The Wolf Of All Streets - Yields Collapsing! Will Bitcoin Pump? l Macro Monday

Episode Date: November 6, 2023

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Yields have been collapsing. Have they topped? And what does that mean for stocks, crypto, and every other asset? Is this a real bull market starting again or yet another bull trap in a trend going down? I've got the best in the business to discuss it. Mike McGlone, James Lavish, and Dave Weisberger. It's Macro Monday. Let's go. What is up, everybody? I'm Scott Malker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button. I've had quite a few of you reach out about Misha over the past week. Just a very quick update. Amazingly, through hiring a company to look and then through just sending a tweet out to my million followers and finding people that can help through social media, we're able to track down Misha. He was stopped at

the border between Mexico and the United States. He took away his phone and his computer and detained him. Incredibly, he got a message out the other day after we already knew he was safe. He has no idea that anybody knows where he is, including his family. He got a message out and the guy simply sent me an email saying, hey, Mishaawandi, no, he might be late for work, basically. Right. Didn't get to his family, to anything else. He had the guy email me and say, I don't have my computer. It might be a little while.

But we do know that he is safe and healthy there and just waiting to be released back to Mexico where he will be free and be able to join us. But definitely a scary few days there, not having any idea where he is, but we were able to track him down and confirm that he is okay. So thank you guys for your concern, for asking the DMs, the messages, the assistants. Really do appreciate it. Now I'm going to bring on Mike and James

and Dave predictably is in an elevator, but we'll be here momentarily. Mike, what happened on the morning call today? Well, I think I want to start with Dave. I think I called him Yoda before. Maybe he's Dave Hard to Get. Maybe we should change it over to that. But, yeah, the morning meeting, first I want to start with I'm in New York for the week,

and I was very concerned. I just walked off the airplane last night, and the first thing I saw was an ad for GBTC. It was one of those electronic flash when I go, boy, is that an omen? I mean, it's only up, what, 3,000% this year. So I'm concerned about that. But back to the meeting, our economists are all flat on and sticking with their view that this uptick on unemployment might kick in the Psalms rule, which we've never had an uptick that's five tenths percent. That doesn't go from james will kick in from below four percent to six just never happened and i like to go back to the gold standard since 1971 the low and unemployment before them was 3.5 and now it's 3.9 kicking up

and the fed's still tiny loan surveys credit contraction bank credit tightening that's just bodies in motion just getting started from our um um that Paul, a China economist who's on the meeting, from Iowa, Jersey, a chief interest rate strategist. He thinks that finally, he didn't really say peak. I think yields have peaked. Now, that's my view, but he thinks expect a decent rally in the long end of the market. That means prices, yields decline.

But the unique thing is from our strategist on FX, he thinks the dollar might have peaked, particularly if U.S. weakness, if we continue to get U.S. weakness in economic growth. And I view that as, well, that's kind of what we need for the dollar to go down, is you need to have U.S. rates to go down, particularly the stock market probably to go down. It's not doing that. Short term, it's not down. And to make the dollar, otherwise, the dollar is a wrecking ball. And look at the yen. It's increased almost 50% since the bottom in 21. And it's still declining. OK, maybe it's peaked at 150. But our equity strategy,

the problem is, as we know, is in small caps. And I tilt over. Everything I see from commodities is severe recessionary. So look at crude oil. It's back to near unchanged in the year. It had some major reasons to rally. It didn't work. Peaked at 95. The low for this year is 63. I think it's heading there. In terms of, you look at crude oil in terms of the Chinese yuan, WTI is up almost 7% in terms of the yen.

It's almost 15%. Those are the key demand importing countries in the yen. It's almost 15%. Those are the key demand importing countries in the world. Now, I always tilt over to the market that I still am very bullish on is gold. The average price here is the highest ever. And I'll end with this. One thing I published this morning,

I really enjoy publishing. If you overlay the US unemployment number or unemployment rate with gold divided by S&P 500, it's a term I learned in trading pits. It shows good chart. It just looks like every time unemployment bottoms, gold will outperform the S&P 500. And it's typically what you do in recession. As far as what Bitcoin is going to do, still showing that divergence strength. But you could say also it has been a leading indicator

for this bounce in the equity market. I love really quick, James, I just love the name Ira Jersey. Doesn't that guy sound like a character from the Sopranos? Ira Jersey, you know, every time you say it, I like laugh on the inside. Go ahead, James. But man, it's hard to follow up with Mike when it's 6am here. I mean, I'm on my, you know, second cup of coffee here. So or espresso. Mike is informed other man mike is informed hey there's dave look i just quickly for last week you know people are trying to figure out does this mean we're entering our end of year rally i mean what's what's going on here is this goldilocks do we have we have dave's backside but is this goldilocks do we have you know is? Are we going to have this incredible soft landing that everybody's

hoping for, the Fed and the Treasury? And my answer is no, still no. I don't see it. What I saw last week was weak economic conditions, more data coming out, just like Mike said, that shows that the economy is weakening. You cannot have this skyrocketing of rates without some sort of impact to the economy. It's going to happen. It's happening. And it's happening in the consumer level. We've seen that the subprime lending category is starting to get in real trouble. And you're starting to see defaults across the board there. And the funny thing is you're starting to see a lot of people who had graduated out of the subprime category now being recategorized as subprime because their credit rating had an

immediate positive impact from the stimulus checks. and those stimulus checks have run out. And now, you know, those same people are taking on debt again. And so their debt to equity ratio has raised to the point where they're back in the subprime category. So that those are just small things are happening that you're not hearing about much about it on the street, but it's reality. So you take the the negative economic indicators and then you take the Fed statements. Powell was pretty scripted this week. I mean, he stayed to script amazingly.

And, you know, Mike knows this that I don't feel like the reporters really pushed him too hard again. You know, they didn't ask him too many difficult questions. But, you know, the reality is he did remain on his stump of the rates are what they are. We believe at this point they're high enough, but we're not ready to give any indication that we're going to be lowering them anytime soon. We could raise them again, depending on what we see. Going back to the 80s, we saw jumps in inflation, and so they had to keep fighting it. So now, all of that said, economic indicators coming in week, and then you have the Treasury, which was really the big event last week. That was the huge event was the announcement of the

fourth quarter refunding of the treasury. And when Yellen came out, well, they just put out their statement actually. And they just said, we're going to issue less than the street expected. Not a lot less, a few billion dollars less, but it was less than the street expected. So that was good news to the street. But there were some nuggets in there. There were some really big nuggets in there that people kind of glossed over. One of them was they reserved the rights to modify or adjust this amount that they're going to do at least one more time in the quarter. So that's kind of a get out of jail free card where they can just issue what they want when they need to. That's number one. The second thing is the statement said that

they're nearing their finalization of the 2024 bond buyback program, which is in no uncertain terms, it's yield curve control. They're going to be buying back bonds that are off the run. We've said this before to some listeners who haven't heard. On the run means back in the day, you'd have the bond traders and Dave and Mike love these guys. It was like walking into a football locker room when you walk on the bond desk. These guys were huge. They had these big reams of paper that were the bonds. And especially in the mortgage backs, they were just flipping through these reams

to see where the bonds were priced for that day because we didn't have the kind of pricing that we have now. We didn't have dynamic pricing. So those were the bonds that were on the run. So if somebody wanted to sell you something that wasn't on the daily run, that was like, what? I don't know where to price that. That's illiquid. I have no idea. And you'd have to consult and kind of figure it out. Those are off the run. So those are kind of the illiquid ones. Well, that's what she's talking about. The ones that don't trade that much.

Well, of course, they're going to go buy those because there's not a lot of liquidity. And that means that there's going to be a larger trading margin, the spread, the trading spread. And so that's where they're going to enter the market and put liquidity in. So that's, Dave's got something to say. Yeah. It's also curiously, because of the lack of liquidity, likely to impact public notions of interest of long rates more than if they were buying beyond the range. It's a liquidity arbitrage brought to you by our friendly traders at the Fed. Exactly. And so what they're saying is, the bottom line, you put it all together.

What they're saying is the treasury is not comfortable with where the rates went. It was not their decision. This is not, there was not driven by them. It was driven by the investors. And the investors said, wait a minute, if you're going to, you just took on true $2 trillion of debt in the last few months, how much are you going to issue next year? And so rates spiked. We talked about this. And now the Treasury got really uncomfortable with that. And they're scrambling, doing everything they can to indicate that, no, it's not the case. We've got it all under control. Spending is under control. It's not under control. Go look at Washington. We're in the middle of now

we're entering another war. So the spending it. The spending is not under control. And so they know that and they're trying to manage expectations to make sure that that long end of the curve doesn't spike up. The yields don't spike up on them. And so that's what the messaging was last week. And the market took it as, oh, Goldilocks, we're going to have the soft landing. Life is great. And I'm sorry, I just don't believe it. I believe it was a bear rally and we're not out of the woods.

That's my take on it. Go ahead, Dave. So bear market rallies are sharper than bull market rallies. Bull markets climb a whirl of worry until you get to FOMO, and then you see the parabolic top. When you see incredibly sharp rallies from the midst of a bear market, incredibly sharp rallies, the sharpest always tend to be the short covering. Always, it's the way it is. I know Michael not about this. We've seen this story before. When look at the the rally from and and by the way from five percent to four four and a half percent is a big huge move i mean the i mean the long bond's not supposed to have the volatility of bitcoin but here we are you're saying long bonds are trading like all coins it's it's and that came from and Dave, that's the good point. It's coming from the hedge fund shorts, right? And so you had is people like Mike saying, but yields have topped,

the Federal Reserve waiting for a moment, waiting for some economic weakness, and then throwing on the gasoline on the fire to screw them. It's a shock and awe campaign because they know what I've been saying on this show consistently, which is long rates that go past, go to a normal curve in this environment would basically be unsustainable from a federal deficit point of view. They know it. They've always known it. They will always will know it. And so do I think that that rally in bonds means we're out of the woods? Absolutely not. Do I think that that rally in bonds means we're out of the woods? Absolutely not. Do I think that that rally in bonds cements my thesis that there will be yield curve control and why I think Bitcoin will outperform and do so quicker than usual if there is a stock market meltdown?

Yes, because of course, everyone knows in 2008, it took three months for for gold to delink and start motoring higher epically. Everyone knows that in the Great Depression it took a couple of years for home stake mining. Gold was confiscated, so we can't really use gold to delink and motor higher. So what's the next iteration going to be? Is the next iteration going to be a month? Is it going to be a week? Is it going to be longer? I mean, it depends how people are positioned, right? I think the reality is, is the correlations go to one and a sell-off because people sell what they can sell.

But once you get past the have to sell, you will see a major delink. And that's been my thesis all along. Yield curve control is part of it nothing that happened last week disabuses me of that notion if anything it cements it and i think people should be aware that the fed knows they're trapped they're going to talk down the long end but i don't think they can afford to raise long rates with a flattening curve with the amount of debt that's going on and so they kind of know it. So is this a pause? Yeah. Will there be a pivot? Absolutely. Is the market going to get absolutely thrashed when they pivot? Yes. And that's something we've talked about many, many times. So every time someone says,

oh, Weisberger said the Fed's going to pivot, they're going to be bringing rates down. I should buy stuff. It's like, well, be very careful what you buy because, I mean, Mike, how many times out of how many times has a Fed cutting cycle coincided with a stock market correction? Every single time. There you go. All the times that I could buy. That's my thought. I love what you said there, Dave. Yusko always know, in these times, people sell what they have to, never what they want to, right? And I think that's a great point. And there, I brought up the article alluding to exactly what you said, James, right here on Bloomberg, if I can get it up. Hedge funds catapulted treasury shorts to record at wrong time. So basically, they piled into these massive shorts on treasuries right at the bottom before the bond sale and weaker job data that you talked about

came in. And then you see TLT with this massive bounce, right? I mean- Yeah. Remember, go back to 1998. This is a similar trade, not anywhere near the same magnitude, I don't believe. But that's what the long-term capital management, they were playing a basis trade between bonds. They were basically short volatility. That's what these guys are doing. I think that's a good one to piggyback off of. One thing I have to point out is I wrote about excessive treasure shorts back in March. It's been the case all year.

They're doing the basis trade. Shorten futures, trading and doing – I used to trade basis. That was a good trade. I used to be able to scalp money out of that. But the key thing I think to point out is So that's a key thing. Never forget the treasury is treasury markets, the most leveraged market on the planet. Um, and a long term capital just reminded of that. Now that was one of those periods I did very well. It was just watching what was doing out and going on with clients and with real money. And we just kept buying back out of the money back month, year-to-hour futures. And some of those, they expired and then they went up 10X when they went under. It just, you had to ride through the trade

like we're doing right now. I think we're just riding through the irrational part. And I think one thing we do agree on is that we're probably not out of the woods. And one thing I do want to mention with Dave mentioned, and we kind of disagree a little bit is since I've been in the business in the eighties, every single time that yields go up and people think they're going to continue to go up because increasing U.S. deficit, they've been wrong. And that's just a lesson I've learned by losing money. And then also making money with clients is every time you get that uptick in yields, but people think it's going to be because of, Oh, the excessive U.S. spending. It turns out it's the opposite. The difference what's happened this time is we've never borrowed this much to expand the economy without a recession or war. So I think that's what's tilting over. And it's because-

At this deficit level, right? At this deficit level, almost 8%. Now it's dropped a little bit since students had to start paying back. But the key thing is what's happened if the market, if we hadn't done that this year and the stock market had gone down a little, would the Fed have raised another 100 base points? To me, that's the lose-lose that was pointed out in our economic team. The key thing they point out this morning is the tone in economic data has now shifted from how hard of a landing. ADP data, jobs week are just getting started. So I look at this as at some point within a few months, we should see that normal divergence. So normally what happens in recessions is that risk assets go down and bond yields go down too. Yeah, that all makes perfect sense. But then, Mike, you said

obviously that in your call this morning, there's an expectation that yields kind of, this was just a normal correction. They'll probably rise again, but this is a pretty big, quick drop. So the difference, I think, I didn't really say the thing is rates will stay high. Rates are the short end rates, 5.33%, 5.5% market. Think of what that's doing to the rest of the world. What's the rate in Japan, Germany, and China? The next three largest companies, they're fractions of that. So that's the Dow crushing rest of the world what's the rate in japan germany and china the next three largest companies are fractions of that so that's the dollar crushing it and it's a problem there but it's yields they're starting to decline now yes this might be just short term

maybe it was just a little short covering blip but to me this is you how it happens you have to get extreme levels you have to people have people who've like headed the biggest banks and will say oh they're going to six percent that's usually what happens when they peak. And I think they have peaked, but also I have good confirmation from things like crude oil. It looks like it's peaked at 95 and it's continuing to trade lower. So these are just, the thing is it's taking so long.

Of course, that's what usually happens with most of those market people and type of cases. We're very impatient, but this has been a very taxing test of patience. But now I think it's the delayed effect, the delayed reaction that's really kicking in. And and okay right now we're seeing a little bounce but this first month of you know essentially first couple first month of the new quarter i'm sorry the new first week of the new month to get that bounce is quite suspicious for okay good if we can feel it seemed came at the

same level levels as we get through thanksgiving good luck. But as we tilt, and if we do what I think we're going to do, go back to a normal recession, equities go down, and people are going to realize the Fed's not going to ease to help you like they have forever. That is the real world of kicking in of the big reversion I've been looking for. Go ahead, James. I think that would, that makes sense. And Dave, I know you've got to kind of respond to that, but the quickly, I kind of feel like the market, my sense is that the market took what the signals from the treasury and the fed last week as to they're not comfortable with yields on the long end being at the rate that they got to. And to they're not comfortable with yields on the long

end being at the rate that they got to. And so they're going to do what they can to manage that down. OK, so if you think that the Fed is not going to they got a little bit out of their control of where the long end of the bond went. And so they understand that. And they said, well, the market's kind of in control of the rates. They even admitted it last week or two weeks ago. But I feel like my sense is the market got that message and that the treasury will manage this. And so I think, though, that the treasury is kind of playing chicken with the economy. They're saying, well, if the Fed is going to have to stop raising rates here, then we can keep issuing T-bills. We're going to have that runway. They've got this runway that they're operating on right now. And that runway is the reverse repo. And there's a trillion dollars left there. And they're going

to continue on that runway until that's drained. And then they have nowhere to turn really except change the rules of what banks can own and how much they have to own in their reserves. Right? So that's the only kind of, that's their only path in my, in my mind, maybe Mike and Dave have a different view on this, but that's it. They're playing with that path right now. And it's, it is dangerous, but I do believe that they're, that they will go enter the market and use yield curve control to be sure that it doesn't get out of control on the long end. And then the deficit blows out to something you can't even imagine. So that's just that,

that's my kind of take on it. Dave. The word that I've been using on this show is manipulation. Manipulation is inevitable. I framed it very simply. We have two choices if you're in the Federal Reserve. Unless the government changes and decides to do something crazy like actually care about economic growth instead of absurd Elizabeth Warren-style social justice and government control, and you deregulate the economy to unleash American entrepreneurship and actually grow a way out, which is a choice. It's not a

choice this government is going to take. There are only two choices. Choice number one, austerity, and not going to happen. Choice number two is Japanification. What is Japanification? It is a manipulated bond market. And when traders are playing in a manipulated market, they parse every single word, every single action of the Fed, and they don't fight the Fed, but they trade around it. And that is what you're seeing. When you compare us to Japan, I mean, Japanese rates are absurd. There's no version of the world where a debt to GDP of over 200% should yield 1% yields, particularly, you know, real yields, because real inflation in Japan is

finally kicking in and people are pretty unhappy, but they're doing it anyway. They've been kicking the can successfully for 30 years. If you're a politician in the United States, if you see Japan was able to kick the can down the road for 30 years, why wouldn't you think, well, hell, I'll be done in this job in four or five years. I mean, I could kick the can as good as anybody else. Why wouldn't I? And that's what you get. And so traders know that. And it's important to understand that. So what does that mean?

What that means is they don't want to be overt about it. They want to be as clever as they can. They want to be as backward. You know, they want to be as, you know, obviously, you know, QE has a stigma to it, but less of a stigma every time they use it. Also less effectiveness every time they use it. But that's a different story. The truth is, is we're talking about a treasury market that's manipulated market, and we kind of know that. And I don't think it's remotely surprising. And we're entering 2024 very shortly. We will soon be in a full-blown presidential and congressional election cycle. And what have I been saying for the last year about that? If you think the government is going to just meekly go down and say, we're going to enter a very deep recession just as a presidential election is unfolding.

I mean, it might happen, in which case we all know what happens when that occurs. You get massive turnover. But people aren't going to go down without fighting. And if you think all the levers of power aren't going to be aimed at preventing that, you know, you're nuts. You're just nuts. I mean, you're asking people to act against their own self-interest. They're going to act in their self-interest. So when I see a rally as strong as we saw, not once but twice off of the 5% level, yeah, I think it's being manipulated. Absolutely. Yes, I think they are bear market rallies. Absolutely. Mike is right.

The reason he's right is because traders are conditioned to not fight. Well, the problem is, and comparing it to Germany and Japan are fascinating. Japan couldn't do what they were doing as the global world's reserve currency. Nobody would use the yen that way. If you look at the volatility of the yen versus the dollar on a long-term chart, you'd see why. It's a big deal. Germany has a dramatically lower budget deficit. I hadn't looked it up.

I was going to, Mike. You probably have the best data on their budget deficit and their amount of debt to GDP. But it's a lot lower than ours. Some of these other countries, I can't explain. You can't explain to me Italian or Greek yields being in the same level as the United States. I mean, I know why, but I mean, it's just, it's illogical, but we have a lot of illogical things here. The point from investors' perspective is watch what they're doing, not what they're saying. 65% is Germany, and U.S. is about double that.

Yeah. That's the GDP. Right. There you go. By the way, Germans are – and here's the funny part. The Germans are more uncomfortable with 65% than we are at 130%. So I'm glad you tell. I want to just piggyback on that a little bit. That's something I've always learned. I had met former bundles bank president David Ising once,

and it's been in the culture of German culture is never as fighting inflation part because it happened in the Wyoming Republic. We just got that here in a significant way and on a global basis, maybe not as bad, but that inflation we created, being we all thought we were going to die three years ago, it was somewhat worthy. And we've all learned that lesson. And that, to me, is one thing that's been the key thing the market's missing when you're trading risk assets

that have been pumped up on zero interest rates for almost 15 years. Japan, it's been 20 years. Is that Fed that eased and helped boost risk assets and over over over pumped inflation their main mandate will never ease with the ease they haven't passed until it gets that bad because of the lessons we've learned it's just typical human nature and that to me is the stage we're in right now the market hasn't figured that out yet in equities but i think they have in bonds and play things like cryptos and i'm not just cryptos bitcoin but i think that's the key thing

you mentioned we see what's happening it's just panification that's been my bias for decades i don't see why we're going to stop that trend right but the point is is that that absent short term bail everything out throw everything need to sell uh collapses that is literally the environment that bitcoin was built for. And make no mistake, when you have people like, you know, Stanley Druckenmiller experience, you know, basically stating some notion of FOMO. I mean, he didn't quite get FOMO because he's not an idiot. But the fact that it was very, very close to that, you know,

Paul Tudor Jones has been saying it. Larry Fink has been saying it. There have been a lot of very senior people talking saying it. Larry Fink has been saying it. There have been a lot of very senior people talking about it. The fact is, everyone, the Bitcoiners like to use the expression slowly then suddenly. The truth is, adoption is very important here. As more and more people decide it is an asset that should be diversifying, the supply at the same time is getting smaller and smaller. And the narrative, and we live in a world where narratives are driving behavior. I mean, personally, I could go on for an hour or two or longer about how bad

the fact that some of the narratives are screwing up people in the world. I mean, my wife was actually threatened this past weekend because of a narrative that we're not going to talk about now because this is a macroeconomic show. But the fact is the narrative of the economy matters. And there are more and more people buying into the narrative that there needs to be a net, that the fiat system is a problem. And that even if you don't believe it's a problem that you need to hedge against it, it matters. And that narrative could gain power very, very quickly. Because think about it this way, the people who are below the age of 30, all kind of believe what I just said is true. And it is it is a big deal. And remember, you know, we all think the spot ETF is the catalyst,

is it really the catalyst? Or is it really the release valve to allow people to get into it? I think it's more the release valve. I think it so. So it's kind of an odd contrarian thesis. But the fact is, is the narratives we keep talking about, you toss off the word Japanification as if it's like, it's not it. The United States has been associated for its entire history with the notion of free markets. You've just said, I've been yelling, James is saying that we are no longer in a situation where our government believes the free market can determine the price of the most important price that can be set, the price of money. We are all saying the same thing. It is no longer a free market. And what does that mean? And so, yes, it's a bit of a polemic for a Monday morning.

I'm sorry for being so heavy. But the fact is, when the government decides that markets can no longer determine the price of money, then markets are no longer free. And people will look at that. Now, is the United States market freer than most? Yes, absolutely. Yeah, maybe. But Dave, I got to interject there because you talk about free markets and you talk about ETFs. Well, I don't know if anyone saw this news, but China does not want to miss out on a Bitcoin spot ETF. And now in Hong Kong, they're talking about launching a Bitcoin spot ETF specifically ahead of the United States getting one. And we also have, you know, Janet Yellen to meet China's vice premier ahead of Biden. It feels like we talk about turning Japanese, but it feels like the Chinese are trying to turn into the old America.

Well, I mean, China, it has always been until Xi for the last couple of decades. They've tried to be more capitalist than us in the economics and at the same time authoritarian. So authoritarianism doesn't mean government controls the economy. It means government severely punishes people who go off the rails where they really care. Now under Xi, it's become more government control than less, but still they haven't ignored human nature. I mean, you don't have people talking about paying your fair share of taxes in China. You don't have that.

There's no Elizabeth Warren saying we should pay more, rich should pay more. If you're too rich. That's because her team's already in power. The level of control there is absolutely astounding. Did you guys see the article this weekend? Maybe you can pull it up, Scott, about the WeWork app. And it's warning users, if you are within 500 feet of someone who has a low social credit score, that you should leave the area.

You should distance yourself from that person. That's the level of control there. So make no mistake, that control is psychotic. And if we're not careful, it's coming to the West. So we have to be aware of that. Did you see my favorite Black Mirror episode? I'll have to look up the title, but they literally did an episode about this years ago. I was still living in New York when we saw it. I'll have to look it up. It was literally about a future

where your social credit score is determinative of your life. And it was very fair. How do they do it? They do it by shutting off your money. That's how they do it. Your money is not good here because your social credit score is too low.

Sorry, you cannot buy that. How else can they punish you? I mean, that is too low. Sorry, you cannot buy that. How else can they punish you? I mean, that is the... The ultimate. The European CBDC future in a socialist or communist country. Exactly. Which brings us all the way around,

obviously, to Bitcoin and why it's so important. And that's why areas that are experiencing super high inflation but bordering on hyperinflation, I mean, it's a stupid economic definition that it has to be. What is it? 50% month to month inflation for it to be hyperinflation.

That's just ridiculous. I mean, look, if your currency is devaluing by 100% a year, that's hyperinflated. That's ridiculous, right? But you've got areas like that who are unbanked and they're using Bitcoin as as an escape. Right. And so to Dave's point is it may be these ETFs that it's an interesting way to put it, Dave. And I haven't thought about it in those terms that it's more of an escape valve because there's so much pent up pressure for for investors to own this. They just have not been able to because they see it now we can say that but i can tell you i talked to a few institutional investors last week that are still just completely clueless about bitcoin and they're even invested in it they just don't do not understand how it's different they're they're like They're excited about the crypto world again. And it's astounding.

What we have to get to is a better understanding. But the people who need it, they understand it. They get it. It's the people who don't need it, right? And by the way, if you believe that social control is the way of the future and what you want to achieve as someone in the government, what is the single asset that you care about extinguishing in its crib more than any other? And that explains what Caitlin Long says and has, I think, fairly conclusively shown the governmental desire to try to bring Bitcoin to zero a year and a half, two years ago, which of course has obviously failed. But it's not because these people are Luddites. It's not because these people are dumb. It's because these people, you know, they're sitting in their, their whatever studies class in whatever schools they were. Now they're all in the Biden

administration and they're saying, we're going to ultimately try to control the populace. We need to take over money. We can't have this thing. Atlas shrugged. We're at Atlas shrugged. But Bitcoin is the opt out. And I know I'm starting to sound like Robert Breedlove or Dan Hell or any of these guys, mostly because I agree with them. But the reality is, is only a fool ignores the evidence in front of our own eyes ignores the evidence in front of our own eyes. The evidence in front of our own eyes is that there are people, the people who most care about controlling money and controlling the population are the ones who are the most anti-Bitcoin. I mean, our favorite, you know, final boss picture. What does he do?

Well, he's at the Bank of International Settlements. You know, what does Christine Lagarde do? I mean, you know, it's the villains are the people who have an incentive to want to squash economic freedom. And so, you know, you bring it back to trading. Those are the same people who are, at least in our government, are controlling the price of money. And you can see what's happening. Now, you could take this two ways, and I want to bring this down to a trading situation. You could take it two ways. One of two things is going to happen. Either number one, they're going to succeed, which I think is the likely scenario. They're going to keep a lid on long rates. They're going to

quantitative ease and risk assets are going to, at least some of them, are going to get a bid potentially off of a lower base, but they're going to get a bid and that will help a lot of the crypto market. But there might be carnage before that. Or number two, you're going to get a UK Soros moment where the world says you can't do it. And and you get a big break and you get a bit and you get a big break in the economy. You get major change. But for those people don't know the analogy I'm talking about, I'm talking about how Soros effectively pushed and won against the Bank of England to devalue the British pound back, you know, sadly, I was alive and on a trading desk at the time, so I remember it. And it was unthinkable until it happened. Now, the Bank of England is easier pickings than the Federal Reserve, no doubt. Yeah, I mean, to be fair, the U.S. dollar is the global reserve currency.

Well, that's right, which is why it's unlikely. But if it happens, it would be catastrophic. It would be catastrophic. Do I think it's likely? No, I don't. I can't hear my things. Well, exactly. So I'm thinking, first, China. I just brought up an article my things. Well, exactly. So I'm thinking first China. I just brought up an article I wrote, Atlas Shrugging in China.

We all know the book Atlas Shrug. It's very similar to what happened in that book describing what happened in Japan, which I remember being in trading pits for and working for Japanese firms, and what happened in Soviet Union. It's all happening. It's so classic. It's just all the economic models are being tested right now in China. And it all all happening. It's so classic. All the economic models are being tested right now in China. And it all has to do with simple reversion. $17 trillion of GDP maybe goes back to $13 trillion. Japan has been unchanged at about $4 trillion for 30 years, about. But a key thing I want to point out is, just to push back a little bit, is there's only

been minorities in this country that try to push Bitcoin to zero. It failed, but it's perfect. We need to see that stuff because they're top up. They're just, okay, there's some of them are leaders, but in this country, it's just checks and balances are awesome. In China, it's one person. It's not China anymore. It's one person. In Soviet Union, Russia, it's one person. in iran it's basically one person that's the big difference and the key thing i want to point out is being oh and we're open this one problem with bitcoin is i agree with that is there's 30 000 competition competitors and wannabes maybe one that matters or two it's the the in the the enduring trend in the increasing proliferation

of crypto dollars if you're in china now you and and any other country will has melting currencies if you can get access to the buck first you can start there and right away you can get a decent crypto dollar you can some of them earn interest now get five percent let's look at program you just had um scott the most profitable company in the planet now per ploy is tether but i think that's the key thing to remember is if I'm right about this normal risk asset correction, the problem with Bitcoin still is it's 3x volatility of gold and S&P 500, but dollars, it's different. So I still worry about that. And we haven't had that yet. We're still S&P 500 is up 13% of the year. It's still, as we can just say, well, everything was down last

year in terms of risk assets and everything's up this year, except for bonds. So what I think is going to do well next year is bonds, gold, and we'll see how Bitcoin does. But remember, it's already had a decent GBTC up 200% in one year. Is it going to do that again next year? That was a great ARB. That was not just ARB of the year, 50% discount, not 13, but that's over. Most of it's over. Maybe it goes to zero in terms of the discount. At some point, it will, but we've already had that. Now, if we tilt over to that normal recession where you take wealth and you make people lose wealth, it's always happened that way, and we've had the biggest pump in wealth ever.

That is where I'm still a bit concerned about the Bitcoin side, but it's dollars, treasuries, and gold that still, remember that. We don't have dollars. I don't, remember that. Go ahead. Did you see Berkshire Hathaway? Yeah. High cash level. So it's just what Druckenberg was doing. Everybody sees two notes at 5%. I said, thank you very much. I can lock that in. But the key thing I want to point out is gold is basically a fraction from its all-time high. Bitcoin's still quite well below its all-time high for a good reason. We were losing you there for a second, but yeah, we got it. Yeah, here it is. In case anyone was wondering what I was referencing there, it should be coming up and it's not, but there you go. Warren Buffett's Berkshire Hathaway sits on record 157 billion cash pile. They've been

selling massively. Druckenmiller doing the same thing. To Mike's point, that doesn't mean they're even bearish on stocks. It just means they're probably taking the free 5% and running with it when you can sit on it. From a macro standpoint, that's bearish. That's just the way it works. They're never going to say that. They don't say that. But I also remember 2009, it was the opposite. That 6-6 low S&P.

Warren Buffett was over. No, this is a buy. He was clearly sticking his neck out. But when you see high cash rates, that's just classic. You can't say sell yeah well speaking of uh things that uh are not bearish at the moment this is the crypto market right now apparently uh market i was going to point out that you know xrp look at the xrp bump and look at ether yeah you know you're going to have multiple guests this week talking about the charts. I mean, is this alt rotation?

I mean, yeah, probably. There's a lot of extra market cap though. I mean, of course that comes with prices going up, but it's, I think the market cap's at 133 trillion up 1.5% just today. So we've talked about de-linking of Bitcoin, but the re-linking of altcoins to the NASDAQ is also very clear. And the Russell. The Russell had almost 3% on Friday. Big relief rally. We all know what a relief rally means and what I think, so I'm not going to go through it. I think that this is the relief rally from the last leg of Bitcoin dominance.

And it probably has some legs, but I don't think it's the quote alt season that people- I agree. But what's notable is that it's been a very, very long time since Bitcoin went sideways and altcoins actually went up during that time. I said 133 trillion. Someone just pointed out I meant 1.33 trillion, guys. I was talking about the crypto total market cap, not133 trillion. Someone just pointed out I meant $1.33 trillion, guys. I was talking about the crypto total market cap, not $133 trillion. We might not be here if that was the case. But I do want to say, though, that it does show, I think, whether it's FOMO or not, it shows renewed confidence in the crypto market that Bitcoin made a big move up, traded sideways, and the money actually started flowing into alts. Because even when we went from 15 to 20, it didn't happen. 20 to 25, didn't happen. 25 to 31,

didn't happen. And those were always the telltale signs of a bull market was that there's some new capital and interest for better or for worse. I love this one, WeMix, 15.46%. I mean, I haven't even heard of some of these things still. I feel like I'm pretty in it. Although we did make the joke last week that WeMix sounds like the bishop from Princess Bride. WeMix, I make you a WeMix of a song. But yeah, so at least we can make fun of WeMix while we're at it. But I mean, what do you guys make of the fact that we're seeing this much green in crypto? I think it's people said it's like everything else. It's speculative animal spirits.

I've said it a billion times. Speculators drive the market in the short term. Investors drive the market in the medium term. And asset allocators drive the market in the long term. And in the short term, you can get a lot of upground emotion a lot of noise and we've seen it i mean you know mike blithely tosses off the s&p up 13 you see the russell what it did last week you know at the end of the day people you know get out of their foxholes and want to play with it and traders uh follow momentum and and play these

sorts of trades i mean look you know we my company, CoinRouts, we are a trading system. And I'm telling you, I know what our volumes are for our clients in the aggregate. And Bitcoin makes up a much smaller percentage of the volume than its market cap of people trading, because there's more opportunities to trade in and out of alts and trade arbitrages between perpetual swaps and spot etc etc or if you're in bitcoin between futures and perpetual swaps and futures and and spot all of this stuff this motion is creeping back in now volumes are still nowhere near where they were two years ago but they are certainly approaching that and this is it's a volume play uh and this is the toe being dipped back in the water post the 2022 hangover of of you know multiple catastrophes and multiple scams and

i think it's the beginning of a trend now that, that doesn't mean the trend is up. That means the trend is more interest. More interest is all that I think that that shows. The interest right now is manifesting is up. But if we see long rates start creeping back toward five and people think the Fed is losing control, then that will be problematic. And that's what Mike is describing in his case for a reset. You know, look, people have to live. And there are lots of people out there that professionally trade this stuff, not just crypto, but everything. And they're going to trade this stuff and they're going to invest this stuff on the margin. And so unless there's a cataclysm, this stuff continues. And the issue really is just what will they be doing? Will they be taking 5% and taking their bat and their balls and going home, which is the Mike scenario, or not? And look, I've said it before. There are lots of people who can't.

There are ones, if you're Berkshire Hathaway, you can because you literally don't care what people think you do, what you think is right. But if you're a pension fund, which has an eight or you're at worst, you're a fund manager being employed by a pension fund, which is an 8% actuarial target. You literally can't do that. And so, and you go to the rest of the world, you have similar dynamics, different names for it. That's really the issue. You can't do that because you have committed future obligations. Whereas the fact that Berkshire is sitting on that much cash, their business is to buy companies. And they've been selling. Yeah. They're waiting. They're doing the smart thing. They basically say, look, the other stat I saw is bankruptcies are up, what, 63%?

Yeah. They're going to buy up everything for pennies on the dollar. Right. So if you're Berkshire Hathaway, you're sitting on a big cash pile, then the smart move is wait for the bankruptcy filings and wait for businesses that you think are good businesses that you can infuse cash into and make them good businesses again. Right. So it doesn't actually mean that they think, although they probably do, that stocks are going to crash and they're just going to go on the open market and start buying a bunch of stock when they're at lower prices. To your point, if they can buy companies in bankruptcy. Exactly. If I were sitting there,

the two greatest benefits of financialization the world has ever seen are Buffett and Munger. They love financialization. They love the fact that asset inflation was the dedicated policy of central bankers around the world for 30 years and that's why rates were kept real rates were kept low. They love that. So, what do they want? Well, they want to see companies that have decent businesses that are on have bad cash flow that they can pick up cheaply and then when financialization the the the lever pushes cash flow that they can pick up cheaply. And then when financialization, the lever pushes back to that,

they will make not just market gains, but outsize gains. That's what they're doing. And it is completely rational. It is what I would do if my job was to, you know, reap financial windfalls on, you know, on the back of buying companies, that's the best way to do it. And is it, have we had a depression? No.

Have we even had a recession? No. So you build up cash now in expectation that when the recession happens, you know, six months in, a year in, you can start buying things. That's logical. Right? I mean, Mike, you mean you see it any other way? I agree with that. I'm concerned that we have become so addicted to something that's never happened in history. And the band-aid has been ripped off so fast. And it's classic human nature to never expect what's supposed to happen, what normally happens, what the rules of economics say should happen to happen, particularly when you're in the middle of it. And that, to me, is where we're going now. And it was one of the things I'd love a year from now people would say to me or two years from now.

I'm like, oh, McGlone, I only made 10 percent in two notes and everybody else made 20 percent in the stock market. I fully expect this is something I'll be writing about and discussing the rest of my life that, yeah, I'd rather be like trying to take the risk. I'm taking the risk of being what Roger Rapson said when he gave a speech in 1929 in September in Massachusetts. He said, I will repeat what I said to you this time a year before and the year before. And I will point this out. We are at the most elevated level of equity and risk assets ever and maybe a hundred years and for for good reason. But that reason's gone. And we're just overdue for a normal recession. And I'll just point out the last

two recessions, stock market, S&P 500 corrected 50%. Everything in between, what people are doing, I'm not smart enough to figure out, but it just did. And I don't see what's going to prevent it from doing that this time. I just have to say something really quick. And if you're wondering what I've been doing over here, you guys talked about Munger and Buffett. And if you guys didn't see the Wall Street Journal, just interviewed Munger and of course asked him about Bitcoin and man. The price of Bitcoin has been, you guys can just look it up, but the price of Bitcoin has been rocketing higher again. Is that something that concerns you? Of course it concerns me, blah, blah, blah. He goes into saying that currencies only count if they're issued sovereign. But the very last line, when you start creating an artificial currency, you're throwing your stinkball into a recipe that's been around for a long time that's worked very well for a lot of people. Throw in your stinkball. Now, Scott, bring up my tweet from Saturday morning.

Right. And I reposted it. James and I were saying the same thing. I mean, look, the reality is the recipe is financialization. Look at the percentage of the S&P or of the economy of financial firms. Look at every single metric, price to sales, price to book, everything. Everything has gone crazy. Why? Because of monetary printing. That's the recipe. You get to make money. And, you know, if all you do with your money is made by two things, their money and people don't know this about Berkshire, but maybe they should. Berkshire Hathaway is probably one of the great derivative traders on the planet. Yeah. When I say great, I don't mean great in the sense of their time in the market. I mean, they bully people and they abuse derivative markets and they take advantage of every single thing they are the hardest to negotiate with every derivative desk has to deal with them because they're so big but they absolutely can't stand dealing with them because they're so damn rapacious and you know it's it the hypocrisy of

some of their public statements is funny but the reality is if you're making your money based on derivatives, financialization, and wild valuation swings, which are all hallmarks of the fiat regime, that's a great recipe for Munger and Buffett. It's a pretty horrible recipe for money supply pump, the average money supply annual change since 1960 has been 7%. Right now, it's minus 4%. Now, say, let me see it change. James, there's a recipe. I got it. A recipe. Yeah, I mean, and that's the point.

It's clearly a good recipe for about 1% of the people. I mean mean of course the top 10 do just fine because they have assets but the main street like dave said gets slaughtered in in these kinds of situations and we're going to see it play out here we're seeing it play out perfect oh it comes here to 957 go ahead dave no that's it i's it. I mean, look, at the end of the day, if you wanted, if you had a whiteboard and you said, okay, what am I going to do to increase wealth inequality? What would you do? And what you would do is you would have loose money and high regulations to create moats for big companies to keep out small, decrease social

mobility. And at the same time, you would flood the system with liquidity, which will drive financial assets up so the rich get richer and other people don't. Well, we did that. Then we, in the pandemic, panicked because we thought there'd be mass problems and maybe there would have been. And we handed money directly to people, which let the consumer inflation genie out of the bottle. And now everyone in the world, in all the central banks, are all trying to jam that genie out of the bottle. And now everyone in the world in all the central banks are all trying to jam that genie back in the bottle. And that's the situation we're in. I mean, look at it any other way. And the Bitcoin community that, you know, I'm not even going to say the crypto community, the Bitcoin community, because crypto is more of a play on technology that will

revolutionize finance and democratize it. But Bitcoin in particular is saying, listen, we need sound money and we need sound money to happen organically from the world's periphery coming in. And that sound money is something that needs to be restored because the lack of sound money is what got us in this situation. And so you have major cross currents here. Does any of this play out in the market in the short run? No. These are long-term narratives. But what plays out in the short term is people looking at manipulation and saying, should they lose confidence? And honestly, I think Powell's done a great job in terms of keep kicking the can and he's doing it on his own because he's not getting a lot of help. He's a professional can kicker. Really. He's going to go down in history, hall of fame of can kicking.

He's going to be very rapacious or I guess for pronunciation on this show, it'd be what patients, you know, one thing we haven't discussed, maybe we'll discuss it next week is that on November 17th, we need to have a budget. What's that doesn't matter. Remember that? You remember that? What happens then and how much more are we going to spend? Because that was another can that was kicked down just 10 weeks down the road and that road's coming.

How did you describe the household equivalent? You had a great tweet on this, James. The household equivalent? I mean, it's like where we are today with the amount of debt and unfunded liabilities of nearing $250 trillion on the amount of tax revenues that we have is the equivalent of somebody with $100,000 salary and $5.5 million of debt. What's wrong with that? It's a public good. I'm just kidding. Just kidding. That's a modern monetary theory. It's a public good. And if I could print my own money, sure, I'd do it too.

That's right. That's right. I could print your way right out of it. I guess it's different for us lowly citizens of the world and not for them. Well, I mean, the highlight of my day was rapacious and we mix. It was great. Mike, you're going to be back in Miami next week? I will. All right. So we'll be back in Miami next week? I will. All right. So we'll see different people in the background. I like the energy in the New York office, though. I can tell.

It's a little different. It's great. Must be fun for you. Guys, thank you very much. Got Twitter spaces in 15 minutes. I will be back, of course, tomorrow, 9 a.m. Guys, I absolutely love Macro Monday, my favorite hour of the week. It resets me for the entire week and gets me ready.

Love your guys' perspective. And on that note, we will see everybody next week and tomorrow and gets me ready. Love your guys' perspective. And on that note, we will see everybody next week and tomorrow and in 15 minutes. Bye.