The Wolf Of All Streets - Warning: Are Global Markets About To Collapse Again?

Episode Date: August 19, 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  ►►WE'RE ALSO DISCUSSING THE MARKETS ON ROUNDTABLE (THERE ARE NO BOTS!) 👉https://roundtable.rtb.io/shortUrl/wYXYlUf ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► The Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://thearchpublic.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 '10OFF' for a 10% discount. 👉https://tradingalpha.io/?via=scottmelker  ►►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  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 Japanese yen is showing strength once again, and there's some evidence that the carry trade is also increasing once again. If you guys remember, that is what unwound and caused a major tremor in markets only a few weeks ago. Is it going to happen again? We're going to talk about this and so many other topics here on Macro Monday with James Lavish, Dave Weisberger, and Mike McGlone. The best hour of the week, guys. Let's go. What is up, everybody? I'm Scott Malchrow, also known as the Wolf of Wall Street. Before we get started, please subscribe to the channel and hit that like button.

Going to go ahead and bring on the gentlemen. Now we've got James, Mike, and Dave. Good morning, gentlemen. Mike, should we start with the morning meeting? Sure, I can give a quick overview. We just talked about this a little bit pre-recording, pre-going live. It said the revisions for non-farm payroll.

Ana Wong called it the QCW, the benchmark revisions, expects $700 million, a million of revisions. Key thing she pointed out is Chapter 11 filings have increased significantly, 35% from a year ago. And she thinks we're going to see the next unemployment number at 4.4% and that the Fed expectations could reach near 50 basis points. We do have that kind of number right now in markets priced

for 25. Gina made a quick statement. She's quite bullish equities and for good reason. She said her earnings have been awesome. Got to get that. We've heard those in max seven has actually been good. But the key quote I was surprised by her, she said, there's a risk to policy. If we get more, if market starts expecting more cuts from the Fed, that might unwind more of the yen carry trade and be bad for equity. So I was a bit surprised by that one. Erica Eidelberg has poked us on interest rates. She's pointed out this drop in 30 or six fixed at 6.5% is doing nothing to help the affordable index. It's helping a little bit. She sees it as another source of a slowing economy, but key consensus from Audrey and Gene, everything was a weaker dollar.

So we can leave it there. I can dig into my thoughts later. Yeah, I kind of want to just bring up what you said so nobody takes it for granted because this is part of it. On Wednesday, the Bureau of Labor Statistics will downward revise jobs for the April 2023 to March 2024. That's a year, people, period,

by up to 1 million jobs. This means that all beats recorded in the past year will have been misses, and the US job market is in far worse shape than the admin would admit. This just blows my mind because everybody holds their breath and markets wait for all of this data to come in a few times a month, jobs, inflation, et cetera, and markets react and people make decisions. And then while you're sleeping, they go back and revise a year's worth of data, meaning that all of those strong job numbers were a complete bad position. On data that was already severely lagging. It's the unemployment rate that matters. I think Dave has some good, strong views on this one.

I mean, look, the one that I care about and I just, you know, we haven't seen a new piece of data since, well, the July data is Fred's, you know, Federal Reserve Bank of St. Louis that everybody loves to show is the native-born employment. And the simple fact is that native-born employment is still below where it was pre-pandemic, right? And, you know, it's amusing, you know, in a macabre sense that we have all these pundits who say, hey, you know, look how great the job numbers are and how everything's flowing. And what are you guys talking about? Why all the doom and gloom? And why are people yelling that Bidenomics isn't working? And the answer is we still haven't even gotten back to the level of employment we were in year three of Trump among people who were actually born in the United States,

who, by the way, are the vast majority of the voters. And so the vast majority of the voters are seeing that they've had effectively a four-year pause. I mean, yes, we went down and we came back up, but we're still not back to where we were. And people forget that the economy, things have been growing. So theoretically, it should be dramatically higher. Right. And every other four year period, you know, you would see a 10 plus percent growth over that four year period. We've had negative growth. I mean, it's been down. And that I don't what I don't know. It'll be interesting, James. I'm curious what you know is if the BLS revisions are going to affect the Fred data, too. Because if this number is actually lower than it explains why Trump will actually win in November. Full stop.

Because you can poll whatever you want, but if people are less employed or feeling underemployed, that is what's going to matter to the election when everything is said and done. And the echo chamber of people who, to quote, I don't want to quote quote clip assness because he was much more eloquent than i will be but effectively he was talking about stiglitz and and effectively how he effectively lobotomized himself and some of the stuff he's saying

people who are trying to come out with defenses of price control uh it's just it's mind-boggling right you know people have lost their minds in terms of ways to go about it. But this unemployment data could be the August surprise. I mean, you know, essentially, this is the sort of thing that under normal circumstances will be front page headlines. People will be reading it. It will be a very big deal.

My guess is it gets memory hold by most of the media and the only ones who cover it are Fox and New York post, which I might discuss about how our media is at this point becoming, you know, pretty obvious, but I'm very curious, James, what do you think? Do you think that this affects the Fred data or do you think that's separate? Well, I think, yeah, that's, that's interesting. The, the, we don't know what's really going on with the polls.

It's clear that – I was talking about polls. I'm talking about employees. Yeah. So it's hard to tell what the actual sentiment is. What's interesting is Michigan's sentiment was up last week. So that was actually something that was interesting. So am I still going or am I paused out? I paused out? Am I okay? You're great.

You just look like you're doing some tech work on your computer, but you, but you're, but we hear you fine. You can hear me. I'm frozen. Yeah. So, I mean, look, the, the, the debt, the data is the most important thing is what you said, Dave. I mean, that's reality of what's going on. We don't really know what's going on. We did see the unemployment number jump up. We're going to get more readings this month and we're going to have a little bit better idea.

But when you look across the board and you think about how credit expansion has stopped, which means that people are at their limits and you're seeing the default rate for credit cards up over 10% now. That's a problem. But then you get these strange readings of the continued expansion of the consumer, like this last week where we had great retail numbers. So it's a very difficult answer. And the problem is there's so much noise. And something like this just shows us how much noise is in the data. We don't know exactly what's going on. But what we do know is that there are pockets of recession in the economy. And how big those pockets are, well, that's the question. And are they growing? And my guess is they are

growing. Those pockets of recession that the areas of the economy, the sectors that are interest rate sensitive have been struggling and they continue to struggle and they will continue to struggle. And now we get some more Fed data coming up and meaning some insight from the Fed and what they're thinking this week. And we'll have a little bit better idea of whether or not we're going to get some relief there. So those are all the questions, but bar none, you're right, Dave, the most important thing for people when they go to the polls in November is how am I doing? How am I fiscally doing it? Do I have a job and am I doing better than I was four years ago, period? So I got to follow up on that a little bit. And that's one of the metrics I had to post this

weekend is McLoom versus McFax. And that is retail sales. I so have enjoyed for over a year now, pointing out the facts of retail sales. Yes, they're strong. But if you subtract out the CPI number, it's the worst retail sales are actually negative on a year-over-year basis since right before the great financial crisis. And another thing I really enjoy publishing, and that's just sitting in front of the data and not having a position or a view. It's just so fun to point out the facts. Cash levels are high. No, they are extraordinarily low. You look at money markets as a measure of total market value of stock market, it's about 10% right before the financial crisis, closer to 15%. So it's these

things that you hear the sell side say, and then sometimes we repeat it and we say it. The facts are they're very negative compared to the past history of where these things have been. And don't forget that the Fed actually doesn't care where the stock market is as long as it doesn't absolutely bottom out crash. As long as it's stable's stable if it sells off 10 20 that helps the fed on the inflation side because it's such a driver of the economy so that's not that they're they're not going to come out powell's not going to come out this week and and talk up rate cuts in in september he's probably going to he's going to probably speak a little bit more hawkish to keep the the markets from running and And that will help

him on the inflation side, which will give him more firepower in September when they come around and just make their cut. Yeah. I have a question, Mike. Have you taken a look at all at retail sales, luxury versus Walmart, et cetera? Because obviously we saw Walmart have this huge, huge earnings, right? And people said the consumer is strong, but I don't think Walmart represents every consumer. So I have to, I appreciate you going there. I don't dig in directly, but I just recall running my own money and from the past, anytime you go towards a recession, you want to own Walmart because that's where you go. Especially when you raise four kids, like some of us have, you just go to where you can, you know, you can afford it. So that's where you go, especially when you raise four kids like some of us have. You just go to where you know you can afford. So Walmart's always a go-to.

I've read a lot of the anecdotal and it's all the luxury, most luxury goods have been declining. I hear it's happening in Europe. Mainly it's depression in China. The data I keep and the stuff I get out of China, particularly from my colleagues who are allowed to speak freely, are, Mike, it's worse than you even expect it. But this is the global. In the US, just remember Walmart earnings doing great is typically a sign of a recessionary trajectory because that's where you go shopping. I just remember doing it when my wife and I would go shopping when we knew we had to save money.

We went to Walmart. Yeah, that's exactly what I was getting at and exactly what I assumed. So I'm not sure that Walmart doing well is a sign of a healthy economy or a sign that people are looking for deals, which I think is probably the latter. I do want to kind of dig in now to the title here, which is hyperbolic, but obviously about the yen. And I would like to discuss this with you guys. So attention, Bitcoin traders, the Japanese yen is strengthening again, but actually up a few percent since last week.

There were some articles saying that people are re-entering the carry trade now that they've seen a bounce here on the yen, which is kind of mind-blowing. Does this mean anything or is this just floating market? Dave's making the best reaction for anyone listening on audio. He has the best facial expressions

and covering his face. I'm going to go to you. Okay, let's just cut the shit. The fact is, any time traders think they can get an advantage at any time of the day, they'll take it.

And any time they think they have to take it off, they will take it off. Markets are extremely complex organisms. Every single day, there are people who are doing things like the yen carry trade, if they think that it makes sense at a particular price level to borrow the yen cheaply and buy something else and get yield. So it's not that they're going back in or going back out, et cetera. What matters is when those that go into a trade towards the time that the trade is turning against them are levered to the point where they have to do force selling and ultimately end up crushing themselves. This is true whether it's the end carry trade,

whether it's people buying inverse perpetual swaps with Bitcoin whose collateral value is dropping when it drops. It doesn't matter. Anytime you get over leveraged traders and a market correction, bodies float to the top of the pond. End of chat. But now the sole question that one has to ask oneself at any point in time is, is something going on that's going to cause a trigger? And will we end up with a black monday event like a real black monday event not the fake one we had a couple of weeks ago uh and you know we've seen them throughout history they happen and they happen when people get stuck in trades and can't

get out and then the forced selling happens and it creates a cycle and you end up with a crash in the market. The bottoms off of that and then quiesces for a while. We've seen this many, many, many, many times. I mean, the most recent in the crypto world was the post FTX fall. And the one before that was the pandemic fall. Right. They were the same, literally the same people having to to use Mike's words. People don't sell what they want to sell. They sell what they have to sell. And so when you get into a for selling event, this is true, whether it's crypto, whether it's, it's, you know, whether it's, it's us government bonds, whether it's gold, whether it's equities, we just happen to read about equities more often than we read about

everything else, because those are the more famous things in history. Generally, you know, those are the, you know, the october 87 one the 29 one whatever the gfc one was actually worse because it wasn't equities although equities didn't crash it was more of a slow motion train wreck or a high speed train wreck but kept happening over a period of time but the point here is the japanese yen like for example it it's it literally it bounced overnight now why is that you know like right now i was just looking, it bounced overnight. Now, why is that? You know, like right now, I was just looking at it. Hold on, I got to pull it back up.

Right, 146. But I mean, I want to go look a little bit of a five-day chart. That's the point. So, you know, you can pull that up. But, you know, the five-day chart, it dropped down. You know, it dropped a couple percent. And now it's back into the middle of where it was, you know, last week, but it's still not where it was. So the simple fact is the yen is going to move around. The Bank of Japan has their howitzer aimed at it if it gets too high.

And traders are trying to play this tap dance of picking up pennies in front of it, effectively trading around it, saying, OK, well I could buy it here. Because the the the BOJ Bank of Japan isn't going to slam me. But they're going to want to get out before the Bank of Japan slams them and vice versa on the downside. So the reason I was making that face Scott is because these markets were in the summer. I mean, you know, it's like there's crap going on. But, you know, Mike is right. There's a lot of stresses in the economy. The real question is, is which way do we go? Do we go towards a classic recession? Let everything freeze up and we need a correction of all risk assets to clear it? Or do we go into a Hayek style? Is it Hayek? Who is the crackup boom? Mises style crackup boom, where the government start just fire hoses of liquidity and risk assets around the edges take that fire hose because governments don't know what to do about it. I actually think it's not obvious to me which way it's going to go, but something has to give. Can I follow up on what Dave said? Because I think it makes a lot of sense. And two things here that's changed, I think, in history. And that's what our job is

to anticipate these things. The first is we have learned the lessons of too much liquidity inflation, the most in our lifetime. I'm just reading Alan Binder's latest fiscal monetary policy history of the United States, 1961 to 2021. And what Nixon and Burns did is exactly the case that Powell has said in the past. He will not repeat. So I think that's changed. We pumped way too much liquidity. We learned the lessons of inflation. Inflation hurts everybody.

And now we have a chance to potentially recreate the inflation. I think there'll be pushback, just like inflation post-Weimar Republic in Germany. To me, that's the key thing. And also, I think that's really changed with this election, is we don't have a new potential person coming in per Trump. As you said, everybody votes for Pockbrook. Now, I think the sense is people are starting to vote rule of law, morality, and do we want to deal with this crazy person, as my mother, the lifelong Republican, called him for the next four years. So regardless of what happens with the economy, I think that's starting to tilt over now for this election.

It's less about money, less about economy, more about can we really deal with this crazy person? And there's only one alternative. Well, it's not Biden anymore. He's not an old guy. So I think those are things that have shifted. But the main bottom line here is the lessons of too much liquidity, too much inflation should resonate if human nature is an example for lifetime. So let's talk about that. The choice then is to

either cut spending and allow for a prolonged recession. That's one choice. Or we could turn on the fire hoses again and start inflating away some of this debt and leave inflation hot for five, three to five years where it does actually push up nominal GDP. And when AI really hits and we get that so-called productivity miracle where we have serious productivity for a lot less debt is the bet. And that's what we're kind of, those are the two choices right now. And I just don't think politically, there's, if you go back to incentives, right, Mike, and the incentives and the incentive structure and the structure of, of our, our government and how they are incentivized. It's to spend money for their, for their constituents in order to get the votes. That's it. I mean, the problem is the structure. It's not, I just don't think there's any rational thinking past that. It's only about getting reelected and how do you get reelected, spend? Right. And come on, let's just, let's just look, what has she proposed over the last week? And we're going to hear the rest of the platform over the next three days.

She's proposed one other $1.7 trillion in new handouts and price controls. That is literally the lesson that you said we learned. Thank you, Sandy. Alan Winder, the textbook I've read, and is going to be one of the cheerleaders with the pom-poms out saying, oh, this time is different. Take it to the frigging bank. You're not going to hear it.

There is no Milton Friedman out there to chide these people. The fact is, is all the Keynesian economists are going to say, yeah, we can get this, and they'll come up with justifications for it. But the simple reality is doing what was we literally heard last week would be gasoline on the fire. There's just no two ways about it. You can't constrain supply. I mean, literally twenty five thousand dollars per homeowner. I mean, it's fine. I mean, you want to subsidize people for first time hometime home buyers but don't expect homes prices to do anything other than go up which will drive up owner equivalent rent etc i mean it just is what it is i mean it may actually be a good policy

if in point of fact she was capable of doing something that she claimed it would actually be good but unfortunately the federal government can't change the red tape for housing because that's all the local level and so you know so there's that so we get all this stuff but james's point is is the key neither one of these of our candidates have any real sense of cutting anything with the exception if you believe that trump is going to listen to the back and cut federal spending by by taking a weed whacker to the federal bureaucracy. But even if he did, he's going to spend a whole lot more in other places. That's right. So I don't think we have physical austerity in our future.

The silliness of a Bitcoin reserve. Let's take some of that deficit money and spend it on the spec of the digital assets. By the way, hold on, Mike. Let's come back to that later. Okay. I do think we might get something in between, but actually split. Maybe Senate goes Republican and White House goes Democrat. Obviously, we see the trend right now. To me, the macro is right now we have one of the most extreme examples in history of excessive overspending on the fiscal side and monetary restraint.

Now, we all know the monetary restraint is coming down a little bit, but it can't come down a lot if inflation stays high. And part of that is the stock market staying sticky. Now, I know Paul gets that. Now, we all know if stock markets drop a lot, Fed just eases. But to me, that's the issue. That's the missing link here is to really get that easing that you expect to have. There's one bridge that comes first. Typically, that risk asset goes down first. And that's why I believe the Bitcoin is to me versus gold, that Bitcoin to gold ratio at 23, which peaked at 37, is still telling me the risk assets,

the fastest horse in race is telling us risk assets, risk is still downward. And that's what you really see in commodities. I mean, commodities, it's clear. And that's why I've worked to everything we said to, I stick towards gold. Right, Mike, that's why. I wanted to ask you about that quickly, Dave, just because

go for it. Two weeks ago, two weeks ago on Monday, Mike, we were saying this is a dream for Powell. Stocks are finally going down. It relieves some of the pressure. Then you get two weeks of this, right? This is SPX. And you basically get the entire recovery and the best week the S&P has had this year. Right. And so markets don't seem to care about any of it. They just continue going up. I mean, I know what your general reaction is to that, but there's no hint in the stock market and risk assets outside of Bitcoin, if you want to say so, that there would be any reason still for Powell to go ahead and cut, right? I mean, markets are at an all-time high.

Why are we still talking about cuts? He's in no hurry. Why should he be in hurry? 25 basis points at the next meeting, keep going. That's why I think we're going to have that cat and mouse game. I republished something I wrote a year ago and just changed a few words, that cat and mouse game between rapidly advancing the stock market and the Fed cuts, anticipating cuts, it's going to continue. There's no reason it really could. Because we had two times GDP. It's silly not to expect the stock market to be all that matters.

It's all that matters in terms of inflation. If it goes down, we'll have deflation. If it goes up, we have inflation. So they get it. I mean, this is the highest valuation since the 20s and 30s. And we have the stock market volatility very low. That's the risk I point out. And then the key thing I look to is from commodities is they're down

one third from the peak, gold's up about the same. And the stuff I read and see out of China every day is deflation, particularly when you have every major commodity in the country and the world trying to push back on their really cheap exports, particularly for people like me who drive the plug-in hybrid. I mean, I can get that same car now at half the price and it's four times more efficient without tariffs on Chinese products. All good points, but the reality is still

that there's tremendous pressure on Powell to cut rates. Tremendous pressure. It's pricey. You could pull it up on your Bloomberg screen. I don't have Bloomberg up right now, but it's over 100% probability that he's going to cut 25 basis points in September. That's number one. You've got Warren talking about it. You've got various other representatives talking about it. He's got to cut. He's got to cut. He's got to cut. Cut, Chair Powell. You must cut. And so the question here is, is he going to have enough fire power too? Because remember again, what we like, we, we, we cannot go into a deep recession. So

it's going to be much easier for him to engineer a so-called soft landing. If he cuts just a little bit, waits a minute, sees what happens. See, maybe we don't have another cut until December. I think he's going to cut in September, November, and December. And we're going to get over a full percentage point of cuts because of what we talked about the beginning, which is the reality of the job situation. The job situation is joblessness is growing, and that's not going to just reverse spontaneously. Like you see it historically, when jobs start to, when we start losing jobs, it accelerates. And so that's the problem.

He's trying to get ahead of that. And if he can point to that, because we just have just enough inflationary data that he can point to the jobs number that we don't want to lose too many jobs. We're going to cut. And because we feel like we're now above that neutral rate. Okay. That's his, nobody knows what the neutral rate is. He can say whatever it is. He can pick a number out of the, out of the sky and say what, because nobody can really calculate that. We've seen that. So there's so much argument about where the neutral rate is. And so if just,

if he has enough firepower, he can cut, I think he's going to, and that then you get this continued, you know, liftoff. I mean, doesn't that just mean he should, I'm going to Dave, I know you're dying to jump in, but doesn't that mean it's just cut 25 in September and then do nothing for another six months or a year, feed the, feed the lions what they want and then just chill. The answer to that question is simple there's exactly

as far as i can tell we have very few bipartisan issues uh in this election taxing no taxing on tips which is i find amusing if they haven't figured out yet that they're going to have to make that very clever because i can only imagine that an executive bonus is on wall street will all be called tips uh i'm also sure that half the people receiving tips and cash have gone, I was supposed to pay taxes on my tips? Right. Yeah. But other than that, the only other thing that they all agree on is that the Federal Reserve should cut. I mean, Trump wants to have direct control.

The Democrats just want to put them under their thumb. It doesn't really matter. It all boils to the same thing i know we think that and we've been saying that the only thing that would force powell to cut is a collapse in the stock market that's actually not true no no no what would what would force him is a is a lock up in the bond market okay right the other thing that would force him. Yes, you're right. A lockup of the boomberg guys are halfway there they're already saying september's gonna be 4.5 we all know that unemployment when it starts to increase accelerates rather rapidly you see a five percent print in october what's he gonna do

uh he's going to cut so let's let's let's understand that but i want to get back to the point about the bitcoin Reserve because it's amusing. I want to talk about Bitcoin because you got to think like a trader. And it is literally one of the smartest trades on the planet. You're old enough to remember a guy named Dan Dorfman. Remember him, Mike? Right? And he got himself in trouble because what did he do? He bought stocks and then he went on his precursor to CNBC

and touted stocks and the stocks went up because other people bought because, oh, Dan Dorfman's buying, it must be good. If Trump bought a Bitcoin reserve and then touted Bitcoin and told people, so let's say he bought it quietly without telling anybody. And then we woke up one morning and said, the United States government owns whatever, 500,000 Bitcoin. We're planning on buying another 500,000. What do you think the market would do? The answer is obvious. The market would rally. It would rally extremely hard. What does that mean? Well, it means that the 500,000 he already bought would be one of the most massively positive trades in history as other governments follow the lead. Now,

if you don't believe that other governments will follow the lead of putting it on a reserve asset, then you'd be right. I personally think other governments would. And so that really becomes an interesting question. So whether or not it would work or not, I mean, it is an obviously brilliant trade. Is it big enough to do what they're claiming? Of course not. Totally hyperbolic. Is it large enough to be meaningful? Yeah, absolutely. And is it all that different in a sense than what Roosevelt did with gold? No, not really. The difference is, is the budget deficit back at the time that Roosevelt did, it was way smaller and gold was way bigger as a percentage of monetary aggregates. And so, yeah, that's why he was able to get that done. But we can talk about that trade. You could do

the numbers on it. It isn't nearly as good as they're claiming, but it actually is a smart move if you really are just thinking about it as a trader. OK, that's the only point I want to make, regardless of what one thinks of the need for a global digital store of value and the way to value Bitcoin. I've said it all along. We can talk about that, but we're a broken record. I would just assume let's get through this next couple of month period and see what happens. Then we can have a conversation about it. As far as gold is concerned, look, I still own gold. I don't own as much as I own a Bitcoin, not even close. But the reality is that we're

printing money like crazy. We have peacetime deficits that we've never seen before in this country. And pretty much every place outside of Germany is in the same boat. So sure, you know, if something is the denominator, you want to own that. I just tend to think that there is optionality in Bitcoin becoming the next denominator, which would be at a 10x plus level from where we are. And that's the whole point. I love the idea of Bitcoin as a global, as a strategic reserve asset in theory, because I'm a Bitcoiner. But the irony of the government having such insane debt and using that printed money and debt to buy Bitcoin, print more money to buy Bitcoin should not be lost on anyone.

Well, no, of course not. But think of it this way. That's what I meant. Everyone thinks how brilliant Saylor is. What did he do? Well, he did it. He levered it. That's exactly what he did. He just found people willing to give him extremely cheap money to buy it, right? And not very levered. I mean, he's not exposed unless Bitcoin drops 95% or whatever it is. I don't know what the exact number is now. We haven't seen a refresh.

My guess is it's around 6,000 bucks based on my back of the envelope math. So, you know, Bitcoin would have to drop pretty damn far. So once... Go ahead, Dave, sorry. No, no, that's it.

I mean, I just, it's just, it's just a question of what do you want people doing? I mean, you know, our government is already doing things that make no sense, right? I love the idea. Trust me. I'm just saying.

Let's just remember what Mr. Saylor does. He's a genius at marketing. Bought into it. And then I look on my screens. I see him on CNBC and Bloomberg and just talks about Bitcoin. I mean, that's genius. You got a guy just talking about your position. That's classic social media now.

It's awesome. The key thing I want to mention is one of the best trades ever I've seen from the government recently in the last two, three years was President Biden releasing the Strategic Petroleum Reserve. I so loved writing about it. And I said, we just netted $25 billion. We can cover all. At the same time, you could have covered those in forward futures and netted

$5 billion. Now, we can cover $10 billion. And guess what? We don't need that anymore. It was set up because it was when the US imported, that was set up to cover 90 days of imports. Now, we're a massive exporter. So I don't want to dig into Bitcoin Reserve too much because I respect your opinions, Dave, but you do need an act of Congress and it is a trade. But for US government to do that and spend more deficit money would be silly. But to me, that's things what happens when I look for markets for peaks. It's that ETF launch, the halving, and beta making new highs in March was a classic sign of a big peak. We're still in the enduring hangover.

And then the stuff we came out of the Republican convention about Bitcoin reserve, you just look at it as an outsider and say, well, that's really silly. Should I sell into it? I think a lot of hot hedge funds managers said, yeah, I'll sell into it. That's the problem. They're still selling every rally in Bitcoin, the real money. That's what I'm seeing. I just want to see it show divergent strength. And versus gold, it keeps ticking down. Even when beta is going up, that's my risk, is when beta goes down, that's what we have to see. And I'm still afraid that beta's going to go down and Bitcoin's just going to lead the way.

We could have this conversation again. Bitcoin is an option. We don't have to. There's no point in having this conversation. I'm telling you, none of this, it's not like I haven't been consistent. Scott, you and I both, we're on the same page here. I expected Bitcoin to stay in the trading range through to mid-September minimum, and we'll see where the politics are. We're not in mid-September yet.

I don't really give a crap where it is. As long as it stays in this trading range, which it seems to stubbornly stay there, it's fine. If we break into the 40s, okay, so we've broken through the trading range. We haven't. And it's correlation to the stock market. Yeah, it's been divergent weakness, but still the correlations aren't there. You can't cherry pick correlation. Either you're correlated or you're not.

If you're not, don't expect it to go in both directions. Now, that said, in a massive event, if we have a Black Monday style event, if the world decides to wake up one morning and say, I need to sell everything, yeah, it's going to get sold. That's true. Gold is going to get sold too. Yeah, of course. If we saw the TNT, gold went down for three months before it went on a monster rally.

For gold, a monster rally. Bitcoin, monster bitcoin monster but you have to understand the magnitude here a monster rally for gold to be where the ultimate gold bugs all say it should be is to double most gold bugs would tell you 5 000 is where their fair value is i know because i read all that shit and i listen to them is Is that a 50% off sale? We have Bitcoin is any 95% off sale. Dave, we have to point out. And while I agree with Mike that it has not shown that it has divergent strength yet, we have to point out that how small this asset is. It's tiny compared to the other assets we're talking about. And it can move around and does move around because of large players.

And so they can just come in overnight and hammer it down because they see, you can see what all the leverage is on. You can literally see leverage on your screen and decide if you want to try to wipe that out and push it down to benefit your own book. We've seen it happen over and over and over and over again. And so until Bitcoin gets to the size that is at least, I would say, a quarter to a half the size of gold, it's going to continue to be like this. It just needs more. It needs to be bigger. It needs to have more liquidity. And the other thing is this thing trades 24-7. It is an opportunity for

traders to move around risk assets on the weekend. They look at this, if you're a hedge fund, and we're not talking about tiny hedge funds. We're talking about like 10, 20, $30 billion hedge funds that are moving around this thing. And I've seen them on the 13D filings. So you know that they are moving around this thing on the weekends. You can see it. They're not just in the ETF. They're hedge funds. They can buy and sell whatever they want. It's not like a family office. So we just must recognize that it is still a nascent asset, and it's going to be volatile. It's just going to be volatile to the upside over a long period of time, and that's the point. And that's – It has been. It has been.

That's why I put on my trading hat, as David said. I'm anticipating the algos turning over. The 100 week, 200, 100, I'm sorry, 100, the 50 day, 100 day moving averages are rolled over. It's still below that 200 day. The average price since Bitcoin ETFs were launched is around 60,000. All the algos are tilting lower in Bitcoin. That's the point I'm playing.

I put my trading head on. Macro big picture, yes, we hear that. But so that's my point is- And we love that because when that happens, it usually reverses. It does. It usually, but typically when it happens, when it's doing like this and beta's going up, that's a sign of a bigger problem in the macro. So I'm not cherry picking. I'm pointing out pattern recognition systems that I think are happening, are all kicking in to sell- Yeah, Mike, real quick, Dave. Real quick, Dave. Mike, the only issue I have with that is we keep saying that Bitcoin is showing... You want Bitcoin to show divergent strength, right? You want it to outperform all these things. has gone down, doesn't that mean that it's uncorrelated? I cheer for any argument that

says it's a less correlated asset. So you should be happy as a Bitcoiner, even if it's down when other things are up, that you have an uncorrelated asset that is the holy grail of any portfolio. So Bitcoin continues to go down, everything else is going up. That's the difference. That's the difference. Here's the problem, as I noticed in this space. The vast majority of people in this space say things like that, but human nature is they want it to go up to make money. It's just like everything we've heard this in 1999. Everybody's in it for long haul as long as it's going up. I remember hearing it in 2007.

Everybody's in it for long haul as long as it's going up. The housing market, it's never going down. I remember hearing that in 2006. I'm like, yes, it's going to go down because it just went up too much. I'm pointing out facts of, and I'm just using it as my key leading indicator. I'd love to see it happening, but this is where I kick out. From a commodity standpoint, I see severe global recessionary forces, most notably, and I just view Bitcoin goals as a tremendous leading indicator. And right now it's telling me that it's consistent with what I see with deflation and the risks for risk assets to go down.

And here's my counterpoint. For about a six-week period in the spring or late winter, early spring of 2021, Bitcoin was trading around the same place it's trading now, except funding rates were all very, very high. It was trading way above its 200-day moving average, looking very extended, and it stayed there for a long period of time, volatilely, until it cracked. And when it cracked, it cracked back.

Here, we are literally the exact opposite. Funding rates have been negative for the better part of six months. We've had more long speculators wiped out than short speculators wiped out. We are well below the 200-day moving average when global monetary conditions are such that the denominator has been getting worse and worse and worse, i.e., its fundamental valuation as a percentage of global monetary aggregates has actually gone lower, and we're staying in the

same trading range. To me, this is exactly the setup for a rally and your risks are tilted towards the, your short risks are significantly larger than your long risk at this point, for exactly the same reason that I was really nervous in 2021. Now, the reason I'm mentioning 2021 is every one of the freaking indicators you talk about are looking at, well, Bitcoin hasn't done blah, blah, blah. If you look at Bitcoin off of the 4,000 low from the pandemic, or you look at it off of the 8,000, you know, the somewhere between 7,000 to 10,000 range before Paul Tudor Jones first coined the phrase fastest horse in the race. So remember, we're up, what are we up,

10x? So anywhere from 8 to 10x, depending on when you measure it from when he actually coined that phrase. Gold is up 8 to 10x in that period of time. I mean, you know, it's a very different world. You have to cherry pick, you know, where you're picking your time series from. The thing about Bitcoin is you either believe one of two things is true. You either believe that there's no, there isn't a snowball's chance in hell that it's going to be anything other than a fringe asset that a bunch of people are going to people who with tinfoil hats are going to hold, or you believe that there is a serious chance that Bitcoin will become the base layer of the internet of value. We'll stop. If you believe the latter, then the squiggles where we're talking about now will be meaningless

in 10 years, literally meaningless. Now, obviously, Saylor and his ridiculous prognostications believe it's completely meaningless. We wouldn't even be able and his ridiculous prognostications believe it's completely meaningless. If Bitcoin were trading over a million, much less the 40-some-odd million that he put out at the BTC conference, you couldn't even read the chart squiggles on a 10-year chart that we're looking at now. So I'm not getting that hyperbolic. But what I am saying is that it's either going to become a store of value like gold, which takes a long period of time, or it doesn't. And if it does, then it's dramatically undervalued. And that's literally the thesis. And so you pick your own probability. The market is telling you

the probability is less than 8%. If you think the probability is higher, then you think it's undervalued. And right now, all the other metrics, the value metrics, whether it's half rates or you could go through whichever version of it you want, it doesn't matter. It looks cheap. Whereas in 21, the last time it was at this price, which is the springboard that you're using for all your comparisons, it looked incredibly overextended. And that's the difference. Well, let's also define Mike is a long-term Bitcoin bull. We know that, but he's talking about trading patterns. He's talking about short-term fundamentals. And so we have to remember that Bitcoin does not always, it's not always the

tip of the risk spear. It has been mostly, but it's not always the tip. So we have to define what is the event we're talking about that Mike is concerned about? Is it just a plain vanilla slip into recession, all risk assets get sold off? Or is it something more like we saw last spring, which not this last spring, the spring before where you had a meltdown of the banking system and Bitcoin was close to its worst. The sentiment on it was almost near its low. And then we have a wipeout of a banking crisis with Silicon Valley Bank collapsing and Bitcoin was up 50%. So what is the fundamental event that we're talking about? Is it something like a plain vanilla recession? Is it civil unrest? Is it banking unrest? Is it a collapse of regional banks because of a wipeout of commercial real estate? Is it something bigger? Is it something like we don't have an

election? I mean, all these things would have a different impact to this asset, I believe. And people will find out pretty quickly how powerful and how valuable Bitcoin is when it can operate outside of the system that can be controlled by the people who are causing these things. So that's something that is not in its value yet. It is not in its fundamental value yet, but we've seen hints of it at certain times. And that's something we have to also take into consideration. It's interesting. I just want to bring up this article, Dave, just because it speaks exactly to what James was just saying. We have these cyclical narratives or occasional narratives on why Bitcoin's doing what it does. A couple of weeks ago, when Trump was 70% odds chance to win the election on Polymarket and started to drop, then Bitcoin started to drop and everyone said,

Bitcoin is now directly correlated to the odds of Trump winning the election. Well, now that you dig in, that's not the case anymore. So it's sort of a temporary thing. But the point being here, there's a hell of a lot of cross currents that influence the price of Bitcoin and focusing singularly on any narrative, maybe true for 24 hours, but generally does not relate. I read something else this morning, Scott, which is like someone, and I don't know, I can't find the tweet, but someone said that data shows a much higher percentage of bitcoin ownership among liberals uh and if that is true because i'm on the fundamental believer that money talks and bullshit walks that what you will see out of a

harris wallace administration is a more pro-bitcoincoin stance where their private equity friends and their other friends in Silicon Valley and the VCs will get to play. Which we have not yet seen. We have not yet seen any of that, by the way. Now imagine a world where they basically tell Liz, listen, you can have some of what you want and she's getting some of what she wants.

The price controls the other stuff. But you got to stop with this crypto crap because too many of our constituents own it and they take a and they and they pivot not on all of crypto not on defy but they do go down the lines the dccpa uh which would basically make defy very difficult this is not something this is not a bullish scenario for the crypto industry it is merely but it is bullish for Bitcoin. If in fact they allow some of these things to happen, let's say, you know, the minimalist, think of a very, what a left-leaning pro-Bitcoin policy could be. Things like Bitcoin transactions, non-tax, if you sell below the cash threshold, pretty easy to do. Things like you can have your own

wallets, but you have to register them and declare your holdings with the IRS, which is pretty easy to do. You can see these things. And I'm going to be infuriating people. These are not my proposals. I want to be clear because the hate mail will be horrible. I don't want to deal with that crap. But the fact is, is you could easily see it. But a world where Bitcoin is legally, it becomes a legal asset. It is specific. You can, you know, effectively the policy that the SEC has of pushing FINRA not to allow brokers to touch it gets reversed. And all of those things happen, Bitcoin's price will explode. And that is very much in the,

as a potential catalyst. I don't want to talk about potential catalysts in the sense of this is going to happen, so buy now and ahead of it. What I'm saying is it is easy to see a world where Bitcoin, forget crypto, but Bitcoin is not really a point of contention between Trump and Harris. And if that happened in September to October,

at the same time as the halving cycle is at its point where people are looking at it, I have the people, you know, I can see the people who look at the same time as the halving cycle is at its point where people are looking at it. I have the people, you know, I could see the people who look at the three data points of the halving cycle and say, look, you see, the world aligns this way mysteriously. And all of a sudden, boom, you know, you have a massive Bitcoin rally. Everything aligns for the big rally, right? And it goes back to the trying to figure out what's driving price. I've said so many times, and Dave, we've discussed this, if we just go up in October, if that just happens,

for whatever reason that it happens, could be the election, could be the liquidity cycle that Raoul Pal talks about, could be the Bitcoin halving, everyone's going to say, could have just fallen on our heads and had amnesia for the last three years and woken up today and saved ourselves a hell of a lot of shows and Bitcoin just went up when it was supposed to. But that's not necessarily the

reason. The other reason why what I just said is more likely than people want to believe is, you know, we could say whatever you want. You know, we love to point to politicians and say, oh, they're dumbasses. They're not dumbasses. They're calculating and cunning people who want power, and they do things that make sense. Russia just legalized mining. We know China is probably already mining for the government, and the rumor is they're going to legalize it. You're right, Mike. They have big economic problems. In a geopolitical world, that basically creates two possibilities. Either we abdicate it and say, okay, we're going to crush it and do what Liz Warren wants and hand it all over to them. That seems very unlikely and a very bad, risky play. If our better play is out-compete them, because we already now,

by virtue of China banning mining the first time, we have a lot of the hash rate and we have a lot of excess power. We have tons of natural gas that could be used that's being flared at, you know, in oil mining, you know, whether it's drill, baby drill or otherwise, even the climate nuts. And I don't mean that there is no, I'm not denying climate change. What I'm saying is the climate nuts, the ones who want us to eat bugs, even they will know that methane is 20 times more of a greenhouse gas than CO2. They're all in favor of flaring and burning methane rather than getting released into the atmosphere. So there's lots of reasons why Bitcoin will matter. I mean, I was just at a thing yesterday for this absolutely atrocious environmental brewing disaster for offshore wind off the coast of New Jersey.

But what do you think that power is going to be? It doesn't blow constantly. And so you're going to need Bitcoin mining to do, you know, because there's going to be a lot of episodically cheap power off the shore of New Jersey before it kills all the whales. Dave, we're doing it in West Texas. I own a company, Cormint, that's doing it in West Texas right now. They've got stranded clean energy with massive wind farms, and they can't keep them going without the Bitcoin ecosystem, without the Bitcoin system. It just doesn't work. It's just very, very clear. So once Liz is forced to back down on Bitcoin, not on everything else, on Bitcoin, I think that that is a catalyst. And honestly, maybe is not an attack on bitcoin but it's certainly an attack on a very important aspect of why people hold bitcoin right but what's that

attack likely to look like the most likely attack vector will be just like you have to declare you have to declare all your assets you're basically they're going to say declare what your assets are and the one that scares the hell out of me is, Oh, by the way, you got to register your wallet addresses with the federal government. But, you know,

but, but okay. Even there, you know, it's still, uh, that's not going to really impact most. Uh,

that's not going to impact the price. It's going to make people mad, but let's say, you know, you have your, your ledger and you, you, you, you, you, you're a good citizen. You say, I don't want to trust people mad. But let's say you have your ledger and you're a good citizen. You say, I don't want to trust a bank. I'd rather hold it myself. If we're speaking specifically about price, I 100% agree. I don't think that there's any

existential threat. I don't think there's any threat from the United States right now to the price of Bitcoin. For anyone watching, neither Scott nor I are in favor of registering your addresses with the government we are merely having a conversation on price because that's what we talk about here on macro Monday that's it I want to be really clear because my libertarian impulses are like I'm self I'm making myself upset even thinking about this it feels to me like the most likely scenario of what a pivot looks like. It's funny because that's what we do here and on these shows.

And then people assume that anything you say is actually your belief or opinion. But the idea is actually to think through all of the likely options, regardless of your personal belief about it. Exactly right. Which is why I'm- Makes a great soundbite.

I'm caveating the crap out of this because I wanted to be clear. I think that that would be horrendous. Just like I think a CBDC would be the single most dystopian thing a government could do. Well, now you hit on why, now you hit on why Warren is so against Bitcoin because she wants to go down the CBDC route and, and she doesn't see how they can coexist, you know? coexist. And so that is the issue. Ultimately, you've got a few of them that are going down that route. And until they realize something you said just at the beginning of your monologue there was once they realize the incentive structure is to get reelected, once they realize that they've got a lot of people on both sides of the

aisle who want this, that they're going to lose them if they are against it, then they're just going to let it be. And we can't discount the power of Fidelity and BlackRock. They are extraordinarily powerful and they're not going to want some onerous regulation now that you can go to what you just said is wallet address being you know registered they don't care because it just means probably more people just it's easier just to go get the etf so and to them by the way that's the same as like you have to report if you have a foreign bank account right exactly right and by the way your answer to how they coexist is easy. You say you make everyone register their addresses. They have to report all transactions over a certain size.

It's easy enough. There are multiple companies out there who could do that for them. That would be simple. And still, the CBDC, if they wanted one, would be on all fiat transactions. Yeah. Right? I personally think that the much more likely scenario is not a CVDC. They work

with USDC and others to do exactly what they're working with Google on search and on advertising. It's the public-private partnership. It's much more insidious. But? But, but we, but that's a totally different show and a totally different topic. The point being, I think that they're trying to convince the, the far left of what, what the most likely scenario that they could actually get done is right.

As opposed to let's implement everything on the far left, because if you look and we're going to see it, you know, we'll, we'll talk next week. We'll look, we'll look back at what was the democrat democrat platform and it's going to be much of what is in the the far left warren side stuff dressed up to not look like it that's going to be that way and all i'm saying is that there is a very reasonable path for them to take that looks like they're being pro-Bitcoin or potentially even pro-Ethereum in a sense because of the way they're going about this. So I don't know what's going to happen, but it feels like they want to blunt that issue. And the way to blunt that issue is to get

the big money people talking about it. And let's be blunt. Scott said this many times. What's one of your favorite expressions? Why are people in Bitcoin? Why are people in this? Because the number go up. If they can make number go up, they're going to be happy. So let me follow up on that. A year from now, I think it's much more likely Bitcoin number goes up if stock market beta goes up. And I think the risk is everything's tilting downward. Just look at the inverted curve. Look at bond yields. Look at gold. To me, that's the greater risk. And then you just look at normal patterns in Bitcoin versus this 100-week moving average. It's only gone above it four times now, like it's doing now and rolling over. It always bottoms about 50%, 40% below its 100-week moving average, which is around $40,000. I'm

pointing out the facts of how it's traded in the past. And then we've also, I think, one of the best reasons ever for Bitcoin to make a good high. So I'm just pointing out those facts of how it's traded in the past. And then we've also, I think, the biggest, one of the best reasons ever for Bitcoin to make a good high. So I'm just pointing out those facts. And it to me is this fast sourcing race to me telling us right now all the patterns we see is this race is over. You should expect gold and treasury bonds outperform the next few years in a normal recession. And if that doesn't happen, that would be great. But good luck luck because it's just, it's, it's the same things. I remember saying in 1998, 1999, I was early in 19, in 2006

and seven, I was early. This is worse than I've ever seen. And the difference this time is it's, it's global. It's happening everywhere. And I see, you see all the signs in commodities. Okay. But it was more likely to drop to 15,000 and go to 40,000. Just remember. I want that to be very clear with the exact same reason. Mike, the difference is we are at 130% debt to GDP here. We have massive global leverage. The difference is the gig is up.

They can't let another, they can't have another great recession. They can't. They will print more money to get out of it because they can't have it. That's the issue. The issue is there's, and when I say they,

I mean central banks and treasuries. So we will expand the money supply to get through a a tougher session no disagreement there and we're all turning japanese we're all turning japanese exactly that's my belief you know and that's and i keep talking about it there's the all roads lead to inflation all of them every single road leads to inflation. All of them. Every single world leads to inflation. I disagree with that. You have to debase a currency. I see it from a commodity standpoint, from a global standpoint, from what's happening. And historically, we're heading towards severe deflation. You have to depend on what you said, massive debasement of the currency to get what

Milton Friedman says, inflation. Right now, in commodities in China, we're seeing nothing but deflation. So you have to depend on that. And my point is the lessons of too much liquidity and inflation have been learned. If we, of course, human nature might change, but I doubt it will. And that's why I point out is, yeah, Bitcoin's great, but three times the volatility of gold and S&P 500, I'll stick with gold and treasury bonds. Well, I'm really looking forward to the government having me report my Bitcoin wallet, then telling

me that I need to trade my Bitcoin in for the new central bank digital currency to buy a warm pancake they won't do that that all kidding aside uh if bitcoin is like they never you know they're not going to make you trade in stocks or gold or diamonds or whatever or land for the central bank digital currency they're basically going to say if you want to go buy a pack of groceries or go to the grocery store, you need to sell whatever your assets are into the central bank digital currency before you're allowed to spend it and buy stuff. That's what they're much more likely to do, which is quite dystopian. Don't get me wrong, but let's at least understand what it is that's dystopian.

Welcome to the Bitcoin black market. Oh, that won't welcome to the black to the bitcoin black market oh that well james i wanted to talk you know i did want to talk about uh and we can't now by the way just but i want to talk about the price controls more deeply in your newsletter we just didn't kind of get to it but that that the black market there you go that's where you end up right yeah that's where you end up so absolutely well Yep. That's where you end up. Absolutely. Well, okay, Dave, you're absolutely accurate as to what a CBDC would likely, the most terrifying dystopian version, but it wasn't as good of a punchline. Sorry. The most widely traded crypto is not Bitcoin. It's the dollar.

I mean, all the politicians are just finally figuring that out. Yeah, I mean, look, Ro Khanna and Richie Torres and Ron Wyden and Kirsten Gillibrand all understand this. And, you know, they're not yelling into a vacuum here. I mean, you know, they do understand those two basic points. And, yes, they have different agendas than some of us do there's no doubt but the the core point here is bitcoin ethereum and as you say mike i'll always give you credit for digital dollars yeah absolutely all right well we're at 1003 on my coast 703 am for james sorry buddy uh and that's all we've got for you today. It was great being back.

I was gone, obviously, Wednesday to Friday. We did get in macro Monday last week, though, to show my commitment to this show. And it's going to be interesting, as always, to unpack everything a week from now and see what's changed after Jackson Hole, because I think that's kind of going to be the big news of the week.

And maybe we'll unpack price controls further next week. That's all we we got for you guys. James, Dave, Mike, thank you guys so much. Really appreciate it every single week. Everyone else, see you tomorrow. Bye. Bitcoin, make money great again. Look at James' shirt. It's go.