The Wolf Of All Streets - What Will Bitcoin Do If Stocks Correct? w @truflation | Crypto Town Hall

Episode Date: June 20, 2024

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Happy Thursday, everyone. Hopefully you can hear me. I'm having some technical issues keep getting kicked off. You guys can hear me? Good. That's good news. Got Michael Saylor back at it again, buying over $700 million in Bitcoin. I think we all just wish we could be a little bit of Michael Saylor. But looking at what it says here, MicroStrategy now holds 226,331 Bitcoin, acquired for 8.33 billion at an average price of $36,798 per Bitcoin. Saylor is 6.6 billion in profit in MicroStrategy's Bitcoin holdings. I remember when people thought he was going to get liquidated and he was a moron and he should stop buying. I guess it didn't take very long for people with a

long timeline to realize that those people were wrong. Dave, I'll ask you first. What do you think of this continuing strategy, raising convertible notes? It was a $500 million note, went to a $700 million note. What do you think? Well, it's a playbook that he's copying from – is Bezos the world's richest man? No, I don't know. But copying from what Bezos did at Amazon. For those who don't remember or are too young or haven't read their history books, Amazon in the late 90s needed a couple billion dollars, which at the time was a lot more money than it is today, to build out their basically fulfillment network. Everything that we've kind of taken for granted now, those distribution centers, the automation, et cetera, he had a couple of choices.

So what did he do? He did a convertible bond issue of $2 billion. Now, why is that? And what's the mechanics there? Well, convertible bonds, basically, in this case, for sale, or it's very similar to Amazon's, essentially, what you're doing is you're selling a call option at 35% above your current stock price, and you're giving a well below market interest rate for you to borrow. So effectively, you're monetizing your own volatility. That's what Amazon did. So they were able to sell much, much less dilutive stock because a lot of it got exercised even after because it was long and updated that it survived the internet bubble.

You know, their crash from 90 down to 10 and then subsequent rally. And now it's in the thousands. So obviously, it's whatever. But in this case, Saylor is monetizing Bitcoin's volatility because MicroStrategy at this point is a levered play on Bitcoin with a nice little cash-generating software business that's dwarfed by its Bitcoin holdings. So effectively what he's doing is he's saying, okay, people, Bitcoin's historically volatile.

You're therefore will let me borrow well below market rates to buy more of it. And he does so episodically. And frankly, it's a reasonable strategy as long as he doesn't lever up too much. And for all intents and purposes, I think his liquidation price is way below where Bitcoin is today. And so I don't really think he's all that levered. So yeah, it makes a whole lot of sense. And I can't imagine he's going to stop doing it unless Bitcoin volatility plummets or it gets to a price level where there's no, he doesn't perceive upside anymore. Yeah. You know, I was on a road trip yesterday and I was listening to Saylor talk at a conference and he was talking about the Argentine peso. And he was talking about his strategy, when it comes to how he is converting business assets into Bitcoin,

and the lifecycle of fiat currency, especially the dollar and its debasement and inflation. And when you hear him lay out his thesis like that, it really is brilliant. And I think a lot more corporations are going to start adopting this approach to actually taking business assets and converting them to Bitcoin and holding them on their balance sheets. I think it's going to start to be a more viable option than just holding cash. It's fascinating. That's always been his premise, you know, and he's had high conviction in that since the very beginning. It's indisputable what it's done for his company, obviously, here. Rand, you think that he just buys until the end of time? Does MicroStrategy ever sell any Bitcoin?

No, they don't. They're gonna hold it forever. Pretty incredible. The real play here is if companies start borrowing against their Bitcoin, which is kind of what he was also talking about, you hold the asset and then you borrow against it. And that could be an interesting arbitrage going forward. Yeah, I agree. James, did you have a comment? Seems you got your mic up.

Yeah. So I used to do a lot of advising on corporate governance issues. And I just imagine the discussions here because the board of directors, this isn't a Michael Saylor decision. The board has got to go along with it. And so you can imagine it was a really, really tough sale to them originally when he started on this road, but they backed him. And this bet has paid off, and he's doubled down and doubled and doubled and doubled again. So I think there's going to be an even tougher discussion coming between Saylor and the board. And the board is going to ask him, hey, Michael, this has worked out brilliantly. Stock prices outperformed everything in the S&P

500, everything in the NASDAQ. How about we sell some? How about we take some profits here, Michael? And Michael's going to say, we're holding this forever. That's the decision we made when we started on this road, and we're going to stick to it, hold forever. And if there is still a four-year cycle, then there could be a crypto winter in 2026 where some of this leverage that is accumulating in the company could start coming into play. You know, depending upon how severe the winter is, if there is indeed a winter. So I think the the fiduciary obligation is weighing on these directors. They've got it right so far. But I think there might be some pressure to to to take the foot their foot off the pedal for a while. James, don't you think there would have been more pressure when they were underwater? I agree with you 100%. But man, imagine the conversations then when Bitcoin was sub 20,000, you know, and the cost basis was still over 30.

Look, it was a hard decision to begin with. And you're right, he started and it went underwater. And people, you know, there were articles in the Wall Street Journal ridiculing Michael Saylor. People forget about that. And now he's, you know, billions and billions of dollars to the good. And I just have to believe that this is going to come up at every board meeting. Hey, Michael, could we're talking about a normal public company that has accumulated this kind of asset on the balance sheet, there would be discussions of how to distribute that to shareholders, whether through a dividend or buying back the shares of the company using that, quote unquote, cash. So we talk about Bitcoin as cash here. But if the word got out that Michael was selling, then it hurts the entire bag. That would be a shock to the market. And so

it's really a balancing act and it's just fascinating to watch. I can't imagine what that would do to the market i'm gonna ask you mike should sailor and micro strategy be selling some of this um well i have to agree with james a little bit it's just part of prudent money management you you book profits it's a lesson i learned in trading pits when um you got to give a little money to the gods market gods or they'll take it away and you always hear about the the few that did very well like dave pointed out jeff bezos you don't hear about the hundred that failed that's the lesson learned at trading pace but i like to point out the crypto winter basically started on like march 14th when bitcoin made a new high now i'm hoping i hate to have hopium

but i'm hoping we'll keep we'll see some of this strength that Bitcoin has been famous for for a decade where it leads beta. But it's been lagging beta since then. And I know I harp on that a little bit too much, but I look at versus gold versus S&P 500. And then I look at the S&P 500, the most stretched ever versus GDP versus 20 week moving average. It's very expensive. It's extraordinarily low volatility. And I look at this as I think the prudent investors are doing the opposite of Michael. They're saying, thank you. I'll take some of this off the table and maybe buying some

treasuries or T-bonds because beta always corrects from these levels. It's just a matter of time. And when we see that point at some point in time where we can have this highly volatile digital risk asset outperform when beta corrects i'd love to see it but i have to point out the facts for now this is a very dicey territory to be adding to longs and particularly unless you fully expect the beta continue to to march on higher, the problem is it's been underperforming. Like I point out, I think the crypto window started in March, and I want to see the market prove me otherwise. And so far, it hasn't. David, do you want to take the other side of that?

I know Dave does. Well, it's not about the other side of it. I heard your great interview with Roel this morning. We're in the summer, right? We're in this period of time when we're in a trading range. Every time it starts to get toward the top of the trading range, it reverts to the middle. Every time it starts going lower, it reverts back to the middle. It's been there. That's where it is. I mean, there's like a magnet around between 64.5 and 65.5. And right now, we're right in the middle of that. And yeah, that's a lot of people doing the trading god thing. The thing that's important here is when you look at the derivative at funding rates and whatnot, it's pretty clear speculators are net short, right? You know, are they hugely net short? I don't think so. But, you know, they are definitely net short. There's no, there's very little hopium from the speculative

hot money side. Now, are long term holders holding on to hopium? Well, I mean, I don't know. It depends how you look at it. I think Bitcoin is going to quadruple from here at a minimum. So is that a hope? Well, no, it's a long term view. And honestly, no squiggle, you know, in this area is going to change that that opinion in my mind. So it's not really the other side. I mean, Mike and I both think the S&P is massively overvalued. I think we both think that NVID nvidia it hasn't invented a new paradigm where trees can grow to the sky uh i don't know when to short it markets can stay irrational longer than you can remain solvent but it looks a hell of a lot like cisco did in 2000 uh cisco was going to revel people who forget cisco is going to revolutionize the communication communication demands we're going to you you know, go to the stratosphere. And by the way, they have, they just didn't make that much money from it. Here, NVIDIA is making all this money, because everyone believes we're going to, I don't know,

10x the amount of data centers in the next couple of years for AI, you know, but you start running the numbers and you look at it, and it's like, well, you know what, their business really did skyrocket. So maybe it's not as bad. But is it this big of a rally? I don't know. I mean, when you want to know when to sell a video, when Pelosi sells. I'll just leave it at that. Oh, man, that's a good take.

Joe? Yeah, I've said this a couple times on this show, and I think, you know, to Mike's point about beta, right right? Like you have to really sort of drill down a little bit more on that than just referring to it generally as beta. Large cap beta is at an all time high, right? There's large cap beta ETF just put in a new 52 week high, you know, large caps, which are tending to be more interest rates insensitive are doing very well, right? What happened in March? What happened in March is you started to get this rapid price out of cuts in interest rates because you had the February CPI print, which came in over expectations. And then if you drill that down even further, the most interest rate sensitive companies with significant piles of debt are the ones that are performing pretty poorly in today's environment,

whereas large caps, which are less interest rate sensitive, are performing very well. So you have this bifurcated market that you've seen for months now, where if you don't, if you, from a balance sheet perspective, don't have to care about interest rates, you're doing extremely well in the environment and vice versa. The opposite, right, is true is if you are sensitive to interest rates. So how does that impact crypto? Well, crypto, if you look at in general, has been very correlated with the more interest rate sensitive assets. IWM has been struggling. IDM growth, the Russell Growth Index is struggling.

It put in its high in March. WM does similarly. So you have a lot of companies and assets that are interest rate sensitive that are responding to the higher for longer narrative and the pricing out of cuts. Whereas your mega caps, which don't really care and they're not interest rate sensitive are continuing to put in new highs so- I think that's all going on here- ultimately if you're of the school of

thought that. You know the Fed does eventually cut and we're near the end if not at the end- then I think you should be all overall optimistic because. There aren't. Signs on the horizon of a recession is just not there- but obviously if you are of a recession. It's just not there.

But obviously, if you are of the case that, you know, inflation is going to reaccelerate and go higher, you could see these all these assets interest rate sensitive, take a leg down, right? Because that means that the Fed could actually have to pivot in the opposite direction that I think the bulls are hoping. Makes sense. I think I was gonna ask Mike, back to you. Is that sort of aligning with what you're thinking? Well, I appreciate the outlook, but just look at retail sales. They're negative if you subtract out CPI. And this is part of the distortions of what happened. So signs of recession, yes, what happened was the pendulum swung way too far last year for recession now it's swung way too far the other way in my space i see nothing but tilt towards recession declining demand for diesel declining demand for unleaded gas paperboard boxes the demand demand for corrugated boxes which has been a great bond indicator for decades since i started trading these things in the 80s is that a recessionary trajectory very similar to 2008 so my

whole bias everything i see is we're getting towards that recession that we've completely priced out of the system which is the risk we just price it back in a little bit um and then we do have things like inverted curves and leading indicators that don't matter anymore well they're going to start mattering and that to me is what matters is what matters. This is when you get, as I say, the S&P 500 large caps, this expensive. They've never been able to sustain these levels. And I have to point out the same signals that I started getting in 2006 and really accelerated in 2007 are worse now. Not only more expensive relative to GDP in the stock market, but the VIX volatility minus T-Bowl rates is the lowest, the 52-week moving average of that is the lowest since 2007.

Now, some of us who did very well that period are looking at these things and saying, thank you. I see gold as a better performer. I see U.S. Treasury bonds about to pick up. And then I look at the riskiest asset on the planet had a great reason for a new high. It did it. It had a perfect reason for a new high in did it it had a perfect reason for a new high etfs the halving and beta new high uh beta taken off and now it's doing the opposite that's like

say show me the beef but for now i see the risk is we're just going to have a normal correction in equities it used to be 10 and bitcoin drops 30 maybe more that's what it always has maybe we'll get to that point where it's yeah great it's a it's a it has a negative delta but right now it still has a highly it's a highly volatile positive so i look at the macro big picture is all pretty much tilting towards a normal reversion of risk assets bitcoins among the riskiest and that's why i keep pointing out so i'll stick with gold stick treasury bonds they haven't worked yet. And I have to point out, I did – at Bloomberg, I'm not really allowed to trade. So I was forced to buy some micro strategy a couple – like five years ago. And I was shocked how much that went up.

So I had to sell some of it. And then because I always look at NVIDIA. NVIDIA is up on a five-year basis up 3,000%. And Bitcoin is, what, 700? Big deal. So for now, to me, it's the macro. I have to point out facts, and I fully expect people to disagree, particularly in this space. And my risk is when everybody agrees with me, I'm generally wrong.

Can I just make two quick points, Scott? Michael and I, anyone who wants to hear us argue can listen to Macro Mondays at 9. But the two points that i do want to make are when you talk about the inverted yield curve being a signal the inverted yield curve is from federal reserve and central bank uh manipulation full stop they need the long end to be lower to finance the deficit we have a disaster brewing uh you know the cbo estimates and that have just come out and i guess we're going to talk about that more on Monday as well. Basically predict just incredible deficits going forward based on interest rates on the long end where the government funds themselves. This Fed is absolutely maniacally

focused on keeping the long end down. And so, you know, yeah, that's why we've had two years of that without the typical recession. Well, because in a manipulated market your signals are distorted so just leave it that way and we could go down a whole space on market manipulation uh second point that i want to make is when you say bitcoin made an all-time high bitcoin did not make an all-time high if you inflation adjust adjust it it did not get to where it was in 21 and if you look at bitcoin's price relative to its network strength, it didn't even come close to where it was in 2021. So we did not experience that euphoria yet. That is not part of the cycle. Anyone who wants to hear what that will look like,

they could listen to the tape of what Scott's talk with Raul was this morning. But it's just a myth to say that Bitcoin hit an all-time high a couple months ago. Okay, so I'll follow back on a notional basis, sure. But let's talk first myth to say that Bitcoin hit an all-time high a couple months ago. Okay, so I'll follow back. On a notional basis, sure. But let's talk first about the yield curve. You can claim manipulation as much as possible, like the same people claim manipulation of gold and then forget to mention the rest of the world. Chinese government 10-year note right now is 2.4%. It's confirmed that China is buying those 10-year notes.

Why? Because they have to. Greece is 3.6%. Germany is 2.44%. So the whole world is manipulating their bond markets versus that US 10-year note, UST bill at 5.33%. That's an accident waiting to happen. That's part of the reason I'm very bullish gold. Very much bearish a global economy. Fully expect a normal, worthy deflationary recession in response to the biggest money pump in history, which was what drove Bitcoin. It's what Bitcoin was birthed from to the highs.

And you just have to point out at some point, this is going to come back. And I think it's starting to trickle down, getting close to now. And I just look at Bitcoin as potentially the best leading indicator. It's shown me lagging. Mike, you still have a money pump, right? You're running 6% to 7% deficit to GDP, right you still have a money pump, right? You're running six to seven percent deficit to GDP, right? Percentage perms, right? You have money filtering into the system through people holding those C-bills. That's someone's income. So I don't see it. I don't

see how you have a recession when you have wartime deficits pre-stimulating the economy. And if you can make that, if you square that circle for me, I would love to hear it because it doesn't make sense. It's 1929 all again. It all starts with one key thing when the most expensive stock market out of lifetimes just pulls back a little. That's where it comes from. And you're good. It's a good point. We're pumping a lot of money, which is a lot of reason I'm bullish gold.

And I fully expect the Treasury government at some point to buy more bonds, the Fed, like they did. But we've seen this before in history and it doesn't work out well. And to point out that Bitcoin is going to be the best performer, it might be. But again, the problem is it still trades three times the volatility of gold and S&P 500. So maybe when we get that initial correction, it goes down and then comes back. But it still does trade three times the volatility on average of beta and gold. That's the problem. Yeah. But the problem with the argument you're making, as as I see it is if you're pre-stimulating the economy and you're pumping out money, assets across the board rise. And we know that assets are held by the top 10%, including the stock market, right? So tell me the catalyst to get stocks to experience a 10,

20% decline. The only thing I can think of is a re-acceleration of inflation, which is the opposite of your thesis, because you're saying we're heading towards a deflationary recession where asset prices come down. So, you know, the Fed coming back in and having to reverse course, I can see that being something that brings the stock market down and saying we haven't brought down inflation. But the argument you're making is that just with all the stimulus, all this extra money that's coming into the system through the federal deficits in an election year, by the way, where we'll get a new president who will also be willing to spend more money, whether it's an R or D, it doesn't matter. They're also going to campaign on spending more money. Explain to me how that triggers some huge fall in the stock market, because without that, I don't think you get the kind of recession you're talking about. You just did. First of all, I fully hope to lose this debate. Joe, you win. I want to win the

markets. And this is what's happened. What you just said is what I hear every day from every person. It's priced in a lot. It's when you get markets this expensive. The way I look at it, when you get volatility this low and interest rates this high in markets this extent, all it is is a tinderbox waiting for the spark. The spark, I don't know what's going to be. We do have Cold War 2.0 kicking in. We do have cold war 2.0 kicking in. We do have hot wars accelerating. And those of us who remember the detente of the 90s really pumped that risk assets, we all know we're going the other way. So I don't know what's going to take, but I want you to win. Good luck. I hope you win. You win the argument. I'm going to just

point out, I don't have a vested interest. That's the difference with me on this. I don't have a vested interest, which is a lot of people who have a vested interest. I mean, I fully expect you to talk to your position. I don't. I'm just pointing out the facts that I see in markets. Yeah, but what you just said is that you don't even know what the catalyst is, but that's a fact that you see in the market. The fact that things are over-exhausted, that there's high valuations. I mean, I've heard that for 20 years. Like I said, you win. I'm not trying to win. We're trying to talk together and figure this out. What I don't understand from your case is what I just heard you say is that something's going to come along. You can't invest to make

decisions on something that may come along and make the sky start to fall. You can overweight T-bills, treasuries, risk off assets, and underweight risk on assets. So the 2022 and 2023 portfolio that has underperformed. Again, you win. You win the argument. Good luck. Can I jump in here and maybe help kind of dissect this a little bit and back up Mike?

I guess if that's okay,ott i don't want to like just go ahead i was gonna call on your next yep go ahead thanks man um so look i'm the new guy here i don't have a fancy you know suit on i just have like this little cartoon character but i like to focus on real estate macro trends and to back up mike Mike, there is some not, you know, pretty bleak looking data coming out of the States right now in terms of home listings across the US housing sector. I'm looking at a map right now. And as of today, year over year, sales inventory growth, for instance, in Florida, we're up 70% home listings in Florida. Georgia's up 50%. South Carolina, Mississippi, 50%. Texas, 42%. Arizona, 68% more

home listings on the market right now than there were a year ago. Yeah. I know we can make the argument that rates are high. Um, you know, there were people are waiting for them to come down. They don't want to get rid of their current mortgage mortgages to flip into a higher mortgage. Um, there's, there's so many factors at play here, but at the same time, you know, Mike is making this argument about this Tinder, this flame. I think if we're already at these high numbers with housing issue, housing crisis, and there is just a small fraction of some sort of a recession or people losing their jobs at scale, these homeless things are not going to go down. If anything, it'll spike up more and will quickly flip into a seller's market. And I mean, it's, it just, it looks bleak on the housing front. And I think it's, it can potentially scale pretty exponentially if things were to, you know, go down the route that Mike is talking about. So I think people should be aware that just because they think rates are going to come down, people are going to start buying homes again.

That may not be the case here. I think it's more likely the opposite. Right. If rates finally come down, there'll be so much supply on the market, to your point, that you would imagine that housing prices will drop. I think it's a buyer's market, not a seller's market. But I think that, yeah, when you unlock all of that, that's what's going to more likely happen. All these people who have been looking to either get a home that wouldn't or looking to sell their home, but know there's no buyers or know there's nowhere for them to go. But has anybody else here been watching real

estate closely and think there's a canary in the coal mine there? I mean, Joe, you were saying kind of what can make the market drop, if you've been looking at real estate at all? Yeah. And what you see is a frozen market, right? You see a frozen market. They just have the statistic out that it was the worst rated market to buy a house in. That tells me that prices are really still high and people are salivating at the idea of lower rates. I mean, I was just looking at National Association of Realtors. They're projecting lower rates for the next year and they expect buying and demand to pick up. I do think there's a ton of people waiting, waiting for this interest rates to come down so they can piece together a buy. So to me, that's a bullish sign for real estate.

It's not a bearish sign. I think the fact that you've got money sitting there trying desperately to get into homes and you have a structural shortage of housing across the United States, I don't know why you're making a bear case for that. That seems more bullish than anything. There's the next crisis, by the way, or that, you know, downturn is not going to come from housing. The structures that were put in place from a banking standpoint, not only here in the United States, but globally associated with real estate and that particular risk that turned everything upside down in 08, 09. I mean, the chances of that happening again as the next crisis that came from that crisis are next to zero. The other thing, too, here is that from a macro economy standpoint,

you know, the United States economy, not to talk about global, but the United States economy is so much more dynamic than people give it credit for. Think about this for an example, you know, an example here on crypto Twitter, we had 1000s and 1000s of people talking on spaces yesterday about a meme coin. And those people have there's a lot of people in that space that have generated enormous returns and put tons of money in their pocket. Are those kind of numbers, you know, is the government taking a look at those kind of numbers and those people's banking accounts and reporting that on a daily basis? There's so much more strength in the economy than the numbers even tell us. There's a

lot that can be said about how things are actually reported. So it's just, there is hard to find ways other than, and I get it when you've lived a certain time span of cycles, right? You're always looking for the next version of the cycle. And sometimes you're just looking for the next version of the cycle and you're preparing for the next version of the cycle because that's what you've lived. And people that have gone down that road over the last five, seven, eight, three years have just, you know, they've been on the wrong side of it.

And looking for downside catalysts, you really got to look for sort of catastrophic stuff. It's not going to show up in reversions to the mean in terms of numbers. It's not going to show up in slow drips in one area of the economy that ends up tipping the scales. That's just not where we're at right now. There's still way too much money in the system to plug those proverbial gaps. Again, you look at housing. I live in the middle of the country, and housing prices have not budged from, quote, unquote, all-time highs in any meaningful way associated with interest rates. So that narrative, I mean, that just goes nowhere. And any sort of crisis associated with that is miles and miles and miles off. Andrew, I just responded at one time in 2006 when I explained this to a former boss. He said exactly what you said. There's too much money in the system. in real estate and how banks were treating that proverbial asset class were astronomically different than the way that they've been doing it for the last 20 years.

It's not just money in the system. It's the new flow of money into the system, which is what we talked about in the deficits, right? You have to factor that in. It's not just money currently, it's money that's coming and will continue to be spent. But the other thing that I want to just mention real quickly, let's talk about how I think Mike might actually be right here, because I think there is a case, but I see it for a very different reason. Janet Yellen, and this goes back to what Dave was saying, Janet Yellen has been funding the government with short-term paper. It's well documented. They're running far above historical trends with running that short-term paper. And that's partly the reason, in my estimation, that you have this inverted yield curve. It's basic supply and demand. You don't have as much long-end supply coming in to fund the government. That has to change, right?

We know it has to change over the next six to 12 months just by virtue of the fact that, you know, after the election, you can't continue to fund the entire government that's rolling on, you know, 12 to 24-month paper. So once that changes and you have that supply, to me, I think that will pretend a curve where you have the long-end rates actually rise and rise precipitously because of the additional supply that someone has to absorb, which is much harder to absorb from a balance sheet perspective, which if you get that long-end structuring, financing these huge deficits to actually rise, that can pull down the market. And we've seen this, by the way, if you look at the last, the end of 2023, right, Janet Yellen

put out the QRA, quarterly refinancing, and we saw instantly the market started to rocket higher because she telegraphed once again, she's going to fund with short-term paper. That's a game you can only play for so long. Yeah, I think there are two things. First of all, I don't think that you're right with that. I think that this government is trying to kick the can down the road. If this administration re-ups, I think they will try to fund the government short term for the next five years. In a new administration, I think you probably will be right, but who the hell knows what they will do uh there's so many you know there's so many moving parts i really we'll be examining that i'm sure come october uh i think it's too early to do that right now we don't even know

who the candidates are going to be and i know i say that that sounds like a tinfoil hat conspiracy theory but i legit don't believe it's going to be biden versus trump but we'll see what happens anyway uh the the point that i was going to try to make Trump, but we'll see what happens. Anyway, the point that I was going to try to make here is that there's a huge difference between now and 2007 and 2008, a massive difference. And it's because mankind are learning creatures. People realized, and we saw this, we literally saw this in March of the pandemic, that back in 2007, 2008, the Fed was like, well, we'll quantitative ease, we'll do this, we'll dip our toes in the water. Back in 2007-8, the Fed was like, well, we'll quantitative ease, we'll do this, we'll dip our toes in the water.

Like, oh shit, this is worse than we thought. Oh shit, this is worse than we thought. And it kept going. Now, at the first whiff of a massive failure, they're pulling out the bazooka. And we can talk about the Fed put, and it scares me because I agree with Mike on the stock market being overvalued,

where we diverge is Bitcoin's delinking. Sadly, Bitcoin's delinking has been Bitcoin has stayed range bound when the stock market's made all time highs. That's the opposite of the delinking I want to see. But delinking is delinking. It's a separate thing. The fact of the matter is that the Fed this time, if commercial real estate starts to fall or if there is a major housing fall and MBSs start to fall and banks stability or solvency is in question, the Fed's pulling out the bazooka. And that bazooka starts with a T, trillions, not even billions. So that's the biggest difference. And that literally, you know, if you get to that disaster scenario, I think they're alive and well. Do I think they're going to do that based on the stock market?

No, I don't. Do I think they will on the banking system? Yes, I do. You're absolutely right. People forget this about that particular crisis. The injection that got put into the economy, and this is actually hilarious to say now, it was this massive, massive, massive injection. It was $800 billion. $800 billion. $800 billion. I was there. I was at Citigroup at the time, Andrew, so trust me. I know much of the inside baseball.

I know of some of the billion dollars, multibillion dollar bets that they made up and down the chain. That bad bank that they created, basically to segment assets. They did all sorts of shit. But the amount of money they put into behind just the facility that they did, you know, a year and a half ago, I forgot what it was, the ETFB was $4 trillion. Yeah.

And that was for nothing. Yeah, we had an Inflation Recovery Act or whatever that weird thing was named, you know, was significantly significantly higher than a billion dollars. I mean, it's so so the numbers associated with the way that, you know, government now reacts to even a glitch in the proverbial matrix. Dave is absolutely right. You know, they will absolutely just super soak the proverbial problem. Now, long term, is that a good way to handle things? Absolutely not. But at the same time, let's deal in reality. That is how things are going to be dealt with. And so how do you position yourself from a market standpoint? I look at that Bitcoin associated with reduced interest rates and interest rate cuts. I mean, how many times do we have to see over the last, let's call it two months, that

this small nation state, this country, this country, this country, this country are starting to reduce rates? At some point, that will find itself to the United States, even if it's politically motivated, you know, at some point a month or two before the election, which I would bet is probably what's going to happen. Whether it's data driven is a different conversation. Politically driven. Yes. What does that mean for Bitcoin? Higher. So interesting conversation on both sides. Mike, you don't think that bazooka is coming, correct? Well, there's learned in the past.

Well, there's one thing missing for one off on banking issues. Sure. But the Fed put doesn't happen until the stock market goes down. It has to pre-p. Market's going to go down first. And then you see the Fed put and see how it happens, see how the market reacts. So maybe I'm talking more of a trading opportunity, but it's the silly thing I hear from everybody I know in real estate. Oh, markets will get better as soon as the Fed cuts. Oh, the stock market will be fine as soon as the Fed cuts. They're missing one key thing.

The market Fed's not going to cut until markets go down, partly because it's this. You get to a point when you're two times GDP, a market capitalization, an equity market. That's all that matters. I mean, stock market going up is keeping inflation sticky. And inflation is probably not going to go down until we shut off that sentiment and consumer spending by stock market going down so the fed put which people think is just as strong as ever i love people who are very happy being long and making a lot of money which is great because there's been a lot of other things have done very well like this year gold's doing as well as as s&p 500 is you have to remember what precedes the fed put is you have to have

markets go down. Let's just use one example in history. We did not go off the gold standard until in 1933 until after the S&P 500, the stock market was down about 80 to 90%. You have to have those events first. Otherwise, the Fed is going to, the stock market is going to do the same. Yes, we're getting that fiscal spending. But I just point out the lessons I learned in the trading pits, volatility is always reverting. When volatility gets this low,

be very careful long assets. The thing is, it could stay low for a long time. What about 2019? 2019, we cut the Fed cut and the stock market was at an all-time high. And so what did it take for them to cut? There was an inverted yield curve. 2019, inverted yield curve, stock market got an all-time high. Fed got a cut. They did it as a preemptive cut before the economy turned down. There was just some indications. Obviously, you know, we're heading into an election year at that point and you had a different inflationary outlook. But the Fed cut. I mean, it's just not true what you're saying about how they only react when markets are down that's not accurate the the the the correction of 2018 didn't matter and this hold on they didn't cut until seven eight months

after that correction let me just check that i'll remember that yeah the market the market the market bottomed in december of, along with Bitcoin, by the way. And then you had seven, eight months before they cut. Market had roared back to an all-time high. Right. Okay. So they started cutting in July. That's what I just said.

After seven months. Yeah. cutting in july that's what i just said yeah so it's just it's not factually accurate what was inflation then cpi i just i just said i just said that that obviously a different inflationary outlook but the notion that they don't they only cut or only react when the stock market's declining is not well that's what the Fed put is. And then also the big difference from back then is volatility is much higher and we are much lower on the stock market versus GDP. But that is OK. That makes sense. I mean, that was a rare one, but it did come after the correction of 2018. The Fed put, though, and the reaction time is much, much, much tighter than it was even five years ago, 10 years ago, 15 years, 20 years ago.

Like Dave said, you know, humans are learning animals. Right. So politicians and the Fed at the same time have learned behavior associated with if they're seeing movement in the wrong direction in any substantive way, it doesn't have to be a market correction of 15, 20 percent. If it's 5, 7, 8, 9, 10 percent, I'm telling you right now, their finger is on that button. And yeah, but Andrew, just look at the last FOMC. Right. You can just tell they want to cut. Right. But they can't because the data turned against them. Right. Which, by the way, I think that undercuts the deflationary, recessionary argument. The inflationary expectations pick up when the economy is strengthening, not when it's weakening, right? It's just an economic

indicator that things that the consumers are, again, coming back into the market, buying. And you can see this in like the freight index, right? The freight index has taken off in the last three months. Lynn Olm just posted a chart about this, how you see indications of green shoots of the economy strengthening, which has got the Fed spooked because they thought they had inflation taken care of last fall when Jerome Powell gave out that mission accomplished speech about how, you know, we think we're going to be cutting more. And that's when the market priced in six cuts. This stuff can move on a dime is the point.

I mean, it's all about expectations. Well, and that's kind of the point that I'm making is moving on a dime is very different than how the Fed, quote unquote, and the dynamism of the markets, very, very different than even 10, 20 years ago, right? So this stuff happens much, much quicker. There are responses that are much, much quicker and the responses are so much larger than they used to be. Yeah, it's, now whether or not those responses and the evaluation of what the response should be are the correct responses, that's a different discussion. But the reality is the responses happen much, much faster based on data sets, and they don't have to move as much as they used to.

I don't think we could have a possibly better day for true inflation to be here as we talk about inflation, all these macro metrics. And I think that Stefan Rust, the CEO, you might have some feedback here on what you think the true inflation numbers are and likely what's coming because I use true inflation all the time and it does not align with the metrics that we're seeing provided to us from the government. So maybe you can jump in here. Yeah, thank you, Scott. Thank you, everybody. Yeah, look, our inflation right now, so the true CPI, where we see it leveraging 18 million data points, three price feed for every single data point that we aggregate across 12 categories tells us is about 2.15%. We update this daily. And yeah, so it's below what the government is saying. That on the flip side,

when the government is saying there were at 8% during the COVID times, we were up at 12, 12 plus percent. So on both extremes, we tend to err on the higher side or on the lower side to where government's reporting, where we do see correlation around our numbers to the government. If we backdate a lot of where we come with the across the 12 categories that we track, we sort of just Yeah, I mean, we see a strong correlation that we can predict where the government's going to be reporting. If we've not as we've now identified where they're lagging in terms of using stale data up to six months especially in the real estate market uh which has a big impact in in the bls number at least it's like 30 they they sort of give it a 36 percent

weighting the housing sector um and and so that's that's sort of where we see it. You know, somebody was talking earlier about housing supply. Yeah, I mean, if they drop interest rate, which they inevitably will do, you know, we're sort of predicting a September big drop to boost Bidenomics and show that Bidenomics is good. And it's worked just to stimulate the stock markets price, whether that gets distributed to the individuals, you know, over what time horizon, that's for sure. But on a housing spec, you know, on the housing market, what's that going to do with the limited supply, it's going to drive up prices, but it's going to make it cheaper to get a loan to buy the more expensive house. Supplies dropping for new houses coming onto the market, which is not really surprising.

Employment data for the first time creeped up above 4%. So unemployment data. And so unemployment is growing a little bit there again as well. So we just got all the indications that and there's no way we're going to bring inflation down to the targeted two percent that powell wants to hit i just don't metrics but not by their metrics yeah exactly by their metrics sorry um yeah because you're right now that that you're there right but according to inflation you know we should already be there and we should already be trying to stimulate the economy, we should already be trying to drive growth,

there is no growth in the market, there is too much bureaucracy to stiff to stifle growth, we're not promoting growth, we're not picking up new categories that are driving innovation, right? The whole AI space, crypto, healthcare, all of these elements are experiencing significant innovative changes that are being limited with having to buy, you know, spend more money on lawyers, on forms, on submissions, on compliance.

You know, in the finance sector, that's how they got so fat. They spend 70 cents on the dollar on compliance. And so, yeah, it's no wonder you stifle innovation in that way. And we sort of think stagflation is coming. I think there's a lot of people that agree with that. Okay, so I got to unpack this, because obviously, you saw an opportunity you view inflation as an exceptionally important metric that people should understand and you decided to basically recalculate it on your own and it has a blockchain element to it correct so like what was when did you say hey i'm going to

create this it's going to be you know uh it's going to be a crypto, and we need to get the word out on what the actual numbers are in inflation. So when we were told that inflation is only transitory, I mean, that was a trigger. It was like a red rag to a bull. Yeah, I just felt that we needed to go after that. You look under the carpet how they are working in a model and modus that is combined up to over 100 years old. The data that they're using is stale. It's up to six months old. The methodology is sort of intransparent. If they don't like the numbers, they then just change the methodology. And just alone, if we could take a developer approach to building something more systematic,

we could create something that's 30x better. And so we embarked on that journey. We're immediately backed by Balaji and Chainlink. And that sort of put us on the route. What were we doing? We were aggregating all of these price feeds. We were pulling them from, you know, sort of standard APIs that are available in the real estate sector.

You can get them from, you know, Zillow, Redfin, all the natural sort of providers. You can get them, even the utility pricing, you get in real time on a county level from the government, which the BLS doesn't use. So we decided to use that in addition to other metrics that we could pull. And so we just felt the weighting also needed to be more transparent, have more insight. And we make this all available on a decentralized network of an app chain, we call it, the Truflation Stream Network, maintained by the database and the ledgers, maintained by 10 different node operators today.

And it's published through Chainlink on a daily basis across some 8 to 10 different blockchains right now. And you say, obviously, that you're trying to democratize finance, give people better data. But why is inflation data? You could do this with a lot of things. So why is this the thing that you 100% chose to focus on? And why is it so important? And do you think people are missing that it is so important?

No, I think, you know, when we first started, people were asking us, why are you doing inflation? Who cares about inflation? The government already publishes inflation. But we felt it was the one single metric that measures the performance of an economy. And it was, yeah, and it was just corrupted. And so the same people managing the economy use inflation as their scorecard in terms of how well they're doing and how well the economy is performing thanks to their policies, thanks to their financial guidance and all the metrics that they use. And that, to me, was just the one metric that I felt would summarize everything.

And at the same time, it aggregates so many additional data points together. So not only when you capture inflation and you want to get into the prediction associated with inflation, you need to understand what are the commodity prices? What's supply chain look like? What's the labor market look like? What's confidence look like? What are weather streams like? Because they ultimately all have a future impact on the economy. And so ultimately, we became this network

where you now have a suite of assets, data assets and data prices across real world that you can then use on the blockchain. And so that's ultimately where we've come to today. So not only do we do CPI today, we've added a couple of other indexes. Yeah, I see. Electrical vehicle index. Exactly. Why is that important? Well, that was important mainly because commodities.

How do we, you know, I don't want to buy an ETF with with with Tesla's prices, yes, shares in there with by byd shares in there with Rivian shares in there, I wanted to get something that captured the underlying commodities, you know, EVs are going to grow in a large portion part of the world, they are already over 50% penetration. If you look at China and the retail market, you look at Norway, the Scandinavian cities, highly, you know, electric already, from a vehicle standpoint, how do I participate in the underlying commodities associated with that lithium, copper, palladium, platinum, etc. And so this index ultimately reflects the value of the

underlying commodities used to build EVs. And if you've got EVs and you believe in the future of EVs, you know they're going to need commodities. So no matter which company wins or doesn't, the commodities are an essential ingredient to making that happen. So it was the picks and shovels concept. So as you're building here, like what kind of things can people look forward to future indexes, big plans, upcoming announcements, etc. So we've built the CPI around the US mainly because the US has the most data sets available, is the most transparent out of most of the governments worldwide. So somebody was highlighting earlier that the US economy is the most resilient around the world. And I couldn't agree with that more. And other parts of the world are really struggling, and it's not going to get any easier for them. In fact, it's going to be worse for them than for the U.S.

But that said, a lot of governments are looking, especially high inflation markets, are looking for an independent source of truth for inflation in those specific economies. So we've been approached by one or two governments in high inflation markets to help them build a better transparency around what is inflation in that specific market. And we'll be announcing that in one month's time. So we'll be sharing more on. Yeah, it's got to feel insanely good. Yeah, no, it's pretty cool. I mean, it's actually and it's in sort of a collaboration with the government itself. So the government saying, you know, get rid of this, you know, this department, we don't need this, we want to just set the framework, work with the finance ministers and figure out how we calculate, you know, is this framework right and good, and bring this to market.

Put it on the blockchain. Yeah, it's kind of scary that they might be using incorrect data to make the huge decisions that impact every individual's lives. Yeah. And we know that it's always lagging. Key word, afuera. There you go. We know that it's always lagging. Key word, afuera. So listen, obviously, because it's decentralized, it's blockchain based, there's a token. So what's the purpose of the token itself? What do you use it for?

Obviously, it's been actually very successful, I think, in a down market. So. Yeah, thanks. I mean, the tokens used for the utility and getting access to all this data. So we have a network of data providers. I think there are now some 80 data providers that are contributing. They're all whitelisted. They stake their tokens to be whitelisted. And they pay an AppChain fee to the node operators who are rewarded based on hosting and verifying the data and ultimately enabling the compute associated with that data. Data analysts can equally participate and access the TSN, the true inflation stream network,

and build their own index. So anybody here wanting to build an index with some of these data sets can easily go out there and start building their own index. You know, we're not going to think of every single index that the world needs, but somebody else could build another inflation index in another country or come up with, you know, a red wine index or, you know, the eggs index or whatever the index people want to create. And ultimately, we're seeing a shift of, you know of real world assets move onto the blockchain. I mean, ultimately, we don't think that it's going to be waiting for the land registry to tokenize the building so that then somebody can build a fractional token model off the back of that tokenized land registry. We actually see synthetic solutions pop up much faster.

And you're seeing that already happen today around the indexes that we're launching. So the EV index today is already tradable as a synthetic perpetual on exchanges, like an overlay. And then you can see that also synthetic assets themselves, like real estate, where you can go and trade the price, you know, the square foot in Austin, and you can bet on that as a synthetic asset tomorrow will be up or down, things like that. So that's going to move a lot faster, largely because you're all of a sudden opening up access to inherently very difficult markets to enter for 1.7 billion people. That's crazy. When does Jerome Powell give you a call? Is that the final boss? We've spoken to the BLS, I'll tell you that much.

Wild. Absolutely wild. So listen, for people who want to check this out more, how can the community get involved and contribute to the growth and participate? I may have lost sound here. Yeah, you're back. Okay. That was strange. So people who are interested, obviously we have Truflation on stage. I think you should all follow them first of all, right? Follow the Twitter account, the X account, excuse me. But how can people who want to find out more, get involved in the community, how can they

participate in this moving forward? Yeah. So we're on Telegram, Discord. We have a newsletter. Yeah. Those are the best. Go to trueinflation.com. And if you want to calculate your own personal inflation, we have a calculator to trueflation.com and if you want to calculate your own personal

inflation uh we have a calculator trueflation.com calculator and then you can go and calculate what is inflation uh for you specifically we launched that about i think it was about six weeks ago or seven weeks ago we now have had over 200,000 submissions of people calculating their own personal inflation. That's more than the 80,000 survey than the government does. So we have a very good feel or are getting a much better feel in terms of how households are spending their money. Absolutely amazing. So thank you so much, guys. Once again,

follow him and truth relation up on stage couldn't have been like a perfect, more perfect segue for Browse to bring you up on stage today with the conversation. Because sometimes we're just sitting here talking about like the value of meme coins. And today, obviously happened to be having a sort of wide ranging macro discussion that continued to touch on inflation. But we sort of whine constantly that we can't get real data. It's all lagging, that the Fed has no idea what they're doing. Well, hopefully these tools will actually help. And the fact that it's decentralized is just absolutely incredible. So Stefan, thank you so much for what you're doing, guys. Absolutely give them a follow and check them out. That it? Any final thoughts, Stefan, before I let everyone go everyone go no just thank you for inviting me and thanks for the opportunity and and look you know just we're trying to breathe that source of truth right and so um any any suggestions anybody has how we can do better how what other indexes we can do any openers um in terms of working and building a better platform. Happy to listen to anybody.

Reach out to me on Twitter. Thank you, Scott. Thank you so much again for your time. We'll be back tomorrow, 10.15 a.m. Eastern Standard Time. Until then, see you tomorrow. Bye.