing up for the financial markets of the future to take place outside the U.S. in a way that is unthinkable or would have been unthinkable under any administration before this one. And it really is that big of a deal. And I'll state my line in the sand. But let's get

back to Macro Monday and talk about what's going on in the markets. Because what we saw this weekend was fascinating. We saw a 30% drop, which, by the way, if you remember, what I said is on these things, what you're always looking for is forced selling. When forced selling happens, nobody is stupid enough to stand there and buy and catch that falling knife. So when you see a mass deleveraging, look at what actually occurred. Bitcoin is back to still above where it was when the Binance news was still announced, $1,000 above its bottom. Ethereum is above its bottom from that news. But all these altcoins, on the other hand, they trashed. They dropped 30%. Yeah,

they're off their bottoms by microscopic, but it looks like a dead cat bounce. The truth is that there was obviously for selling. Now, we may never know whether it was one or two funds that went belly up or that had their charter revoked or were told they had to dump their portfolios, but there was no liquidity there to suck up that liquidity. Once again, it happened on a weekend. Every time in the past we've ever seen this sort of selling cascade happen on a weekend, it's generally been prop traders using derivatives to push the market down. And I want to be clear about this because this is something we talked about. I did a video called Masterclass of Manipulation, which anybody can watch. It's on the CoinRoute's YouTube channel.

But basically, the simple point is there's more liquidity in the perpetual swaps than there is in the spot. So what you do is you accumulate a position that's long spot and short the futures. Then when the time is right on a weekend, you sell the spot. And what we will do, it will knock the price down horribly. And then you sit and wait way lower to buy back your futures. You'll get the average price on the way down of where you sold. You'll buy back at the bottom. Easy peasy, you make money. Happens to be that type of strategy, which the SEC would call momentum ignition,

is more or less considered illegal by almost every regulator around the world. But there is no cohesive regulatory framework for that because the regulators around the world don't agree with one another yet. And so what will happen? What will happen, because we're seeing it with MICA, we're seeing it in the FCA, we're seeing it in Dubai, we're seeing it in the fca we're seeing it in dubai we're seeing it in hong kong we're seeing it in singapore is eventually if the sec keeps on this path the rest of the world will come together and start trying to regulate that type of strategy because it's clearly what they want to do just hasn't happened yet because getting that should happen but as you said that should happen that would be sensible and reasonable also i mean i was watching a bit of that price action this weekend which i should not have been because i was supposed to be on

vacation with my family it appeared to me that some of the market makers also disappeared that's right the books the books just emptied out on both sides because maybe they're not interacting with certain big name exchanges right now because they don't want to do business there and get in trouble so for people who don't know we love to talk about market makers in crypto as the big whales who are manipulating price. That is literally not what a market maker is. A market maker's job is to keep the spread tight and be the sell wall and buy wall on each side to make sure that your orders get filled on both sides in size. Well, if they disappear, you just have a bunch of people left, a bunch of retail. And if somebody sells into that,

it is going to crash. The key takeaway from this is what Dave described is what I used to do with clients in the trading pits called basis trading with futures versus cash and treasuries. And that was sometimes that was leveraged 101 as we learned from long-term capital management. But the bottom line to remember here in the macro is when, as John Liscio pointed out, and Dave will remember that name, is a prominent journalist from the 80s and 90s used to write the current yield column in Barron's, pointed out traders are dope sniffing dogs. That's what this is. But the key macro is when traders know there's gaps that they can exploit, why weren't they doing it in the buy side?

They know it's a bear market. They know the weakness is price going down. They're always going to exploit that. That's just what traders do. And the SEC's job is – and I want to tell you one story, too, what happened, tilting back the SEC a little bit. When I first started in the trading pits in the 80s, I was told to do something that's illegal. And later, then my firm settled with the CFTC, paid a fine, but they did it because they knew they could get away with it until they couldn't.

That's what's happening now. And now the regulator's in the space, but traders know the gap in the risk are to the downside. That's my point is. So I think the bigger picture macro is you're supposed to be selling rallies and most risk assets. And the last one that's still hanging in there, that's going to be the biggest one that's going to matter is stock market. Because if that thing doesn't stay up, everything falls except for bond yields and gold. I want to get back to that, but there's two things. Obviously, when you have the prospect of 50 percent of the of the world's wealth not being able to invest or hold assets, then those assets are going to drop. It is incredibly simple and traders are going to exploit it. The market makers pulling out, I mean, yeah, some of the stuff in the Binance filing is incredibly damning for some of the

large market makers. And so, yeah, of course, they're going to be pulled out. It makes that strategy that much more effective for the people who are willing to do what is knowingly a manipulation strategy. So it's just worth understanding that it does make it more susceptible. The meta point here is the SEC's actions quite clearly are not just harming investors, but they are increasing the ability to manipulate these markets. Think about what I just said and think about their mission. And now ask yourself the question, did Hester and others warn the SEC that this is exactly what would happen? So one has to ask oneself the question when Congress talks and the courts go after them, are they doing,

are they handling their mission? The answer to that is decidedly no. So now let's go back to macro. And I'm going to have a question for Mike. So I'm looking at the yield curve, and I think it's utterly fascinating. So right now, whoops, I had it up. Right now, the one month through to a year is flat. I have the 210 here, by the way, just for reference. No, no, I understand that. One month to a year is flat. So traders are saying the Fed is going to stay put with a small percentage of maybe a quarter point between now and six months at some point, and then back down to where we are today in a year. That's what the bond market is saying. They're then saying 50 basis points-ish cut at two years. They're saying

another 25% at three years, another 25 basis points at five years, and more or less maybe another 20 basis points out to 10 years, which is nowhere close to. Basically, what I just described is literally impossible. There is no freaking way that that could be what actually happens. But that's where our friendly market is saying, and why do we say there's no way that could happen? If we stay where we are for a year, then that's possible. That is possible. The Fed just sits there and says, okay, I'm not going to do anything. I see what Mike says. I see PPI going negative,

which by the way, I'm going to give Mike credit. We're now in June. He in February said that the PPI would roll over and go negative by July. So fantastic call. Does it matter for trading? So far, no, not at all. Yeah, so true.

Did I make money on it? But it was still for a macro strategist. That's a great call. I don't believe it's even remotely possible in this politicized environment that if we tip into recession in Main Street, that the Fed isn't going to be forced and their hands not going to be forced to start cutting or at a bare minimum to start flooding the market with liquidity. And as a result, most people in the stock market are saying the same thing. So you're seeing this rotation going on in the stock market, right, towards more of the things that people think are immune to this stuff. And I tend to agree with Mike that I don't believe that a lot of these tech stocks are immune to this sort of stuff. But it is really important to know that the bond market is effectively saying the Fed is stuck in amber. That is basically what it's saying,

that they're not saying they're a non-factor. They're saying the bond market is basically saying the Fed's not going to do much. So now the question is, what are the catalysts and what's actually going to affect the stock market. Well, the big one that is going to affect the bond market too is, and I've said this every single time, I will continue to point at it, it's commercial banking and commercial real estate and the regional banks and what's going to go on there and the black hole that's evolving. It is fascinating. I was at a conference of realtors last week in Miami, and people are still pretty bullish in the real estate community on residential, and nobody wants to touch commercial with a barge pole. But you're in Miami, and we all know that real estate is hyper-regional, and so I think you could be bullish on real estate in Miami and extremely bearish on in San Francisco. Oh, absolutely. Absolutely. But my point is that I don't it's pretty hard to find somebody who doesn't see a black hole in commercial real estate in the major metro areas.

I agree. And that is is a huge overhang to the economy. And Powell understands this, which is why he pulled out the bazooka on the bond, on the bonds, on the bond market with the FBTFP. And there's another bazooka that's probably ready and waiting if that thing falls. And I think that's what's keeping the stock market. People are looking at it. But what's interesting is it looks more like the bond market is blinking than the stock market right now. Now, I personally think that when we get to crash season, and obviously it doesn't crash every year, but we get to the fall, we're going to have at least one 10 percent drop in the stock market. I agree with that. So I don't know when or how, but I do believe it. Right. I just want to point out, while the U.S. economy seems headed for a soft landing.

Yeah, right. The Eurozone just led into a recession. we always talk about macro from the united states perspective and what's happening here but the rest of the world isn't waiting right i mean the eurozone's already in a recession here that should be a pretty good indication of what's coming here that's such it's so important it's also the key thing to remember is what's so important what dave described and what you just saw in the headline headline is the part of human nature that will never change. It's not logical for the masses of human nature to expect a severe, worst recession of our lifetimes, like I am. What I'm doing based on the facts of history and trends, what's logical is a headline like that. You can't, as a strategist at a major entity, most of them come out and make that major call. A few do.

Most notably, you've seen some of the Goldman Sachs calls have been very wrong, particularly on energy the last year. Now, before that, they're right, but who didn't call a bottom in commodities when energy went negative in 2020? But the point is, this is the way it works, and you have to watch it sometimes the way it works with the masses. And that's what I see right now is I think it's illogical to expect a 10% correction in the stock market. All the lessons of history say peak to trial, you should drop 50%. Now, we've just gotten started, and most lessons of history say this is what normally happens. You have to make people feel good. It happened in 2008.

It happened in 1930. And feel like it's not going to be bad. And then you look at facts, what happened is, bottom line, the liquidity pull is still happening, despite the fact that everything's tilting over. Now, that's one thing I appreciate what Dave mentioned. It's very important why our chief economist, Anu Wong, pointed out why they won't hike this month. They call it a pause. The last hike was the last time, the way I look at it. Unless the stock market makes a mess, that's a lose-lose. Stock market keeps going up, they're going to keep hiking. Now, we've heard that from other Fed governors. But the key point is what you mentioned about the bank crisis, commercial

oil strait, bankruptcies picking up, the long and variable lags. Yeah, that's all. And maybe they read McGlone's note about PPI collapsingpi collapsing yeah that's all the reason to stop hiking but that's the key point they're still dangling that carrot that's my point is you're supposed to just say thank you yes that would be great if we have a soft landing guess what it's already priced in what's the risk reward of pricing buying equities buying risk assets cryptos are going down with the market already thinking yeah we've already priced with that soft landing what's your risk reward a normal reciprocal recession and dump on the back of the biggest liquidity pump in history. And there's so many markets are showing that's just getting started.

Like just right now, crude oil this morning is down 4%. There was not one analyst last year except for some of the idiots like me who predicted that would be happening. Why? And the key thing is, why do they get it wrong? Because what you pointed out, that recession that's been indicated by collapsing commodities, copper, crude oil, leading markets, and the data is going to be way far behind, but the markets are way far ahead. And that is just showing us, and the key question I ask myself is, you should not expect a stop and end to this plunging, forward- looking metrics for markets like commodities and cryptos until you get a long and variable lag to Federal Reserve easing. That's just normally the way it works.

Maybe it's different this time. I don't think it's different. I think that the market is a discounting mechanism. And I think that the amount of money that was created is significant. So basically, what we have is a ridiculous situation where where do people put their money if there are in hedge funds? Now, I want this to be exceedingly clear here. The amount of the mutual funds aren't going anywhere. If anything, they're probably contracting slightly on the equity side. So, you know, people's asset allocations, more humans, more capital owners are putting money into treasuries and getting the, you know, and, you know, and getting, as you put it, what's wrong

with getting 10% over two years to wait this stuff out. That's the Michael Golden statement. I think more people are doing that. But if you're a hedge fund getting two and 20 or more on performance, you can't outperform. They don't believe they can. Now, frankly, if you're right and the market crashes, they do outperform. And so they can make a lot of money, but they generally are looking to take more risk. And there is a lot of money sitting there. And so what are they doing? It is sort of the closest analog I can say is one of my least favorite, but actually true aphorisms about tech investing. When a company first gets revenue, watch out. In other words, companies that are worth X on the story start making revenue and now people start looking at what their multiples are. And all of a sudden, invariably, when companies first switch into revenue or even gasp,

first get to profitability, that's actually horrible for the stock. I mean, I wish that weren't the case because it's totally irrational, but it is the way it is. Now, why am I mentioning that? I'm mentioning that because a lot of people, people pumped up NVIDIA. And when we could talk about that to literally internet bubble levels of price to sales, price to revenue. Right. Basically assume that no company on the planet is capable of competing with NVIDIA in the next five years. Completely ignoring the literal millions of STEM graduates that China is cranking out, completely ignoring the fact that we know we need more chip fabs here and everywhere in the world that's not on the island of Taiwan.

And basically saying NVIDIA is going to own the entire AI market for their calculations using their GPUs. It's literally insane. Doesn't mean it can't keep going up, but it means it's insane. And to some degree, our market is pricing in that insanity. And at some point, I think you're right. I think that bubble goes, but I don't know if macro is what does it. I weirdly think that it may very well be that people are putting money into those stocks. I hate to use the words because it sounds so dumb coming out of my mouth as relative safety, as a relative place to try to get growth.

I mean, people are desperate for it. And I personally just wonder about the mass insanity that is going on. But that is more or less what's happening. Go ahead, Mike. Well, I think that I like that point because I think we're at that stage now. It's so early days. Instead of just saying, OK, I've just seen this a few times that maybe it's not it's better just to completely underweight equities and overweight the whole treasury curve rather than trying to find different sectors of equities that are going to outperform in this recession. To me, that's the point we need to get where almost all bear markets end when people give up and all the strategies you see come out and say, oh, it's going to last another 10 years.

We're so far from that. Everybody's, it's just that the pendulum is so far swinging to one side. That's my point is when the market says 4.59% of two-year note guarantee, you're supposed to just say, thank you, goodbye, go on vacation and not like Scott did and not look back to me is sometimes sometimes you get that opportunity. And I just I think it's one of those times I looked. Dave can vouch that we were we were sort of behind the scenes. We were all vetting what was happening with BitGo and Prime Trust the entire weekend and trying to get to the bottom of that story. So I didn't do much vacationing, unfortunately. I tried.

But would you see what's happening? We keep seeing these speculative... Remember, like we mentioned, I remember seeing fuel cell stocks. It always happens when things get started. The market goes through these mean speculatives. We had PepeCoin, right? We have NVIDIA.

It just, that's a sign that you should be saying thank you, goodbye. And it's, yeah, McGlone's been wrong about equities be saying thank you. Goodbye. And it's yeah, McGlone's been wrong about equities for a while. But I remember this in the past. It's just that to me is a shoe to drop. And if it doesn't drop, it's great. But the Fed's going to make it drop. Unfortunately, I don't see that you've been wrong, though. I can't remember how many times you've said we will see big rallies in this bear market. Yeah, well, you should be looking for the opportunity to sell massive rallies,

which is what we have right here. So I don't think that you've been inconsistent. I don't think anyone's expectation is that everyone's going to know every move to the day and to the amount. That's just not reasonable. The path is correct. Now, if we rip up from here

and make new highs, we're done. Right? Go ahead. Sorry. I was just going to say timing. In 2006, I was bearish on thinking the global financial crisis could happen. I was literally short MBMA, Fannie Mae, a bunch of others, and I was way early. And being early and short is not a good thing to be.

It doesn't mean I was wrong. It means I was early uh what's your pnl show your pnl showed you wrong what's the bottom line from the world we come from you know well it was a little bit weird because i probably was net slightly up because but i kind of had to get rid of stuff because of things that were going on a city group such as once i found out that city group had a massive long position in equities in Fannie and Freddie, I liquidated my short position because I didn't want to be accused of insider trading, which unfortunately, I wish to God no one told me about that position,

but I didn't have a voice. And of course, we all know what happened, Citigroup being almost bankrupt by the moronic people who got rid of their hedge on what was supposed to be a dividend tax arbitrate. But that's besides the point. No, so that's a big deal. I just also think it is worth understanding that I agree with Mike in terms of the stock market. Don't know when. Maybe there's a climbing, grinding rally, climbing a wall of worry going on. I don't know.

I don't have an opinion of timing. I've just been turned too many times being timing wrong. But I think this weekend, we actually saw a fundamental repricing in many crypto assets. And I think that Bitcoin is actually, it has led. It's well down because of the events of last year. But there's no more forced selling in Bitcoin. This is, you know, there really isn't any right. You know, no one there's no regulator saying you have to sell it. Just people are worried that there isn't a place for them to trade it without a cost of the money. That's really it. And so I actually think that the likelihood of delinking as we go into the fall is higher than I did three or four weeks ago,

even when I thought, you know, it probably drops, you know, in concert with it. But I certainly don't believe that crypto's beta to the downside will be even remotely close. I think it will actually be buffered. I think it will be mod. I think that NVIDIA is likely to have a much higher beta to the market than Bitcoin will, for example, and Ether will. But unless, you know, I'm wrong on the courts and the courts say, you know what? We're going to shut crypto down in the United States because, you know, that's what we think. Yeah, I just want to very quickly share one chart, which is Bitcoin dominance, because this has obviously been the talk of the town. And guys, listen, this is not a traded asset.

There's no people buying and selling this. So you have to always take these things with a grain of salt. You see people applying indicators to these things and those indicators are generally based on traders. But it is interesting to note that effectively Bitcoin dominance, which is a good indicator

of whether liquidity is moving in or out of all coins to and from Bitcoin, is breaking an area right around 50%, about 49%, where it hasn't been in over two years. And so if you look at this massive gap, if that rises up here to 57, 58, these altcoins are just going to get absolutely destroyed. So this really is a moment where if you're watching specifically the Bitcoin and crypto market and not looking at the macro, it's time to pay attention because all coins, if Bitcoin drops here and Bitcoin dominance rises, what you've seen so far with all coins is nothing.

So I think that's a good point, Scott, and that is a body in motion. That's Bitcoin dominance increasing. And what stops that body in motion, right? I don't see any signs of it. In fact, it's risky accelerating. I completely agree with Daveave at some point bitcoin's going to transition to trade more like long bonds and gold but it's the weakness i'm seeing lately the divergent weakness if i'm right in the equity market goes down and makes another low which i think it's going to we'll all say well shit cryptos warned us now maybe that won't work out let's see what's going on the key thing i want to point out is the bottom line is back to the macro. And obviously this is a macro is we're going to get inflation data this week.

And CPI, the one that's most widely watched, it just, you know, retirement funds, everything is expected to be four point one percent. It's clearly it's actually the trajectory. Downward trajectory of CPI is about the same as it was in 2008 to 2009. And it's going to become about 4.1%. And the upward trajectory of federal funds from zero is the highest pace ever. Now, that's 5.25. See, they've crossed over. It's clearly significantly restrictive, but it's the bodies in motion that matters.

And you ask yourself, what stops this body in motion versus is there fuel that might add to it? I just suspect what you pointed about Bitcoin dominance. There's fuel for that to continue to potentially accelerate. And there's fuel for this trend. Maybe Fed funds will stop rising, but there's plenty of fuel for inflation to accelerate to the downside. And that's what I mean on July 13th when I'm hoping on vacation, we're going to see that PPI number that's going to be negative year over year. Dave, I have a question for you. As we see Bitcoin dominance rising, but with

Bitcoin price dropping, right? Do you think there's a narrative, obviously, that people are running to Bitcoin as a flight of safety from all of these altcoins and that's what's happening. I think that's a very small part of it. And then most people are probably exiting the market entirely. See, because when we used to look at these trends in the past, there was no tether. There were really no dollar pairs in previous cycles. People would literally only trade altcoins against Bitcoin. So when they exit an altcoin, whether they were leaving the market entirely or not, they had to go through Bitcoin, which meant selling an alt to buy Bitcoin. Now you can get straight out. Okay. So I want to ask a question because the answer depends very

much upon the chart I would like to see. I would like to understand the percent of the market that is Bitcoin, the percent that is Ethereumereum the percent is stable coins and the percent that is everything else there you and i think that it matters and and i'll explain first of all my guess is bitcoin plus ethereum dominance is even bigger probably the biggest it's ever been uh relative to everything. I'm sure it's dramatic. I can tell you their market caps collectively is $710 billion of the 1.05. So you're almost 69, 70%. It used to be 65, 66.

Right. So that to me is indicative. That is a very important number. Stable coins is in most which are effectively not securities because by any rational definition, because they don't provide a yield, you do not invest in them based upon the efforts of others to make a profit. 110 right uh ish if you're just looking at sorry to interrupt but to tether is 83 billion usdc is now only just under 30 so that's 110 plus let's call it a smathering of others you now have over 800 ish something 820 830 billion of the trillion so you're you're right literally the entire rest of the market is less than 20 right and so the point is that i think that the entire rest of the market is less than 20%. Right. And so the point is that I think that the entire rest of the market are what people are fleeing. I think that it is a fleeing in the United States because they're afraid they're not going to be able to sell what they own.

And so people don't like, it's just sort of like, why did I think Ethereum staking would increase when they got rid of the lockup feature? Well, it's the same idea. When people think that they can't get out, they don't get in in the first place. And if they think they're not going to be able to get out in the future, that's when runs on the bank happen. And so that's what people are doing. Now, is that right or wrong? Honestly, 20% for altcoins seems high to me, given what's going on, given the uncertainties that are happening. But it is what it is, right? Well, that's changing fast. Yeah. No, I understand that. It's going your down. Don't do what you think. That's why in a show like this, it's really important for people to understand. I mean,

when I talk about de-linking, I am not talking about alt season yes there will always be pumps and dumps yes alt season happens in stocks too they're called otc instruments and they trade in the king sheets etc and those things that's what you know that's what strat nookmont was doing the wolf of wall wolf in the wolf of wall street as opposed to the wolf of Wall Street. That is what people are focused on. And it also disturbs me to no end when people make claims, and I won't mention who again, because when Mr. Stark talks about how great regulation is, they've never kept up with the OTC stocks either. And to modernize disclosures using the internet would be a major help to investors to actually stop, to give people the ability on an official website to actually see the filings and understand what's going on. And, you know, we have that.

But without going down a rant hole again, because I am very easily triggered these days. The fact is that one could believe that speculative excesses in crypto is getting wiped out. I didn't notice. could possibly be worth, the coins themselves, not the pieces of art. If you own an NFT of a piece of art and you think it's worth something, I mean, look, I've paid thousands of dollars for various pieces of art in my life, still own them. I bought them because I liked them, because I wanted to be on my wall in my condo or in my house. But the fact of the matter is, these meme coins, people are buying them to participate in the community. And what is that community really about? It's about people who have the money to buy the art.

They're dumping on you. Yeah, they're dumping on you. So, look, I do think that we could see something which is an interesting bifurcation where effectively the SEC and other regulators say, you know what? Here's what you need to do. You need to explain to people clearly and concisely where value comes from and what the value is and what rights they have. And if you don't do that, we're going to prosecute you and then go after the foundations or the owners or the whatever that create these coins without actually explaining what's going on. That would be a good thing. But I also think that in a

downdraft market, those are the ones that are going to continue to get killed. And by the way, 20% of a trade, $200 billion is a lot of money to be in things that we believe to be 98, 99% worthless. So there is a lot farther that ones that are actually worthless can go. Yet you could be hitting tradable bottoms in layer ones that have real use cases. And so it's an interesting, it's a fascinating point because we talk about the market as if it's one thing. It isn't one thing. There are many things and they may not all, the correlation may not be nearly as high in this cycle as it has been in past cycles.

I mean, the stablecoin point is so important. Go ahead, Mike. Well, you inspired me to update my stablecoin database. I've been just taking all the top 10 off the coin market cap, 126 billion or so about that last. The peak was 180. It's obviously a higher percentage now because the whole market's gone down more. So it's maybe 12% now is probably five percent then i can figure that out

but the bottom line is i also look at stable coins is it's um bit of a melting asset at the moment and stellaby kinds are great they were great when you had zero interest rates and you had negative interest rates in much to the rest of the world but now when you the us government's giving you five percent it's the thing people always need to remind be reminded of when they pointed out that fiat currencies decline over time. Yes, they do. But they do pay you interest. Right now, you're getting a very good interest.

You're getting contracting liquidity and 5% guaranteed. And a T-bill, a one-year bill, is hard to pass up. And it's just that sucking sound of money going to, well, thank you. And also with the US government pumping a lot of, you know, reissuing a lot of the debt. It didn't last for a few months. That's just a giant sucking sound for liquid assets and risk assets. And what are the most risky cryptos? So to me, see, this is the bear market tilting back down. And again, what makes it stop? I think it's really important to talk about stable coins for a heartbeat. The fact is that people buy stable coins so they can transact and buy and have dry powder to buy into crypto. And in the global scheme of assets, what we look at as stable coins of you know whatever 100 billion dollars is trivial

i mean literally trivial if you consider the entirety of the market cap uh that's that's thing number one thing number two is there's a large component of stable coins that are being used by people outside the united states as the modern version of euro dollars, except in this case, it's global dollars. So from the world South and whatnot. So there is a cadre of use. Circle, obviously, USDC is mostly savvy institutions who know they can get in and out, in and out, in and out. And it still hasn't recovered a lot of its losses from when people lost confidence before they thought they were losing money from Silicon Valley Bank. But they're moving. But you would expect, given the nature of Circle's clientele versus Tether's, for it to be a leading indicator of the market's drop. And in fact, it did lead the market's drop.

It started dropping before Bitcoin and Ether started falling because there's not as much interesting demand. I think that it's overblown, though, to say that the people view stablecoins trading off against treasuries. They do if and when they decide, OK, I'm locking myself for two years. I don't want to. Crypto is not what I'm going to be in. Unfortunately, I think that money is already gone. I think it's out. I think that now it's really a question of what's the overall level of speculation, you know, dry powder in the crypto market. And I don't know when the bottom is, but we're closer to the bottom than the top. And I think that's really important to understand the different use cases. No U.S. institution is putting money in tether in order to, you know, for, you know, in competition with T-bills. They're just not. Now, there are plenty of people

outside the United States that are not in competition with T-bills, but as an ability to be able to transact when they think a bottom is tradable. But that's, it's important to understand that in a global market, you can't look at it the same way. There are a lot of people in this world who have no access to buying T-bills, Mike. Literally. Good point. I'm glad you countered it. It's part of the reason I've been bullish this big picture and the dollar all along because this organic, rapidly advancing technology went for the dollar. It's base layer.

I mean, you've got to mention a stable coin in any other currency other than the dollar. They're not. They're crypto dollars. They're maybe minor amounts in the euro. Good point. I think that's a key thing. The key thing is there is that sucking sound. It's what crypto has never had before.

Never had a recession, a real recession. Never had Fed tightening into deflating commodities and never had major competition from T-bills. Now they do. And to me, it's that sucking sound away from speculative digital assets that are in a bear market versus something where, hey, maybe I can lock up for a little while and be the one person to buy everything at a discount a couple of years from now, versus those people who sell, hit their stops, go liquidate. And that's ones who go, you know, how it usually works in bear markets, the people who are overextended get liquidated. Come on, long-term capital manager, we've all seen this. Lehman, FTX, they only went under because markets went down. They liquidate and then things return assets to rightful owners, those who've been able to sit it

out. And that's why I point out, I keep looking at that too, you know, I'm like, oh, thank you. So before we leave, it's time for my, my, my, you better do it fast because we're going on space in 13 minutes. Stuff on leverage, unless you are a professional and doing it for reasons. And, and, and I think there are reasons, but stay away from leverage. Now, nothing I'm saying is investment advice anyway, except for that. And that's not investment advice, that's a warning. I think that's fair guys. We got to wrap up, obviously, Mike, I don't know if you's not investment. That's a warning. I think that's fair,

guys. We got to wrap up, obviously. Mike, I don't know if you can make it to spaces at 1015. I'm sure you have a life. But I know, Dave, you're going to join us for a bit. Hopefully, we're going to be talking this all to death again there. But more obviously, with the crypto focus and all those things that are coming this week, it's going to be huge on crypto town hall. By the way, guys, we've had millions and millions of people listen. I think we can officially make the claim that it's the largest crypto show in the world already after a week and a half. I don't know anyone else is getting a million listens on your average

Monday or Tuesday. Kind of crazy, but I encourage you guys all to come over. It's on Mario's account. Guys, until next week and until Spaces, which you're always invited, guys, everyone, I will see you tomorrow at 9 a.m. Thank you, Dave. Thank you, Mike. Cheers. Thank you.