Unchained - Bits + Bips: How to Reignite Market Confidence Amid Tariff Turmoil - Ep. 818

Episode Date: April 16, 2025

Markets are nervous, liquidity is drying up, and political messaging is inconsistent at best. In this week’s Bits + Bips, the crew unpacks the shifting mood across capital markets and what it will take to bring back the risk-on energy. From Trump’s high-stakes tariff strategy to whispers of deregulation, tax cuts, and even capital flooding, the stakes are rising. Plus: What would trigger a “Trump put” Will crypto finally benefit from the global chaos? Whether the devaluation of the yuan could be a big moment And how animal spirits might return… if they’re properly incentivized Show highlights: Sponsors: Bitwise Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Joe McCann, Founder, CEO, and CIO of Asymmetric Ram Ahluwalia, CFA, CEO and Founder of Lumida Noelle Acheson, Author of the “Crypto Is Macro Now” Newsletter  Links Newsweek: Steve Bannon's 'Flood the Zone' Strategy Explained Amid Trump Policy Blitz Cointelegraph: Senator Tim Scott is confident market structure bill passed by August CoinDesk: Donald Trump's Memecoin Faces Massive $320M Token Unlock Amid Record Low Price Decrypt: Canada to Launch 'World First' Spot Solana ETFs With Staking This Week: Balchunas YouTube: The Great Tariff Debate with David Sacks, Larry Summers, and Ezra Klein Bloomberg: Investors Fear Another Big Blowup of Basis Trade as Treasuries Lose Haven Status Wall Street Journal: China’s March Lending Jumped on Government Stimulus Push CoinTelegraph: Bitcoin Shows Growing Strength During Market Downturn — Wintermute  Timestamps: 👋0:00 Intro 🥊 1:54 Who won the All-In Sacks vs. Summers debate? 🌍 8:01 Why Trump’s 130-country strategy might reshape global trade 💧 18:32 Does the market have a creeping liquidity crisis? 📈 26:15 What might actually make Trump pivot before the midterms 📉 32:18 How hedge funds are quietly bracing for more chaos 🥇 36:52 Why gold and crypto are standing out in this macro mess 🎭 40:15 How Trump’s love of media attention impacts his strategy 🚀 48:02 What might finally reignite serious crypto interest 🧠 53:01 Can investor confidence return without real economic momentum? 💣 1:08:27 Why the yuan’s devaluation could be a major crypto inflection point 🐉 1:14:02 Ram’s strategy to disrupt China’s power plays Learn more about your ad choices. Visit megaphone.fm/adchoices

It spies the most liquid security in the U.S. And they have a closing auction and the S&P 500. It closed at a 0.9% premium, almost a 1% premium to what the underlying stock were held, which like does not happen in a security like that. It just shows like there's all these things out of whack in the market. Wait, wait, wait, okay, I got to push back. Why are we even debating PE at this point? And I mean this genuinely because we are saying it's 19 and a half,

probably above the average, like, call it over the past 20, 30 years, whatever it is, but like literally tomorrow Trump could just completely want it to everything. I actually bought bonds this morning. I might have to visit a psychiatrist or something. I bought bonds this morning. I feel like I need to make a confession. This is a lot of chaos, which is distressing and it's exhausting. I imagine everyone's as exhausted as I am. But year from now, will we look back at this as having marked this shift? Hi, everyone. Welcome to Bits and Bips, exploring how crypto and macro I'm your host, James Safer,

trad by Archmister and the Lord of Blumrich Zen. Here with Joe McCann, Lord Commander of Asymmetric and Master of Bunk. Also with Noel Atchison, high seer and keeper of the crypto is Macro Now newsletter. Hi everyone. And Rahmala Wali, a maister of wealth, leader of Lumida. How's it going?

We're here to discuss the latest stories of the worlds of crypto and macro. Just remember that nothing we say here is investment advice. Check unchain crypto.com slash bips and bips for more disclosures. Crypto moves fast. It's why Bitwise launched the weekly CIO memo, a jargon-free summary of what's moving crypto markets,

written by one of the best in the business, CIO Matt Hogan. Get up to speed in five minutes or less. Check it out at bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. All right, guys. Let's get into this one. I mean, we talked a lot about tariffs last time. This is a macro and crypto podcast, and tariffs are still the number one thing on the macro stage.

I don't think anything else is remotely close to it. There was talk this weekend of an exemption on electronics, but I don't know, there's like conflicting news coming out of the White House here on this. There seems to be a lot of division within the White House itself. You know, Lutnik is saying different things than what other people are signaling to different reporters. There's a lot of, you know, seems to be a little bit. of splintering in the White House, but let's dive in here. I guess I'll turn it over to you first, Rom. Like, what are you seeing? And we were talking about the beforehand, the All-In podcast debate. Why don't why don't you get into what you thought there and we can debate? We can debate

that debate, I guess, if you will. Yeah. Well, there's definitely a lot of conflicts. And David Sacks acknowledged as much when he called it a coalition. And that's why they're differing kind of viewpoints there. But I imagine that the ratings on the All-ins show have diminished with David Sachs probably not appearing as much. So they brought him back. They invited Larry Summers, and they had a pretty vigorous debate. I'll share kind of my take out. And David, by his own admission, his lens is primarily geopolitical. So he made three points. His first point is that China enriched itself via most favorite nation status, permanent normalized training relations, and the WTO. In other words, the U.S. bringing China into the trading regime in rich China.

The term he uses, a baby dragon became a drogan. That was one point. The second point he made is that there was an expectation that China would behave better as it relates to Taiwan, human rights, in terms of meeting international standards. And then that wasn't met. the third point he made is that China never actually opened up its export market. There were trade restrictions. If you want to operate in China, you've got to have a local JV and give someone 51% control and so on and so forth.

Those are the points he made. I think he's right, actually, on those points, on all those points. Then Larry Summers, he, I don't think it was his best day or his best showing. But, you know, his point was that, you know, this was an attention. attempt to engage with China, that the alternative courses of history really can't test and assess. It's kind of like quarterbacking, you know, the day after. I don't know. In my view, I don't think he made the most complaint arguments.

And I think he should have focused on talking about Mexico as an alternative to China. It's a near short. It's in our backyard. He could have characterized the current approach as like 52 card pickup. There's no clarity. It's back and front. people are getting whipsod with policy volatility. So in some sense, they were talking past each other.

David was critiquing the past and Larry was defending the past. Larry was a part of the creation of these international structures, and he really missed the opportunity to critique the present. Noah, what's your take? I'm going to take a different tack from you. Totally agree. It was a fascinating debate. In fact, I actually listened to it twice.

I enjoyed it so much. And I agree that Larry perhaps wasn't at his best debating level. And I got distracted by the historical approach he was taking and the fairly narrow view that Sacks was taking. I say this as a big fan of David Sacks, huge respect for what he's done. And I agree the podcast is not as interesting when he's not on it as often. But what I got frustrated with was David Sacks claiming that he's focused on the geopolitics, whereas what he's really doing is just focusing on China and geopolitics is so much more. than China. I think Larry made the same mistake of focusing on China, and it's not about that.

If it were about China, there are many, many other things they could have done than take a sledgehammer to global trade than pass tariffs that are going to increase inflation for the American workers and are going to bankrupt many, many businesses. There were many more subtle ways to do so. You're right to point out that it's a coalition. There's no clear message as to what these tariffs are actually even supposed to achieve. And that was my biggest complaint about this debate, the biggest lack. There was a question being asked repeatedly in the debate. How will we know we're on the right track? What metrics are we looking for? The discussion was largely backwards looking, but the question was forward-looking, and that I liked, how will we know that this is working? And nobody even tried to give an answer. David was focusing on, we got to resure emergency supply change. I don't think anyone argues about that. But what has that got to do with throwing huge tariffs on coffee, on avocados, and on cheap t-shirts. I love it.

Agreed. Joe, did you watch the podcast? Do you have any thoughts? Because I have some thoughts like in try and I before if you want to just talk generally about the tariffs. Yeah. You know, it's interesting that one of the, my employees at Ace metric, one of our analysts actually suggested this podcast for the same reasons that Robin, Noel did.

And I have not had a chance. I will absolutely listen to it now. Certainly since you have to have recommended. it. I just think that this, I think the whipsaw nature of the messaging, you know, I was think that's the hardest part for me anyway. The debate around balanced trade versus free trade, et cetera, like there's great points on both sides. As like a trader and investor, I'm trying to navigate what it is they're saying versus what they're doing versus what they're not doing versus what they're saying and they're not saying.

And this past week was, I mean, it was all over the place, right? And then we saw what happened over the weekends. Over the weekend, Saturday we got this news. And then it got kind of reversed. I was thinking about this this morning on a walk. I was like, maybe this whole time they actually have it under control. And there is a strategy. And we are just on the opposite receiving end of this.

And we just don't get insight into what. what it is the actual strategy is because one of the things that struck me is that now 130 countries are negotiating with the United States. At least it's the latest metric that I've read out of the White House. Has there ever been a time in history where you've been able to have pretty much every meaningful country on the planet at the table at the exact same time to cut a deal? World Trade Organization, Joe, right? Correct. The World Trade Organization. which was, right, the beginning of, almost in the beginning,

but let's just say that the momentum for globalization kicked off with the WTO, which ironically had a set of, you know, the protests in Seattle, which at the time were left link anarchists that didn't want this type of thing to happen for all the reasons why populists don't want it to, or want to reverse it.

And so to me, the fact that someone like Vietnam immediately dropped to zero is telling, You say it's just Vietnam. Well, there's also, you know, they're Southeast Asia, close to China, et cetera. Them dropping to zero that quickly, as well as other countries coming to the table so quickly,

even the EU announced today that they're looking to cut a deal. Vietnam needs the United States as a customer. And again, like, the approach that the Trump administration has taken has whipsought us as market participants, but maybe there actually is a lot. longer-term strategy here that will start to unfold with getting all of these people around the table, especially with so many of them conceding so quickly because of the reliance on the United

States and also, frankly, like, the U.S. dollar, et cetera. So I haven't seen the podcast, but that just kind of struck me today that there's the craziness since April 2nd, certainly in the markets, as well as the messaging, as crazy as it may sound to me, there may be an actual meaningful strategy here that they're actually employing. That is just now starting to bear some fruit. We'll see, of course, how this plays out of the next few weeks. That's what Besson said that, hey, this is part of the grandmaster plan, but I don't think it's an organized strategy.

It seems like if a mouse bounces into a wall enough times, eventually it finds this way out of the maze and finds the cheese. And by the way, although I agree with David's points, he made a very narrowly architected argument. It's true we enriched China, but the United States and Americans are enriched even more. China stock market has gone nowhere in 10 years. Americans financialized, created wealth, imported disinflation, improved real incomes, upgrade our economy from manufacturing to a services economy, exported jobs that no one wants.

So there's a whole conversation that unfortunately never really happened there. Yeah, I would say like one of the things that was supposed to happen that David kind of did a decent job talking about was like it was consensus. Like I remember even when I was in a college like in high school, like the talk was like, you know, we're going to capitalism pill China. We're going to democracy pill China by opening markets. And like that basically never happened. And like David didn't kind of admit like even like Republicans back everyone, Democrats, everyone kind of thought that was a plan. It wasn't like it wasn't like it was a huge coalition of. people that didn't want to open this up to China. I kind of felt like from what I read, everyone kind of thought that that was going to be the case. But I think like what you just talked about, like the messaging and the rollout has been awful. Like there's an argument that we should be on-uring chips. We should be on-turing, you know, pharmaceuticals and things like that. And then like, we might be letting like getting rid of tariffs on the same things that you can make the argument that we should be answering, that they made that argument in that actual podcast

episode. And then Trump this weekend says they're going to like allow chips and other things to be made still outside and not tariff those. I mean, you have Bethent and a bunch of other people saying they want, they want tariffs and tariffs will largely be offset by a stronger dollar. Opposite happens. Tariffs will cause lower rates for, you know, for the Treasury to refinance. I mean, we did get below four, but then on the 10 year, we went to four and a half. We're sitting around 4-4 now. 30 year, we went to 5%. I mean, so like the dollar actually weekend rates went up. Like, all these things are happening. And like, there's so much mixed messaging from And it kind of went back to like David going back.

This is a coalition of people wanting different things and different outcomes. And it just seems like that example you gave Rahm of a mouse like bumping its head into a wall for enough times. It just feels like the rollout was just so bad. And like today, New York Times did a podcast with like there's a lot of businesses that are just literally going to go out of business that are dependent on, you know, manufacturing over in China that just cannot be done. I mean, even if, even if the government does, like, institute a bunch of, like, all right, the tariffs or the stick and then they do some carrots. We'll offset the tariffs. You'll get it back in, like, rates in some way. And we'll incentivize manufacturing here.

I mean, that's still going to take years to build out that type of manufacturing. I mean, I mean, like, it just seems like this was like bludgeoning the global trade and, like, seeing what happens. And I don't know. It just, I don't know. But isn't that that point? I mean, isn't that partially the point, right? Yeah. True, but it would take years, but with this kind of flip-flopping, who would invest the money and the regulatory manpower in getting permits to build a factory in the United States when two years from now, Congress could have walked all of this back and it won't have been necessary.

Yeah. I don't know if it's the point. Is it the point? I mean, on the one hand, you could say, yes, like the point is chaos agent bring markets down and hopefully bring the tenure down. Obviously, it didn't happen to James Point, you know, quite the opposite. I don't know. It looks to me like 50-digar car pickup. Looks to me like the criticism you see of McKinsey when they create a PowerPoint slide and they kind of rearrange a global trade order overnight and they say go implement

without understanding the realities of life and business and contracts and supplier negotiations and supply chains and how long it takes to move something in a container and then put it in inventory and then fulfill for a customer and building businesses around that's a know-how and training. So it's kind of amazing. because what you saw here is actually something that a far left group would do. And that coalition argument David made is a good rhetorical argument. But come on, Trump, you have to exercise leadership.

You know, once you're in power, you have to lead. The coalition got you elected, but then you have to lead. And Trump is not a guy that takes the average of all opinions. Consensus, right? Yeah, you're not the consensus builder. You know how to spell it. And we talked, we talked last week about the hit to markets from the lack of trust that there is a goal, which is why I was so interested in the debate that we were mentioning

earlier as in what is the goal. Give us metrics that we can swim towards and there aren't any. And the lack of trust, arguably, since we talked about this last week, has if nothing gotten worse. The thing I wanted to mention about, you know, Ron, when I was saying, isn't that the point? Like, I recommend everyone watch the Bill Maher episode on HBO, Max, or whatever it's called nowadays from this past Friday. I know exactly what you're talking about. Like, Steve Bannon was a guest on Bill Maher, which is saying something for where, for how, you know, Bill Maher is arguably a liberal Democrat and, and, but I don't think he's a

dummy. He's dumb about crypto. Some of the stuff he said about it is completely asinine, but that's besides the point. There's a, there's an aspect, you know, look, Steve Bannon, big advisor to Trump and influential person, friend of his, et cetera. This concept of flooding the zone is what he calls it is exactly what they're doing. And that's why I'm saying isn't at the point, like part of their strategy is just flooding the zone with so much at the same time that it's going to be chaotic. But also Trump, you know, he kind of A-B tests stuff in production, so to speak.

He'll just put stuff out there and see how people react to it. I remember when he was running for president, he intentionally. put out there, I'm thinking about Jamie Diamond for the Treasury Secretary. No, he wasn't. He was seeing how the public would react to that, right? And is it good to do that with global trade policy? Probably not. But at the end of the day, the American people were overwhelmingly voted for Donald Trump. And if that is his instinct is to go that route, coupled with folks like Steve Bannon, who have been an advisor during a long time that are telling him about this flood his own strategy, it doesn't strike me as odd that they're taking this approach

as opposed to having a little more tack and nuance with the way that they're rolling these things out. A couple of observations. One is, look, Trump is all about velocity. He's like the first founder, startup president, in terms of speed and velocity. And I think if you had a reelection a week after inauguration day, he would have won by even greater margins.

So to your point, on the other hand, this reordering of global trade, it's going to hurt a lot of small businesses, it's going to hurt profit margins. And Trump at that point became a bull in a China shop where it went from, hey, you're execution-oriented, you're trying to get stuff done, cut costs, and make an impact before the quicksand, as Vesson called it, of Washington, D.C. gets to you. He became a bull in a China shop there. And again, last week, he talked about the trade deficit as a profit and loss statement,

which is the exact wrong way to understand it. It's really the financing and the capital that the world's providing to you. And the higher it is, the better. We know it contracts in recession. And, like, I don't think there is consistency in chaos. I do agree. I think he's reasoning in real time. He's reasoning in real time, Trump, with feedback from the market and from his constituents.

But there's no principled approach. It's a battle of personality between, you know, Besson and Lutnik and maybe whom are the last person to talk to Trump. it's, you know, so it's unsettling. Yeah. So a question for you guys. Like I think the general consensus is that Trump walked into the 90-day pause. I think that was always on the table to do at some point if they needed it.

And it looks like the bond markets, the treasury markets is what caused him to do that. Though he's like, they're like walking back. That was the case. So I guess I'll go over to you for this, Joe. Like one, the first question is, do you think was the treasury market spiking to 5% and 5% in 30 year, 4 and a half on the 10 year, and just the general massive vol we saw in treasuries. Do you think, one, that was the cause of him doing the 90-day pause?

And two, that spike, there was a whole bunch of debate last week. General consensus is there was a huge unwinding of the basis trade, right? That's taking leverage out of the system in the basis trade, which one, can you just talk about what that is? There's also like these theories out there that it was China dumping, foreign nationals dumping, just dumping of dollar assets. Do you think that's true? So I just want to, you as somebody who,

who's traded a lot of these markets and knows this very well, the hedge fund side of things. Like, one, what is the basis trade? Explain why that happened. And then do you, like all those questions I ask, yeah, I'll stop rambling. But I'm just curious to hear your thought. So what is a basis trade at a high level? You have the exact same asset where you take a future or derivatives contract and short that. And then you're long the same asset, but kind of like call it the spot asset or the actual asset.

So you can do this with Bitcoin. You can short the CME future. and long the underlying asset holding spot Bitcoin. And the reason it's called a basis trade is that over time, that futures contract will settle to the price of the spot token. And so a futures contract in most cases, in general cases, it's because it's in the future, will be worth more than what the underlying asset is. That is not always the case, but for simple understanding of a basis trade.

And this is applied to basically any asset that has a derivative or a future contract or even options to some extent. And the treasury market is no different. The difference with the treasury market is that because the basis, the delta between the underlying treasury and the futures tend to be very small, hedge funds lever up these trades massively. And why wouldn't they? It's the U.S. Treasury market, right? Like, what's going to happen to the treasuries? What would cause of all there? Yeah. So the problem with highly levered basis trades is the highly levered part.

Because when a basis trade blows out or goes in the wrong direction, or you do have just forced liquidations for other reasons in a portfolio where people are like, I mean, at one point last week, gold was just selling off dramatically, right? There was a risk off event where people were. just liquidating everything they had because they had to raise cash to meet margin calls or their risk management frameworks, et cetera. That was it basically that the rumor is the same thing that happened with folks of the Treasury markets last week, which I tend to believe to be true as well because I know Rob and I were chatting about this previously, like the liquidity

available in the Treasury's futures markets is becoming much more thin. So, for example, I forget the notional dollar amount, but it's something like 20 contracts of the U.S. Treasury, like to say the 10-year, decent-sized notional value there. It's usually about 1.6 basis points to buy or sell that in the market in the order books, and that was about five to six basis points last week. That's a huge jump for what is supposed to be a massively liquid market. And you saw the exact same thing happen in the market. the E Mini contracts, which is the S&P 500 futures, which is a massively liquid market.

In fact, last week at one point, we got to six-figure top of orderbook liquidity, which has never happened before. I mean, this is extremely thin markets, which, again, if you look at something like a basis trade unwinding, or let's assume could be China, could be any other foreign entity is choosing to sell U.S. treasuries. When the liquidity dries up, the moves are extremely, are extremely violent. But then it becomes a self-fulfilling prophecy because if you're a market maker, you don't want to be making markets when it's so volatile. So you pull your inventory and the liquidity gets even less and less and less and less, which is, by the way, when you saw the move last week, you know, when NASDAQ was up 10 or whatever in a single session, a lot of that

was just driven by the lack of liquidity, the lack of positioning or the net positioning was you had a lot of people short. But when the E-min contracts are, about a million dollars at the top of the order book, which is a very liquid futures contract on the bid and the offer, the individual stock names are even less. So you have, even though, you know, Tesla and Apple and these stocks are super liquid, they're not as liquid when the liquidity dries up in things like the E mini contracts because the lack of arbitrage amongst the S&P 500 and their constituents goes away. So these types of moves are not slowing down, is my point. and it's kind of working it's the way through, whether it's the equities markets,

the bond market, it's the Forex markets, it's the credit markets, whatever. Each one of these markets is starting to feel this bit of stress, and it doesn't appear to be slowing down anytime soon, which is why I think it's important for the messaging from the Trump administration to stabilize or, you know, frankly be consistent. because right now these markets are reacting to headlines in both directions with minimal liquidity that's having a massive impact on the volatility of these markets. Yeah, I'm not in my head there.

Yeah, exactly right. And the thinness and liquidity is present in equity markets as well. Easy way to test it yourself, by the way, is get a real-time quote and look at the bid-esque and look at the quantity offered. I have not seen it this thin. in a long time. And a lot of prime brokers data and studies showing this. And the other point you were raising there, Joe, is the reflexivity of markets. I kind of liken it to a like a hockey puck on ice where if you sneeze, you can just kind of keep going in that direction. Because it's,

markets aren't pricing on valuations and fundamentals right now, right? You've got like Costco at 50 times earnings. You've got new Vena 86, two days ago, now to 110. So, yeah, if they inject psychology and confidence, markets will recover, actually. This is a confidence shock to markets. People have PTSD. And the lever they have is their control. And like you said, Joe, they're just pulling back. I do think liquidity is actually coming back into markets.

I think we saw the worst of it last Friday. That's a one to two day observation. that might change if they continue to shock markets. But we saw the safety trades blow up last Friday. We saw panic buying the GDX Miners ETF. I think that got panic bought. I think that's rolling over. I think gold is getting soft right now.

So I think these panic trades got bought. I actually bought bonds this morning. Someone, I might have to visit a psychiatrist or something. I bought bonds this morning. I feel like I need to make a confession. Four and a half percent yield. I'm like, well, they were. 4 and a percent yield this morning. I was like, gee, I'm supposed to go buy bonds given the lack of

confidence and trust the attractiveness of that yield. Others are going to do that. Real quick, just doubling back to the previous point, the political angle on this, what's encouraging is that the consensus on Twitter and the real economies that tariffs are bad. This is a big win. This is a big win for like the United States and the world because populism usually works. It's like Click Bay or like Red Meat, right? China bad, tariffs, good. That's not happening. That's not happening, which is great.

And unlike the Q4-2018 period, Trump is flooding the zone with his own brand and his own voice and the constant TV. So he is linked directly to tariffs and therefore stock markets and therefore if there's a recession, then that also. This is very different than Q418. In Q418, it was a financial markets conversation. It was not a main street voter conversation. Now it is. So if you get a bad NFP print, I believe you will have to pivot to preserve the political fortunes of his party in the midterm. So that's a constraint and that creates a Trump put.

The question is, what's the exercise price? Is it a negative NFP print? Is it 5,000 SMP last Wednesday? It's hard to suss that out. I've said before that what would move him or one, the bond market. We've seen that. And two Republican Party polls, approval in the polls. And Reuters published a poll this morning that the results came out on April 8th, I believe.

So this is post-liberation day. We showed that 24% of Republicans disapprove of the terrorist strategy, almost a quarter, disapprove. And that's just of the Republicans, of the independents who arguably got Trump into the White House. The disapproval is up to around 70%. And the midterms are coming. What about what Democrat? If they were a number more than 100%. Actually, no, so there's a small half by like 5% or something Democrats approve of this.

But there's no surprise there. The thing is the midterms. And as you said, this is going to put the put in there, especially because everyone knows that should the Democrats regain control of the House and the Senate, they're going to start impeachment proceedings almost right away. So this is something that everyone obviously is interested in avoiding. And because they don't even want to get up to anything close to that, we could see some pivot even sooner.

And I think we mentioned this even last week. There's now seven Republican senators that have. have co-signed a bill to unwind Trump's actions here. Seven's not going to get anything through. And of course, we all know that Trump would veto, even if anything did get through. But it's a sign that there isn't party consensus on this. And given the scale, given the audacity of what he's trying to do, that could also be where the Trump put comes in.

I would add. So Rob was talking about like stress in the markets. And Joe said like there's no sign that the stress is gone. Like, yes, it's lowered. and we have a few metrics I talked about this last time we recorded. I like to look, one of the things that's really indicative, actually, surprisingly so, is the percentage of U.S. exchange volume that's made up of VTFs. And when that number is like 35% or higher, that means there's a lot of people moving things around.

It's like I like it better than looking at the VIX actually or even the move index, which is the volatility of the fixed income markets. And so we went over 40% last week. Things got crazy on April 9th, which was. the day that Trump basically announced the pause when there was so much short covering into the close. But even today, volume is through the floor compared to what we saw last week. With that percentage number I was just talking about is still right around 35%, which is like very elevated. So like there's still a lot of uncertainty. And wrong with someone like it's not

trading in fundamentals. And the problem is like people are trying to figure are we just going to have a 10% across the board tariff? Or are we going to actually have like a 50 plus percent tariff on China? Because the difference between those things is like a massive delta and what like what is going to happen to the stock market. So that's the way I'm thinking about it. And I'm just looking at this stuff. And if you look at what happened on April 9th, you mentioned the thin futures liquidity.

I mean, the market on close auction, which we don't need to get into specifics on this, but spy is the most liquid security in the U.S. And they have a closing auction and it's the S&P 500. It closed at a 0.9% premium, almost a 1% premium to what the underlying stocks were held, which like does not happen in a security like that, It just shows like there's all these things out of whack in the market.

I won't say it's broken, but that auction and that market on close was broken because it traded almost one full percent higher than the underlying value. And that goes back to what Joe is saying about like there's so much thin liquidity out there. Like there's a lot of these cracks showing up. Nothing's like actually snapping yet as far as like I'm concerned to what I'm looking for. But there's a lot of things I'm looking out there where like the foundation is like a little weak right now. There's a lot of people concerned about stuff. There's another one fact for you. When you see moves like a 7% rally last Wednesday,

You look at historical time periods when they happen in, 1929, 1933, 2008 come up, by the way. I'm not saying it's those time periods. It's not, you know, those bank bankruptcies en masse. There's obviously you had some holly tariffs back then, but this is still an iteration mode. You don't have a great financial crisis. And they can change the policy and it'll go those ways. It's not that. But yeah, this is a, you know, this is where an actor can move markets, right?

Another interesting tactic, by the way, like if you've got a watch list, every morning before the market opens, look at the pre-market. You may find your assets that's on sale down three or four percent, and you can scoop it up. Simply, and to take an advantage of these, the lack of liquidity in market. Yeah, last week I tweeted about this, or maybe is my telegram or something, but the notional volume traded for SPY was the highest ever last week.

It wasn't even close. Like the previous, I forget the previous all-time high of notional volume and spy, but it just blew it away. And, I mean, you just look at the volume. It's crazy. But this is like, I guess, to the point that you were making, James, or I'm drafting off it a bit, is that a lot of the fast money traders, aka hedge funds, are trading macro products as opposed to individual names because of the lack of liquidity. So, like, if you're running, you know, a beta pod or a momentum pod and these individual names are too volatile or too wide in terms of the spread between them when you're trying to buy or sell them, you have to put that money into a macro product.

And so macro products were massively bid last week. I should say massively traded relative to stocks. To your point, James, when it starts to get 35% or above, there's a thing there. And furthermore, if you look at the net exposure of these hedge funds, it would make sense that they are utilizing highly liquid products because they've all gotten very, very short. So there's a difference between your, you know, kind of gross exposure or gross leverage and net leverage or net exposure. Net takes into account how short you are. And there's a really fascinating chart that I think Rom shared previously or I had it in one of my chats where, that the drop in net positioning is super aggressive, which implies, and the kind of gross leverage

is relatively the same. What does that imply? These funds are getting massively short, but they're not able to do it as well through the individual names. Yeah, there's the chart. They're not able to do it as well through the individual names so that they're doing it with these macro-related products, which is mostly your ETSs, like the IWMs, the SMAs, the QQ, the Spy, etc. out. One last point on that chart, by the way, is what you're seeing here is that the hedge fund net exposure levels are at the 0th percentile looking out over the last five years. So net exposure is around 40 percent, by the way. So if you own the SMP 500 index as an ETF, your net exposure is 100 percent. Your beta is one with the market. So their net exposure is 40 percent. They're in a crouch

position right now. And that's why, to Joe's point, they're using liquid ETF products because it can be dynamic and change based on the new slow. But that's also creating the knock and effect to individual securities in the market are getting kicked around because it's lack of liquidity. So it's not a bad time to go research and find opportunities that might create as a result of that. Yeah. Real quick, like I was writing research almost 10 years ago talking about how ETS are used as liquidity valves for the exact reason you're talking about everyone kind of coalesces and liquidity aggregates in places.

And it's funny, like 10 years ago, like what you guys are saying right now, everyone knows it in the market. But 10 years ago, there were a lot of people, old school traders who thought they were like weapons of mass destruction and were going to destroy the market.

So like we would write these notes about them being used as liquidity valves and all these things. And we got ripped apart by a bunch of like really big name hedge fund managers saying that the ETF industry holding high yield bonds and these different things

were going to cause like the next 1929 type crash. 1987 type crash. And just wanted to point out, as an EGF analyst, these things have held up tremendously well. Obviously, I said there was a few cracks. But yeah, things, if you're using these things, they're doing what they're supposed to do. All right, before we dive in, we're going to get into a little more crypto stuff. But we've got to hear a little bit more from our sponsors. Hey, everyone. Matt Hogan, CIO of Bitwise. Are you watching these tariffs roll in and out of the market and wondering what the long-term impact is on crypto? Well, in this, This week's CIO memo, I look at how Bitcoin's recent performance suggests that the crypto market

has strong underpinnings and is positioned to recover sharply once the broader equity market stabilize. You can find out more by reading my memo at bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. I'll go to you, Noel. I mean, do you have anything to add in what we were just talking about? And if not, like, what does all this mean as far as you're concerned? You write, you know, crypto is macro now, is the name of your newsletter.

What does this mean for Bitcoin? What does it mean for crypto more broadly? And then I want to get into a little bit about stable coins because they're still the hot topic of the day. This is the realignment I've been writing about for two years. It started two years ago when I left Genesis. I wanted to focus on the impact that crypto could have on the macro economy writ large. And I'm not necessarily talking about fund allocations, although obviously a lot of that as well. I'm more interested in the de-dollarization.

but I do not mean moving away from the dollar. I do not think Bitcoin's ever going to replace it. What I was talking about is the alternatives that countries bullied by the United States, and I use bullied in air quotes because there's often very good reasons, such as sanctions for invading Ukraine. Countries bullied by the United States are going to be looking for an alternative. That's also why I focus on CBDC development.

That's also why I focus on the search for alternative Wales and the use around the world of stable coins. And it is just weird, James, to see what I've been writing about one day might start to happen actually all cascading through right now. And this is something that, you know, I'm not alone in focusing on this. I mean, the Moran paper that outlined a hypothetical strategy for the Trump administration in using tariffs to bring everyone to the table to solve the issues with China as well as the security umbrella. He did mention that there would be a lot of volatility and which assets would do well. He said probably gold and cryptocurrencies. Why? Because when you have

such fractures, such breakdowns in the established order, new ideas do need to come to the service. And when you do have a need to move away from the established dollar denominated system for survival, if just for flexibility, then again, there are new types of assets. In the toolbox, for our first time in our history, there is a new asset in the toolbox. It matters to me also, if I can just one more parenthesis, not just for the geopolitical toolbox here, not just for nation states to be able to pay each other for the trade in whatever currency they want that cannot be controlled or sanctioned by the United States government, but also for individuals. When there's huge change, we know that does lead to clampdowns.

We know that does lead to greater repression. And for the first time in our history, individuals have a new tool in their box for greater resilience. Just one quick side note detour, if I may. We'll come back to the kind of crypto in a moment. I would say one narrative would keep hearing is to, quote, bring people to the table. That's all nonsense. It's very easy to bring people to the table. You deny them access to U.S. intelligence, for example, which you'll have everyone respond immediately to the table, right?

The United States created and led World Bank and IMF and the WTO and their headquarter in Washington, D.C. So the U.S. can summon anyone to the table at any time. Of course the responsive. If not the U.S. then who? Yeah. And going back to the debate that you mentioned earlier on, I mean, David Sack was saying, you know, we got 130 nations beating their way to the door. And I think it was Larry Summers who said, you really think they wouldn't come if they were asked. And it was David just said, but why did nobody ask them before?

You make a phone call. That's it. It's not about coming to the table. Yeah. It's not that they couldn't bring them to the table. what has that known actually thought of it? But let's take one other maybe viewpoint here, which I'm just somewhat playing the devil's advocate here.

Trump ran on a very populist-centric platform. And when he was out there during Liberation Day, did he have a bunch of suits from Wall Street there? Nope. You had a bunch of Teamsters and folks from the auto industry, blue-collar Americans working. This is really good. TV. And Trump is, whether you like him or not, really gets how to do things for TV. And that has been

part and parcel to, I think, the rollout of a lot of this. You're right. We could absolutely just cut off Eust's intelligence or simply ask. That's not good TV, right? And I know this might sound a bit ridiculous that, like, Joe, it's the president of the United States. The president of the United States has been in the spotlight, the limelight and TV, pretty much his whole life. So that's not going to change. And so by showcasing, I feel, or at least trying to think about it, not so much like, which sounds ridiculous, intelligently, like he could have just picked up the phone or cut off the intelligence, which is true. Think about it from the populist platform that he's been running on. You're right on. You're right on. Like, I mean, Trump said when he ejected

Zelensky from the office, he said, this will, quote, make for great television. And this is how he disinterrupt disintermediates and media. So I think you're 100% on the mark. That's exactly what it's about. I do think they miscalculated the fallout and impact to markets and the impact to jobs and the identification of him to the policy and to these consequences. So this is called blowback. I think most of the first X days of his presidency, he executed very well by any independent measure and standard. This time, he poked people on the eye, people in his base, small businesses that vote Republican.

You guys see this meme? I got to share this meme with you. So tariff exemptions. There you go. You got Apple and the video, Dell Big Tech, the CEOs of whom and their employees generally vote Democratic, or maybe they were influencing free speech in a way that didn't advantage Trump, right? It's not Trump space.

Then you have the automakers here, and then you got mom-and-pop businesses there on the bottom. Those mom-and-pop businesses are disproportionately Republican. So the outcome, the impact relative to the base is different. Now, he had to address this one because this would hurt the stock market. He was getting the phone calls. from people on the stock market. And, you know, if Apple and the video have a 25% tariff and that impacts earnings,

then you're in a sustained bare market. But yeah, it's just a lack of coherency in objectives and approach. And it's the process of Trump doing discovery in real time on TV with the global economy. Yeah. I like Joe's take, which is this is a lot of chaos, which is disqualification. which is distressing and it's exhausting. I imagine everyone's as exhausted as I am. But a year from now, will we look back at this as having marked this shift?

Or will there actually be a change for us to be talking about? In other words, this feels like it's systemic. It feels very noisy. But maybe it is just a pebble in the road. Yeah. Great question. If anybody knows the answer, that would be great to share with us. I think there's a couple other aspects.

that clearly get lost in the shuffle with respect to the populist platform and the way that Trump, you know, kind of plays the media and it does it really well. There's an entire set of deregulation that, you know, I think it's lost in the shuffle that's going to be coming. You have some details of the tax cut and extension of tax cuts that are coming. I also think that there was some, you know, little, I'll give this a smaller waiting, but some speculation that some of the moves in the bond market last week were trying to front run the SLR, you know, reduction. I don't know if that's going to happen or not. Maybe it still will.

I guess my point is that while the media and certainly Trump and you see with Lutnik and even Bessin, other members of his team are out there banging the drum on Terra, saying one thing, saying the opposite thing, saying another thing, saying the opposite thing again, there's all of these other kind of levers that they're going to have to pull later this year. And so if you're going to really take a huge swing, you probably should do it right in the beginning of your presidency, such that you can backtrack slash make up for it before you get to midterms. Because we all know that if midterms were tomorrow, Republicans are toast. I think that's part of the reason why there's taking such a big swing now is you're going to see tax cut.

You're going to see deregulation. You're going to see, I think, likely see the gutting of Dodd-Frank to some extent or serious changes to it. And that's, in theory, going to release a credit boom and cycle throughout the economy to hopefully, to make your, to your point, ROM, make up for all those small businesses that are struggling because there's going to be, call it infinite capital flooding the markets at that point. By the way, I think you're right on the mark. Look, if they had the deregulatory agenda and tax cuts up front, you would have stoked inflation. So they had to start this way. So I agree with all that. I think they just miscalculated the impact from this.

And here's the other risk. The economy is at a close to a stall speed right now. You get 1% real income growth on the consumer. We're seeing weakening all the soft survey data. Does the hard data roll next? Kappex is pulling back. By the way, speaking of deregulation, these tariffs are the opposite of that. People are trying to calculate how much aluminum is in a car coming into port right now.

It's like the worst form of re-regulation. And there's no rules for it. But they need to have it regulated. So they're trying to do stuff in the fly. And they're impeding business getting to work, too. So it's having an opposite effect now. But I agree, look, your broader point, you know, stands. But if they don't intervene quickly, economies have their own momentum.

to them. And, you know, president can lead. He can inspire psychology, lead with confidence, create clarity, unlock CapEx, unlock consumer spending, reduce anxiety, levitate asset prices, or at least lift them. If they don't, and you get a recession, and then deficits go up, tax revenues drop, then I think they're going to be hurt in the midterms. Because They can't control the economy. They can, their levers on the economy right now are significant because there is no recession yet. Or if there is, they can mitigate quickly versus the cost of mitigation six months from now. It's hard.

It's very difficult because economies have their own natural momentum. So I think they, I don't know if they recognize that yet. It will be interesting to see if they, okay, they can't control the economy, sure, but can they control the narrative? And, you know, as Joe's pointing out, he's very good at that, Trump. is very good at that, but can he control the narrative this time? Do you guys think, have a question, do you guys think the passage of any crypto bills in the next few months will start to reignite interest in crypto again? Because it feels like it's been marginalized with all of the noise and all of the attention, even from, you know, crypto diehards like us. Because crypto feels like it's being

left behind thoughts on that. I'm really glad you brought this up because Tim Scott just, I think yesterday on Sunday mentioned that he expects there to be clarity and frankly regulation passed by August of this year, which is pretty impressive. It's like tomorrow. Yeah, exactly. Now, I do think, and I mean, this is my personal opinion, of course, I do think that the level of effort involved thus far, yes, terrorism. and trade policy has been the dominant theme for weeks now, there's a lot of stuff that,

that has come to fruition under Trump thus far, right? Whether it's, you know, the spring of Ross Ulbricht or various other aspects, the SEC is kind of obviously changing their tune a bit, et cetera, et cetera. I think it's fair to assume that there's a good chance that this regulation gets passed by August in some capacity. Will that reignite interest? I don't know. I don't know. know because I certainly didn't box in 20 plus percent on average tariffs from Trump and the way that it was messaged and rolled out at the beginning of the year because my anticipation was there was going to be something and be probably like walking back, working back and forth. And then the Kirkby stuff will be happening in parallel and people will care about that

for all the reasons that we love. That's just not the case anymore. And in fact, it doesn't actually benefit the argument to be like, yeah, the United States is a great place to launch your crypto company and be involved in crypto when it feels like the trade policy can be interpreted as isolationist or frankly aggressive towards these other countries that we want to be doing business with. So will it ignite? Hopefully, volumes are pretty bad. Markets are pretty sideways. I mean, I'm seeing stuff like in my telegram news feeds now. Like, whale deposits $5 million into hyperliquid and goes 5x long on Ethereum. And I'm like, this is news now?

Like, what? How is this news? It's crazy. That's where we're at. And so I really hope something ignites it. If not the policy, it'd be something else. Yeah. I want to say two things.

One, part of the reason, like, it goes back to something we keep talking. about and the fact that crypto, like there are idiosyncrasies, obviously, but like even Bitcoin, it's a risk asset, right? And like, I look at, it just, it just gets clobbered when risk assets get clobbered. And part of what happened, we were talking about this, like the economy was slowing a bit. The Trump election was almost like a, Rom called it like a cut, like a doveish cut when Trump getting elected. But like, no matter how you look at, things were like turning over a little bit. We had really high multiples. I mean, the SMB 500 streamed 22 times forward earning And then those earnings as well, like the E on that PE multiple, those earnings were really high.

So like you those earnings, there's no way we're going to hit the earnings that people were expecting like just two months ago, three months ago based on what's happening here. So like we were kind of at a point where like what Trump did like could really like it really hit things pretty hard. The problem is going back to what Ron was saying like the and Noel like the messaging is hard because like yeah, it's kind of hard. Like once an economy is taking off or going down, it's really hard. It's like a oil tanker. It's really hard to stop it from turning over. You get, same thing with like inflation expectations, all these things. Like, it tends to move in that direction.

So, like, at some point, they got to do something, you know, pull the nose of the plane up here. But I think it, I think a lot of it just goes back to one, is Bitcoin a risk asset. Obviously, right now it is. And the rest of it is trading that way, too. So it goes back to, like, people just don't care. I have a lot. I've had a few people, like, asking me questions. They're like, I'll be honest.

I haven't looked at a single thing crypto related aside from. like a little bit of flows and a little bit of like looking at what's going on the Bitcoin and other coin prices. Like I've been focused on completely other things. I'm sure you guys are mostly in the same camp here. Yep. Yeah, I concur. This is a chart showing the Fed Home Loan Officer Survey or Fed Loan Officer survey. It's a metric to get a sense of bank lending. So like a dot does not a trend make, but the dots going on the wrong direction, right? So this measure, tightening of lending standards, say when mortgage rates are higher, 10 years higher,

banks are tightening on the margin. Does that continue? That's defaults. Defaults bankruptcies are ticking up, so banks have to be more careful about lending. The big irony is this, and I pointed this out when Trump got elected, even before you got elected,

they said Trump's election alone is like a stimulus package with a real economy because of what it means for real world, real economy, animal spirits. People that run small businesses, And you saw the NFIB survey hit multi-year highs, consumer confidence, multi-year highs. I remember the day after the election, I walked into like a local auto body shop. I had to replace a fuse in my car or something like that.

And the store owner, obviously a small business owner, guy walked out, I really know anyone from the hall on the wall. They smile at each other. They high-five and they say Trump's going to fix everything again. Now, that interaction took place around the United States and families. my small business at household, a million times over. And that is what confidence in animal spirits is just really on the ground. People making decision to hire. We saw an NFP print that came out with 200,000 jobs created.

But that was based on decision making done a few months ago before the soft survey data hit us. That's the issue. So when Trump got elected, it was like passing a stimulus package without spending money. Kind of amazing, actually. kind of amazing, right? But now, you know, is he unwinding that?

That's a concern that I would have. If you have cattle ranchers that are saying, gee, like, I can't get farmhands now, right? So that, you know, you've seen bank lending standards starting to tighten, and you've seen capital markets that are effectively frozen, so it's hard to create financing for the economy, less IPOs, etc. So that's the concern. Like he, I mean, he, he, he was like the golden goose, like latest animal spirits package on the economy. They took it away with this tariff stuff.

Yeah. And I think one of the things you mentioned earlier was the phrase PTSD. There is, in my opinion, real psychological damage to the markets, let alone animal spirits, where we can easily, you know, trade back up to S&P 500 to 6,000. And it just everybody sees as an opportunity to sell again because they don't have confidence anymore given the psychological damage from, I mean, myself, a number of folks I know in the markets were, you know, we knew that there was like going to be some stuff with Trump. But like, come on, it's Trump. The guy loves the stock market. He talked about it nonstop in his last term, as well as this pro business agenda, putting all these people around him.

I think having that kind of, to your point, those guys high-fiving each other in the hardware store to where we are today has psychologically broken a lot of people that are involved in the markets. And that it takes a long time, well, it can take a long time to get that back, right? And or there can be things that can immediately stimulate or kind of reignite the animal spirits. And we saw this during COVID with, you know, interest rates going to zero and helicopter money being flown out to everybody, right? The recovering that was aggressive. Obviously, we were dealing with a lot of the results of that now. But my point is, you can actually get, you can get an accelerated version of the animal spirits coming back.

But that does require, you know, full-blown confidence building from either folks like Scott Besson, Jerome Powell, if let alone the president of the United States. 100%. 100%. I thought it was a great point you raised there, Joe, around the behaviors that people are trained on now. So this chart is, excuse me, the SMPP 500, and you can see the different exponential moving averages, you know, 20 day, 10 day, 50 day.

And what's happening now is people are being trained to sell these indices when they hit those moving averages. I myself bought SQQQ today around noon. So those listening, that's triple leverage short the NASDAQ 100. Just to bring my net exposure down, by the way. Like I'm a long only kind of have to be given what we're doing here. But just to risk manage because when it hits that level, it gets sold off. So, you know, bear market psychology is like a real thing.

Right. And you have these two to three day ripping rallies and then you have these leakages. And so it's kind of like a funk that you have to get out of. And you need like some electric shock therapy to do it. So I don't know. So I think, Jody, your point, that's why I spend my time thinking about actually is I don't think the market even knows right now. I think the market is a highly reflexive state.

As you said, driven by news flow. and it's asking itself to the day, are you in a bare market or not? Because you're in a bare market, I'm supposed to sell it right here. Or, you know, can we ride higher on good earnings with limited guidance? Given the fact that, you know, you have conditions for a rally. The net exposure position is very, very low. People are extremely short. So any positive news flow is like a match on a Tinder that will light up and cause a big rally.

So that's there, too. And that's even pre-stimulus announcements. I mean, not necessarily talking about stimulus in the U.S., although that's certainly not out of the question. We've already heard many governments come out and say, we're working on stimulus to support businesses through the tariff turmoil, and we can be pretty sure China's loading up the bazooka.

So, stimulus around, and again, going back to crypto or gold, they are global assets. They will benefit from this kind of thing, much more than, say, U.S. equities would. But stimulus is going to be a, and animal spirits feature, and it obviously has to come if indeed the economies continue to slow.

Have you ever seen an environment where there's this much thickness of tension, right? Between the short term and the long term. I mean, it's incredibly thick, right? With the high VIX, the technicals versus the fundamentals.

I mean, it is a, it's really a highly unique time in markets right now. you're if you're paying attention every day at what's happening and studying markets, it's an incredible learning opportunity at the very least. But I don't, you know, I go to you, Joe, is like, how do you think about the rep repairing a psychologist? I do think that's the fundamental thing. But you need consistency across those voices, not just inspiring psychology, but you

need Besson and Lutnik and Trump to be consistent. I'm not seeing that right now. That's the part that's missing. That's the flooding the zone. That's the we don't have our shit together. We're saying various things that are counteracting each other. We're not all on message. That is the easiest way, right, to, to, I think, reignite animal spirits.

And I think there is something to underscore to your point around there's a lot of fuel on the short side with a lack of liquidity that could really ignite the moves that you could see a face ripping rally. And the way that I look at it is I go, you know, as a trader from basically when Trump got inaugurated until last week, they've all been pretty much like talking the markets down, saying things that are not favorable to the market. That kind of changed last Wednesday. And yes, even though we had some contradictory statements over the weekend, the question is like, if we were trending down, meaning that they're They were talking the markets down or the rhetoric seemed to be very bearish. Are we just, was his thing last week with the 90-day pause, was that just a blip and we're going to keep having more bearish commentary come out of them? Or do we think that Trump's probably bottomed on the bearish conversation?

Because let's be clear, fundamentals don't matter, technicals kind of matter. The only ain't matters right now are headlights. I would not want to be short a tale to Trump. Because, like, there's a great. People are massively short right now. Hopefully it fuels a short squeeze rally. But Trump can literally say one thing and just blow you up, right? Like, blow you up figuratively in the markets, right?

Probably the same in military as well. But that's just besides the point that I would not want to be short Trump headlines. Like, oh, he's going to keep talking down the markets after he talked down the markets for the past two months, let me press my shorts here. Like, it just feels like to me, the, the probability is likely favor positive commentary coming out of Trump and the broader Trump administration, even if it's not consistent, versus more and more and more like bearish pain heading into liberation. Yeah, we'll see deals.

Deals will be bullish. And the other positive news flow will be Ukraine. He is pushing for a peace deal with Ukraine. Ukraine. That's on the bear side of the ledger. If he pushes for Fed independence and tries to replace Jerome Powell, whom he nominated, of course, a few years ago, I think that's Barish for markets. He floated this concept, I guess, at the Supreme Court, around his ability to replace top agency officials. Powell wasn't directly implicated in that. Yeah, but I think he'd get market push back on that, which would encourage him to just

wait a year. Powell's changing. I mean, he's at his term. ends next year anyway. So, yeah, that I, you're right. It's a risk. I've heard people, I've heard people express concern about that risk, but I think the bond market would send a very loud message before then. Meaning, markets were tank. That's what market pushback.

Yeah. Yeah. I would also, I would add to Rob, what you were talking about how thick markets are. I think a lot of it has to do with the fact with what Joe was saying with that, no one explicitly said it, but like so much of this is like, dependent on what one person is thinking and saying and doing. Like, it's literally one person at this point that could, like, completely decide the fake like a whole. I mean, maybe it's

happened, obviously it has happened before, but this is like unique in my lifetime where it's like this guy could blow things up or not. And like, it's just up to the whim of what he's going to do. You see this in Uganda and Zimbabwe and like Costa Rica, I think. So the SMP's got a like 19.5 P multiple on it right now.

Okay. Is it price for that uncertainty? It's a price for that uncertainty to earnings and cap-x and growth. No. We just need to see what The earnings calls are like over the next few weeks. Well, like, wait, wait, wait, okay, I got to push back. Why are we even debating PE at this point?

And I mean this genuinely, because we are saying it's 19 and a half, probably above the average, like, call it over the past 20, 30 years, whatever it is. But like, literally tomorrow Trump could just completely want it to everything. And then what we're trying to forecast from a fundamental standpoint is kind of irrelevant. And so the only reason I'm pushing back, Rob, is that to me, it's a flow story and news story. and until there's any form of like consensus from what the White House and the Trump administration broadly are going to do around these policies, we're kind of like these metrics are useful to probabilistically weigh certain outcomes. But like the SEP at 19.5 p.e is irrelevant if Trump tomorrow is like, I'm firing Jerome Powell and putting in my own guy to cut rates to zero.

You know what I mean? Like it just seems kind of crazy. I think the news is the primary thing. but the multiple reflects the psychology and either the psychology is expansive and optimistic and looking out into the distance and at 22 times or anywhere we were before we were forecasting, you know, Elon Musk putting people on Mars. That's how in the distance we were looking

and building semiconductors in Arizona. Now people are tactical and solving for like tomorrow's bread. That's a little bit extreme, but you get it. We've gone in the other direction. So let's say we get clarity. I do think we'll get deals faster than people think. People like, oh, there's 87. Who cares?

You got to prioritize Mexico, Canada, Eurozone, China. Okay, focus on those four. You'll get clarity on those. Japan. And you'll get faster velocity because Trump can choose to get a deal. He's the term setter. If he wants a deal, you can get a deal. So I'm actually, I think I'm actually more bullish on that part of it.

However, you know, when psychology takes a gut punch like that, I don't think it gets up off the mat that easily. And then people start saying, gee, Costco 52 times earnings, Walmart, a 32 times earnings, weaker consumer retail spending, going to pull back and elevate an inflation. I think it might have taken, you know, the market focus on the optimism to the concern side of the ledger. That's it. Meaning like that multiple is like a pendulum. I don't think you're going back to 22. I don't think back to 20. Can it stay even at 19?

I'm not so sure of that either. I do think just because it's a very nuanced kind of thing happening here. I do think you're an intermediate term rally probably through June or July. That I have pretty good conviction on. At that point, though, I'm going to reassess to see what the hard data says. I might have to look for next or up. I don't know. Related to that time range, if we look at the Fed, like we basically had speeches this weekend or interviews, wherever you want to say that took off May cuts, which some people were like starting to price in. We're basically completely talking up the idea that the Fed is going to cut in May. It looks like people still think we could cut in June or at least July.

That's where the market is pricing. The pricing for two cuts by September, which would be pretty aggressive. So that's one of those easing things that we were talking about. The other thing, I have a colleague in Hong Kong, and she wrote a note this week, it's called the national team in China. It's almost like they do a bunch of things to, you know, prop markets up. Like, they think the China's national team could end up buying like $100 billion of ETS in China to kind of buoy things. So, like, I mean, we've been talking about this since July of last year.

I feel like Joe was the expert at the time. I'm like, China's going to shoot a bazooka at some point. And like, maybe Trump forced them to like kind of produce like one of these, you know, quantitative easing type zookas into the market, which is something that could be very good for risk assets, particularly like the crypto markets. I don't know if it's thought there on the potential for like this QE, maybe even fiscal policy type stuff that could really send easing things, not just Trump's headlines. Yeah, I mean, the foreign exchange market is what I'm primarily focusing on right now with respect

to China because they allow their currency to devalue last week. They historically have pegged their current the yuan to the dollar at a fixing rate. And there's kind of this $7.20 line in the sand that has been breached allowing them to devalue it. Well, part of the reason that they can do that is it makes their exports cheaper, thus potentially offsetting tariffs. That's generally how you can interpret that. There's obviously nuance there. However, when there is. is a devaluation of the yuan from PBOC.

There's typically a narrative around capital flight that picks up. And what is capital flight? Well, there's roughly $60 trillion worth of deposits in China right now. If the value of that starts to go down, people will look to get their money out of China. And we've seen, we saw this in 2014 and 2015. There's been cases of this in, I'm specifically talking about Bitcoin. benefiting from this. I believe it was 2018. Don't quote me on it. But there has been precedents in the past where the narrative of capital flight out of China for justifiable, logical, and macroeconomic

reasons causes or can correlate to a rise in the price of Bitcoin. And so back last summer when we were talking, James, the thing I was looking at out of China is, yes, a massive stimulus package in some capacity as well as M1, not M2 money supply expansion. We saw that, believe it or not in January, but it was actually the way that they were recalculating the formula, so it didn't count. Now we're starting to see this devaluation of the yuan, which can then affect clearly things like capital flight out of China, which again, historically, that narrative is super bullish Bitcoin. So, like, how do you track the narrative coming up? It's kind of challenging. But if you see what's happening with the price of the

if they if they can bring it back below that 720 mark, I think that should be somewhat interpreted as China is looking to get a deal done with Trump. If they continue to let it devalue, I see that almost in the opposite direction. It's not a perfect proxy. So in the in the case that they continue to devalue, that likely benefits Bitcoin. And they're going to have to do monster stimulus. if the currency continues, it kind of strengthens back to where it was,

I kind of interpret that as the possibility of they get a deal done. Fascinating. I haven't heard anyone say that before. I haven't even thought about it in that way before, so that was interesting. No, you were not in your head. I'm by no means a Chinese expert either. It's just trying to read the tea leaves.

No, I totally agree with what Joe said. This is something that I have been keeping eye on for quite a while, and I'm on the record as saying that I think we're going to start to see something that looks like crypto legislation come out of China probably soon. And with all this, probably sooner. It's a very similar situation to what we've seen in Nigeria, in India. They don't like the idea of crypto being used for capital flight, but they know it happens. So they might as well just bring it into the legal territory and keep an eye on it.

We're going to see licensing rules for crypto exchanges. And again, even if individual savers, put a dintzy, wincey, tiny part of their savings in something that does not represent anything tied to monetary policy. That's still a huge amount. And you've got to also look at the – it's likely that China would be quite happy with its citizens putting part of their savings into something that has nothing to do with the United States policy.

Bitcoin is a global asset here. Do we know what percentage or quantity of Chinese nationals leave the country, and they're using crypto as a vehicle or Bitcoin as a vehicle. I would want to understand that because clearly they have controls. I think it's like $75,000 per year, $50,000 per year. It's the minimis. They do, but apparently it is not too difficult if you have a certain level of wealth

and we're not even talking huge amounts. They're sort of middle class end up. To have accounts in Hong Kong that will help you do that. And again, there's a big difference also, between using Bitcoin and using crypto, most of them prefer stable coins for some reason. It's hard for me to imagine that the Chinese Communist Party would get behind a decentralized currency that can be anonymous that's not subject to their control and oversight. Yeah, they don't love it. And they're on record saying we don't love it, but we know that

trading in this happens. And so we might as well monitor it. Monitor, yes, monitor and control to the best ability. I'm not saying that's the policy. If I were the United States, I would encourage China to adopt Bitcoin. And I would do the exact opposite. I would say, yeah, you've got to adopt digital currencies, stablecoin back by U.S. dollars, Bitcoin. Because it's not in China's interest. You need the two things I heard China are capital mobility and people mobility. I'll tell you an interesting story.

I spoke with this entrepreneur from China, now lives in the United States, pays American taxes. He has manufacturing of components for HVAC builders in the U.S. from China. So he's impacted by tariffs. So what are you going to do? He says, oh, I'm just going to relocate manufacturing to the U.S. He's actually taking the Lutnik line. He actually can use robotics in his very narrow use case,

which doesn't apply to Nike sneakers, just to be clear. But the funny thing about it, like this policy is impacting him. He's not even in China. He's changing his production. So when we talk about tariffing China and who's paying what costs, like it's actually individuals like him that are making decisions. And the guy is already American paying taxes, by the way. I thought it was a, I thought it was funny.

But the main point I'm making here that if you want to weaken China, you do three things. You encourage crypto adoption in China and stable coin. The golden passports, I think, are brilliant. You get as many wealthy Chinese nationals to pay for that and move to the United States with their wealth assets, know-how. China doesn't actually make things. It's entrepreneurs in China that make things. When China entrepreneurs move, the Chinese government loses productive capacity.

That's the know-how. And the other thing is, yeah, free speech. Enable satellites above, like from Elon Musk to drop access to Twitter. That's how you do. And the fourth thing is you make open game for cyber attacks on China IP, including their battery technology at BID, where they're ahead. They're cyber attack in the United States. Just make it fair game and make it open source.

open IP for the world, make it a gift for the world. Give China back what they're delivering to the U.S. Those four things, you will, and you don't even need a trade war for any of this stuff. That's Roms playbook, if he ever becomes Trump's position. All right, we went way over here. So I'm just going to shout out a couple things that are happening this week, and we can talk about them next time. We wanted to get in stable coins, which would have been a great transition there, but we didn't have time. But the Trump meme coin is set to unlock this week on April 18th. They're releasing 40 million tokens currently worth like 330 million, like 20% of the circulating supply. So that'll be fascinating to see how that goes.

I wonder how that's going to go. I don't know if anyone has any thoughts there. But the other thing I wanted to say is one, we're getting postponed on each staking and a bunch of staking things here in the U.S. for ETF side of things. But one thing I did want to point out is this week we have four, I think four Solani ETFs launching in Canada. All of them will do staking, different levels of sharing of that yield. Canada is always first. My expectation is this will happen later on this year,

but we're going to see For Salon at ETS listing Canada this week, and they will all have staking. So that'll be very interesting to watch. I don't know if anyone has final thoughts before I wrap up. Noel, you look like you kind of wanted to say something, but if not, I can just wrap. No, this has been a great discussion. And again, so much more we could have got to.

I will address, I've seen somebody put in a comment, how did I manage to move my furniture around since another podcast I did early today? I didn't. I really, you know, wish I had time to, I didn't move my furniture around. All right. I felt that needed to be addressed. Okay. I, um, all right, we'll start with stable coins next week. Um, actually, I won't be here next week, but stable coins will have to be the topic of the

suggestion there. Everyone's bull of shit. We were just talking about what it means for US dollar and things like that. So, all right, everyone, thanks for joining us on the live stream for those listening, uh, to the recording. Thanks for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more. about how the world's crypto and macro are colliding.

Until then, everyone.