Unchained - Bits + Bips: Why ‘All Assets Will Go Up’ in the Near Future - Ep. 716

Episode Date: October 9, 2024

As the PBOC and Fed shift their stances on rates and liquidity flows, the macro landscape is evolving rapidly. In this episode of Bits + Bips, we unpack how these policy changes could spark a massive surge across all asset classes—from equities and bonds to Bitcoin and crude oil.  The hosts, joined by Nikos Kargadouris, a seasoned trader, discuss why liquidity is about to flood the markets, why fears of a U.S. recession may be overblown, and how even memecoins could benefit.  Plus, are central banks close to buying bitcoin ETFs? Show highlights: How the PBOC's shift in policies impacted the markets and when we’ll see a “bazooka” How market complacency and short positions on oil amid geopolitical tensions could lead to mispricing and unexpected volatility How rising crude oil prices could slow the U.S. economy, despite the country being a net oil exporter How strong payrolls data reduced market expectations of U.S. rate cuts Why predictions of a U.S. recession might be off Whether it matters for crypto who wins the elections  The chances of central banks adopting Bitcoin What the outlook for memecoins looks like in the next months Whether the HBO documentary about the identify of Satoshi Nakamoto will be a disappointment  Sponsors: Gemini Stellar Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Joe McCann, Founder, CEO, and CIO of Asymmetric Guest: Nikos Kargadouris, Chief Investment Officer of a private investment office specializing in cross-asset thematic macro and digital asset strategies. Timestamps: 00:00 Intro 02:09 Impact of the PBOC’s policy shift and timing of the “bazooka” 15:01 Oil mispricing and volatility due to geopolitical tensions 27:30 Rising oil prices and potential U.S. economic slowdown 35:51 Strong payrolls reducing expectations for U.S. rate cuts 44:11 Why U.S. recession predictions might be wrong 50:10 Can prediction markets reflect U.S. election outcomes? 56:05 Does the election winner matter for crypto? 1:04:43 Memecoin outlook for the next months 1:15:34 Will the HBO documentary disappoint? Learn more about your ad choices. Visit megaphone.fm/adchoices

I've talked to a number of, like, you know, large hedge fund managers and PMs, portfolio managers, and they're like real money, meaning like pension funds, institutions, like, they're going to just plow a ton of money into the markets right after the election is over. Because no matter who wins, the view is that the market's going higher. Hi, everyone. Welcome to bits and bips, exploring how crypto and macro collide one basis point at a time. I'm your host, James Safer, Tradfai Archmister, Lord of Bloomberg's End. Here with Joe McCann, Lord Commander of Asymmetric and Master of Bunk, alongside Alex Kruger, Kruger Macro of House Asgar, Protector of the Realm. We're here to discuss the latest stories in the words of crypto and macro news. Just remember that nothing we say here is investment advice.

Please check Unchained Crypto.com slash bits and bips for more disclosures. Also joining us today is Nikos Kargadoris, Lord of War, Seager of crude oil. Today's episode is brought to you by Gemini, a U.S.-based crypto exchange built for new and advanced traders. Gemini is offering new customers $15 in BTC when they trade. Sign up today to earn your Bitcoin. Where can you find $700 million in real world assets, 11 million daily operations with industry low fees, powered by 450,000 plus on and off ramps across 180 countries, the Stellar Network? Before we get into this, Nicos, why don't you give it a little background about who you are or what you do and then we'll jump into it? Yes, with pleasure. Thanks for having me on

the podcast. So I have about 20 years and change of trade-fi experience. I've worked at various large banks and hedge funds throughout my career, mainly in the trading or portfolio management capacity. My background is in credit and volatility. And for about the past decade or so, my focus has been on cross-asset, thematic macro strategies. Over the last five years, I've been running an investment office that manages its proprietary capital across a couple of those strategies. Awesome. Perfect for our macro and defy overlap type of show. All right. First things first, we're going to get into China here. I mean, China stocks are absolutely ripping. Our last episode, we talked about the Chinese easing, if you will. And I'm going to give a shout out to Joe here because when we recorded that show, Joe said he thought China was going to come out with an easing bazooka. And I think it was literally the next day that China came out and basically shot a bazooka into the Chinese economy. So, I'll let Joe intro like what's going on here and then we can get into it. Yeah, thanks, James.

I mean, first, from my perspective, it isn't quite a basuka yet. I think that that is actually what is most important as we sit here today. So yes, they did come out with a number of policies that they enacted around, you know, cutting the reverse repo rate. The, you know, mortgages were dropped 50 bips across the board. they literally gave Chinese banks, you know, half a billion U.S., 400 billion U.S., something like that, to just literally buy stocks. And sure enough, you know, the indices have ripped higher. I think the Chinese 50 index is up like 50%.

If you look at FXI, which is an ETF, it trades in U.S., it's up like 55% in past two weeks. What's wild about this move is, yeah, I mean, it's a huge. huge move for, you know, a massive economy like China, but also the Chinese VIX was actually up in the 40s through this move. And so what that suggests to me is that there's just wholesale short squeezing. Now, to be clear, on the stock side, yes, there's a ton of folks that were caught short. But according to Goldman Sachs Prime book, it was actually driven mostly by net buying. You've had folks like David Tepper come out on CNBC and literally saying, buy everything China. So there is not only an epic short squeeze that has taken place,

but there's also a significant amount of net buying in Chinese stocks and the indices itself. I think the thing that is something we should be focusing on now is the first week of October, October 1st or October 7th is called Golden Week in China. And it's the week that the majority of the country basically takes off. And they either travel, they shop, They do both. But the PBOC put these policies in place ahead of Golden Week. And that is not, you know, coincidence. They wanted, I think, folks to feel incentivized to spend and travel, etc., to kind of stimulate some domestic demand. And I think this is one of things that we outlined a couple weeks ago is that China has a major problem with domestic demand right now.

It's basically flat year over year in terms of growth, whereas their exports are up pretty significantly. We all know that China's a massive export-driven economy. And so what does that mean going forward? Well, as we're making this episode today, tonight US time, Tuesday morning Beijing time, there is supposed to be some sort of press conference around this sort of economic plan that the PBOC is outlining. And I think the market is expecting the actual bazooka. What is the actual Vizuka. Well, let's kind of wind the clock back here a little bit to understand the predicament that China's actually in. If you look at 1989, Japan, stocks were ripping, but then they collapsed about 60% in the following three years. They had effectively like three major attempts at trying to

revive the economy. The first one was in 1992 or 1994. They cut rates. They eased. But the banks were basically in this zombie state where they were only propped up by the government to not spread fear through the system. And then they tried again in the middle of 95 for about another year with super aggressive fiscal and monetary easing. But this was premature amid a government transition. So it didn't change really anything from an economic standpoint. And the zombie banks kind of continued to persist. And then in 97 and 99, they did the same thing. Massive fiscal easing, huge balance sheet expansion and capital injections, but this didn't work either. And so, you know, in 2008, the United States had a global financial crisis. Well, how did the United States fix that?

They fixed it with TARP. TARP came out and said, hey, banks, all that toxic trash that's on your balance sheet. Yeah, just give it to us. We'll give you money at par. Boom, banks are recapitalized. Now, remember, QE didn't happen for a full six months after this, right? But they did TARP to begin with, and then they moved on to QE, the rest of history as it relates to money printing. Then look at what happened in the European Union with the ECB. Almost the same playbook, TL, TRO. Hey, give us your toxic assets. We'll give them to you a par.

Or kind of like, you know, indefinite lending facility, if you will. Effectively the same thing. QE then comes after that. So China has a choice to make. Do they want to go down the route of Japan and sort of lose a generation or a decade, if you will? and try to like scrap their way out of it, it took Japan forever to turn this thing around, right? And they still are not kind of out of the woods, so to speak. I mean, the dollar yen traded almost as high as a dollar 150 today before or before reversing. I guess it was Sunday night US time.

Do they want to go that route or do they want to use the playbook that exists? And that playbook is real QE. So assume they go to the banks and say, hey, all that Chinese debt that you own, yeah, I will buy that from you. Give it to me back at par, recap the banks. And then secondarily, I doubt they do this, but maybe they do, is like proper QE, right? Proper expansion of M1 money supply. Now, you could get expansion of M1 money supply without pure QE from money printing, but that's the thing that we're going to be tracking asymmetric. So in our market update that went out on this past Saturday, I wrote explicitly about M1 money supply expansion and how it was a direct correlation in January, February to the rise of the price of Bitcoin.

Since then, yes, Bitcoin did hit it all-time high in March, but since then, M1 money supply in China has gone negative. So you've seen a detraction or a reduction in M-1 supply. If that corrects and starts ripping upward, in my opinion, Bitcoin's ripping to new all-time highs. And this has been my thesis for about a month or a month and a half or so, is that China is really the final boss as it relates to new all-time highs in crypto. And the thing we'll be tracking is the expansion of M1 money supply. Just to throw some numbers on there, because we threw a bunch out there. But I will say FXI, which Joe mentioned, this don't come at me for saying this, but it kind of

is like the S&P 500. It's like a diversified exposure to large-cap stocks and China. That thing is up 44% since September 10th. Then you can look at KWeb, which is a train shares ETF, which is kind of like the queues. It's investing in all like the tech stocks. Think like 10 cent to Alibaba, JD.com. That thing's up 55% in less than a month.

So like we're not, this is like essentially like, the U.S. large-cap market going up 40% in like 20 days. Like this is insane stuff happening right now. And they're also, the one thing I would have asked is that I've been reading, they're trying to prop up their real estate market too because they're basically trying to, you know, not go into a deflationary spiral. Yeah. I mean, look, and you just touched on a really good point that I probably forgot to mention,

but the, the biggest drag on Chinese GDP right now is the real estate market. And it's also the largest driver of GDP. And they have been struggling for the past two years as it relates to real estate. And there's a couple reasons why. One is the stimulative policies that they put in place have been basically to prop up the stock market. And that has ultimately been a fade within about two to three months. And so the reason I think, at least us that is metric, but read the same thing out of Goldman or read the same out of Morgan Stanley, the reason that is so important that they do real QE this time is that they need to not create. out the borrowers that are riskier. So think about real estate developers in places like China.

They're riskier, you know, lenders are creditors to lend to, but that actually is stimulative to the economy, which is stimulative to GDP. And so if they just do this kind of like, you know, lipstick on a pig concept of saying like, hey, we're going to pop up the stock market, we'll drop your mortgages, 50 biffs, but we're not actually going to focus on the riskier borrows in the system, they're not going to solve anything. And I think that this is like one of the biggest pieces to China's puzzle is solving that real estate crisis that they actually have, because if they don't, they're going to look a lot like Japan in the 90s. And the other thing I would add is they're actually buying. So there's some nuance here in the Fed in the Senate, but the Chinese government

is like buying stocks and buying ETFs directly. And it's not like the U.S. did that as well. They tried to prop up like credit spreads and stuff during 2020. This is. like the fiscal side is actually one buying it. So people keep equating it to the bank of Japan, the Fed buying stocks. This is not like, this is not the bank doing this. This is like the fiscal side, the government is actually going in there. And no, they're not saying what they're doing. They're just calling it, it's called the national team. And they're just buying like billions and billions of dollars of ETA up in the open market, trying to spur this market, almost give it like an adrenaline shot. I mean, let's go to Nicos and Alex. Do you have any like complex thoughts? Do you

disagree with anything that Joe said on what's going on? No, not really. Nico? No, I mean, it was spot on, you know. I think a lot of people underestimate that these guys are going to try and throw in the kitchen sink, you know, to try and instigate and hit that 5% growth target that they're, you know, they're in such desperate need for. Also, you know, in terms of the unemployment rates, I think they stop publishing numbers because of the fact that most of the kids that were like 16 to 24, you know, you had a rising unemployment rate, right? So they recognize that now is the time to act. You can't really mess around.

So either you go all in or you don't, as Joe said. So I'm right with you, right with you, Joe. Yeah, I think that it's a great point, Nico, is that I've chatted with some friends of mine that are into macro and have focused on China. And one of them said something really powerful to me the other night, which was that social unrest is the tail risk that China can't control. China is a hyper-controlled country. And if social unrest starts to really rip, that's something that they can't easily tame. And to Nico's point, there's a reason they stop publishing the unemployment numbers. They're not good.

And then if you also look at consumer confidence, it's the lowest it's been in forever. People aren't feeling good about job prospects and certainly spending money, which again is part and parcel to stimulating domestic demand. So I think that, you know, again, I mentioned like they did all this stuff ahead of the golden week, make people kind of feel good. They can't let this thing lose momentum or they're, I mean, first of all, you know, mark my words, if they come in soft or like under expectations as it relates to the bazooka, those equity indices are going to get absolutely demolished because the run up in those things has been so high. The fall on the call option side has been unbelievable that you've got to. to imagine these things are going to get smoked on the way down. Yeah, you got you got to think a lot of people actually put the trade on and they're waiting for the, the basuka to take profits, basically. The, as Joe was saying, the basuca could, I mean, they announced on Tuesday they're holding a

news conference on it to be, to quote what they said actually is wide range ranging action plan for implementing the government's stimulus agenda. And one thing is like actually what they've done so far is almost a strictly monetary policy. What comes up is either, like, definitely is fiscal policy, and the question is that there is QE on top of that or not. Yeah, are you guys implying that China hides their economic numbers and manipulates them? If only there was a way to track information in a non-coercible censorship-proof way. Let's move on to another geopolitical, well, some geopolitical things,

particularly, I mean, oil is likely to be impacted what's going on here with Israel. I mean, this looks like it could be broadening out into a wider war. Obviously, Israel saying it's not the U.S. saying it isn't, but you have Yemen, the Houthi and the Yemen coming in and attacking Israel. We know that Israel is now entering Lebanon, going after Hezbollah. They've been in Gaza, fighting with Hamas. Iran is launching attacks. By this time, this comes out, we could hear about an attack that Israel has done on Iran. The number one thing that comes to my mind aside from, like, how awful this is for anyone potentially involved is like oil prices. But I guess like, does anyone have any overarching themes that they want to, they want to talk about with what's going on

here? Well, we should ask the guy who checks the crude oil chart every minute of every day, Nico. Thank you. I mean, look, at the end of the day, what's happening is unprecedented, right? So I think there's an element of complacency, just generally speaking, you know, there is this tendency, particularly by markets, to try to, you know, have knee-jerk reactions, maybe water things down. They said, well, what's changed? You know, we've seen a lot that's been going on. And a lot of the focus, I think, has been, and this from a price action perspective, I think a lot of the focus has been on, you know, the negative China story and the deteriorating global growth. And obviously, the excess supplies, some of the friction that exists within OPEC, you know, we already know about

that too. So that's not adding, you know, to the cause. And with the supply coming back from December when OPEC starts reintroducing, you know, more supply as a result of the recent cuts and extending that because of unstable oil prices. I mean, the flip side of that is quite a binary outcome. And I think that the market basically over the last week really got, you know, caught off guard. I think what was quite telling was, you know, speaking or looking at, you know, prime brokers, looking at net positioning in the futures market. I think it was the most stretched it's ever been in its history in terms of least amount of exposure.

And actually, most of this big smart money hedge funds are not going to name them on here, but you know who the usual suspects are? They're all bullet short. And you know what? Your short oil, you know, flat to small down on the year, with China just having unleashed a bazooka and every government that matters,

economically cutting rates, Like, you know, this is going to be asset inflationary, right? So I think that would have been supportive in any case by itself, but that will take some time to materialize. But I think where the risk has been mispriced is in this, you know, notion that, hey, it's fine. It's an isolated event. I mean, I don't think people really recognize sort of the history, you know, and the different variables at play. But also just, you know, in terms of oil supply. you know, disruption to supply chains. I think that's the biggest threat, obviously. So

wait and see how, you know, Israel responds to Iran. I guess everyone's bracing for it. It's obviously a big day today, right? So remembering the victims of October 7th. But, you know, this thing started a year ago and look at where we've gotten to. So I'm just really surprised that people had the balls to basically short the already depressed crude markets or WTI that's 20% off of its, you know, yearly highs into China QE and into rising geopolitics. I mean, to me, that's nuts. Can you quickly define bullet short? What is what exactly does that mean?

Bullet short is an expression to Joe, I'm sure, will tell you also where, you know, you're either very, very long or bullet short, I, you know, strong conviction 10 out of 10 in terms of the directionality of your portfolio. So I think a lot of people went underweight and then just looking at. future volumes and, you know, speaking to PBEs and looking at what people are doing, broadly speaking, it was pretty shocking to see very complacent sort of consensual positioning, which kind of added, you know, fuel to the fire, if you will, over the last week. Yeah, I mean, I agree a lot with what Nico's saying, because, look, I'll be, I'll be the first

to admit, I suck at trading oil. I've tried it in my career. And I really do feel like you just have to be, you know, it's like golf or something. You just have to laser focus on that one thing and get really, really good at it. And then you start to understand that there's actually more macro involved in the price of oil than just trading it. But as a trader, I looked at the same positioning that you did, Nico. And I was like, I mean, you got to take a shot long here, right? Like, everybody is short. Absolutely for a digital outcome. Exactly. And so, you know, I didn't put any trades on because I've lost enough money trying to trade oil in the past and I know better. I'll stick with less vault assets like crypto. However, you know, the China story is actually really

important here as well. I think this is, you know, to kind of bring it back to what we were talking about previously. If China does full QE, oil should absolutely continue to rip, right? Like, let's discount the Middle East crisis as it relates to, you know, the supply chain potential shocks that could come from, you know, a full-blown Middle Eastern conflict. China is a monster consumer of commodities, like enormous. And if they all of a sudden are flush with cash and want to stimulate their economy, what do you think they're going to buy? Right. Now, I think there's also another case we made that as you look in the United States, the United States is the largest producer of oil now. We're a massive energy-producing country.

We export tons of oil as well. Does that affect our relationship with China, potentially, but probably not. I mean, I think the United States is still wanting to sell its oil to pretty much anybody at this point. And then finally, like, if the Middle East crisis does start to unfortunately spiral out of control, I mean, the trend is your friend at this point. You're not shorting oil into a major catastrophe that could unfold in the Middle East, given the same thing that Nico just mentioned. China QE, Fed is cutting rates and positioning basically in the gutter. It makes absolutely no sense. Now, I've been kind of pounding the table around this concept of where we won't see a reacceleration inflation, and it's hard to see that with a collapse in oil prices.

Well, oil prices are no longer collapsing. And if we have China QE, I think oil still has a potential tail win. But I would absolutely look at the experts like something like Nico, or to my point earlier about me not trading oil anymore, it is one of these markets that is very, very challenging to trade. There's so many moving pieces there. And it's like playing chess. I think the last thing that I'll point out, and this might be a decent segue to talk

about the election, is if Israel was to attack Iran's oil facilities, that could be potentially advantageous to the Trump administration and their real his election team. And so, you know, the Biden administration is technically, Biden is still technically president. They may not want them to do this, right? So I think, you know, we can, we could speculate tinfoil hat this thing, but you have to imagine that there's lines of communication open between the Biden and Harris administration and the folks in Israel specifically around this topic. Because if, for example, they detonate all the of their, you know, or a majority of Iran's oil facilities, that's going to spike crude oil prices. And that is felt at the pump for regular average Joe consumers in the United States.

So I do think there's a little 40 chess that's likely being played behind the scenes as to why you just haven't seen Israel flat out destroy oil facilities. I will say they did destroy some French oil facilities when Macron said what he said, which goes to show how quickly they can decimate. certain aspects of infrastructure or otherwise. Just one quick thing. And then a question for Nigo is an interesting thing about crude is that it trades like a hybrid of Bitcoin and FX, if you think about it. It's mean reverting on a mid too long time frame. At the same time, it has these very directional moves of like one day to two weeks

that they just killed you if you fade them. There's like there's no easier way to lose money than basically being a mean reverting cruel trader in short timeframes. I wanted to ask you views and thoughts on what you think Israel may be doing in the Middle East with Iran and Lebanon going forward. Well, I mean, without getting too much too caught up into like the political ideologies of either, it's such a sensitive topic these days, obviously, but like sticking to, you know, just pure game theory, right?

You have to assume, like we said earlier, that, you know, Israel is going to try and use this opportunity to rewrite the way the Middle East is. You know, that's it. It's as simple as that. I think when you've come this far, I mean, think about the whole, you know, beeper, walkie-talkie thing. That was some real James Bond stuff. You know, I think that everyone was just, like, shocked, you know, at the capabilities. And, you know, they're notoriously known for zero-day viruses that they, you know, phones, tech, all of that stuff. you know, they're pretty damn advanced. And I think that if you've wiped out basically Hamas is non-existent, right? You've wiped out all of the commas for his, Bala. They can't even communicate effectively with each other.

You know, they appointed one dude. You know, they killed the guy that was there for 30 years, appointed the next dude before he even got appointed. He was like axed. So, you know, they're going after them and they're going after them in a big way. So I think, you know, I totally agree with Joe's thesis, the way that you think about the the fact that, you know, there must be some line of communication. I just sometimes question, you know, how effective is that and how much like rope is Israel really taking? Because Netanyahu's a nut. I mean, he's just going for it, right?

Rightly or wrongly, whatever, it is what it is. But, you know, Israel's military doctrine is escalate to de-escalate, right? So I don't think that they're not going to be, you know, pushing the button and trying to basically almost seduce Iran into a war. I mean, The West also has been, you know, it's been no secret that the West has wanted to try and hinder any aspirations Israel has for nuclear capability, right? And over the last couple of years, people haven't been able to take decent measurements at their, you know, the centrifuges to see how enriched the uranium is. And they're getting to levels that are basically can create the payload necessary for a nuclear

weapon. So, you know, is Israel essentially doing the dirty work on behalf of the West? you know, and America behind the scenes is nodding, you know, the seal of approval, or are they really against that? I mean, we talk about going after the oil refineries. Think about the catastrophe and what subsequently happens if they take an even bigger step and go after the nuclear facilities, right? First of all, Iran has already also threatened to retaliate and to basically burn every oil field in the Middle East because it's within the reach of its ballistic missiles program. And secondly, people forget that about 20% of global liquefied natural gas and crude oil comes from the strait of Hormuz, right, that connects the Persian Gulf to the Gulf of Oman.

You know, you don't even have to take over that by putting a barrage of boats. You can put mines that just prevent movement. And, I mean, that creates an immediate escalation, right, for prices just in general. So I think to your point, there's a lot of macro-fundamental tailwinds that are coming its way, namely the fact that all the banks, you know, are cutting rates. China's throwing in the kitchen sink. So that's going to be supportive and asset inflationary. And at the same time, the kicker is the fact that you just can't be short with the Middle East about to blow up.

I mean, you could wake up, you know, over the weekend and from 75 and WTI, you could be at 90 in a blink of a nine. You know, you just don't know. It really is the widow maker. So, you know, I wouldn't be short. A few things, I would say. One, the Beeper thing that you were talking about, I mean, the Washington Post had a great article out that, like, Israel was listening into Hezbo Communications for like nine years. They had access to their Beeper infrastructure communications that were for almost a decade before this.

So, I mean, that's one, that's absolutely insane. And then two, talking about oil prices to just put some numbers that right now we're trading at like $77 a barrel. The high was 86 so far this year. We started earlier this year much more closer to like the 70 number. we got the lowest we got was 9 September 10th right before Chinese stocks started ripping. So there's definitely the correlation there. If you look at the charge, you can see both Chinese stocks and oil ripping right around the same time in early to mid September. The other thing I want to say is like high crude oil prices historically, like no matter what you look at is bad for the U.S.

economy. slows things down. It gets way more expensive than moosa. This is like common sense for the most part, but it really does slow things down. It's really bad. There's a reason that Biden drains some of the reserves to keep oil prices down because he didn't want the economy to go to a halt when prices were up around $86 a barrel this year. That said, we're in a little bit of a different situation than we were in the 70s and 80s, right? Like, we're now net exporters of oil. I don't know how much that will impact it. There's probably, I mean, there's a lot of electric cars, but it's still going to be affected by oil prices. But like, do you think there's going to be a huge, a different impact? Or do you think, like, high crude oil prices could really slow down

the U.S. economy. Yeah. I mean, look, it's hard to make the case that rising crude oil prices isn't, you know, a drag on the U.S. economy, if not the global economy. But you do make an excellent point about the delta between now and the 1970s, given that we're the largest oil producing country in the world and ultimately a net exporter. I mean, the question then arises, do we as Americans or does U.S. policy on energy suggest that, hey, instead of exporting, to our friends and neighbors keep that for us. And what does that do to Brent? What does that do to the price of oil in Southeast Asia and in Europe and in Latin America? Does that actually slow down their economies and then also ultimately allow the United States to further its lead

as the growth engine for, say, the next decade or whatever? I think this is something that is, again, it's a little, you know, Jedi mine trick. I don't want to say tinfoil hat, but if you look at the policies the Biden administration has put in place, coupled with Janet Yellen's approach to the Treasury, it has had a massive impact on China. And, you know, I wrote about this in our piece over this past weekend, the market update for ACE metric. There's this phrase from the Treasury Secretary in 1971. He said, our currency, but it's your problem. And that's kind of what you're seeing play out certainly in China, if not the rest of the world, where kind of call it American exceptionalism dominance from an economic standpoint and a currency standpoint has kind of, quote, put everybody in their

place the past couple of years? Does that extend to energy policy? I don't know. I mean, maybe NICO has a better point of view on this, but I don't think it's crazy to think that if all of a sudden, you know, there's this massive supply shock or the supply chain itself around energy kind of gets choked, that the U.S. would say, you know, maybe we should pull back a little bit on the way that we're exporting oil to continue to support our economy. What do you think, Nico? No, I'm in agreement with you. I think, you know, everything you said makes sense. I mean, at the end of the day, it's really hard to have the foresight to look so far into the future. And sometimes these things take time to trickle through into the economy, right? So you don't really

necessarily know immediately. What we do know is that obviously if you're paying higher prices at the pump, you know, you're likely to try and travel less, right? So I don't think, I think inflation is generally coming down. But I mean, it's really hard to argue with an economy that's already growing at 3% despite the issues that we have. So, you know, I have to admit, and this is someone that didn't really believe in the recovery of the U.S. equity markets last year. Thankfully, he did believe in Bitcoin. But, you know, at the end of the day, I think that it's a tricky one. Oil is going to probably stabilize, I would say, if I had a crystal ball, I think we're fair value of, let's say, Brent should be, definitely above $80, which I think is also psychological

level. I think it might go, you know, it might, I mean, it might rip, but I don't think that that rip will be sustainable for a very long time. So, you know, ultimately, prices at the gas station take time to materialize and it takes time to see, you know, that trickle through the economy. Honestly, I think it's a healthy thing. As long as the economy is also growing at the pace it's growing, you know, it doesn't matter if oil is trading at $80 or $90. And I think, you know, the higher the price of oil, if you minus to strike that golden balance, then you get, you know, you make OPEC plus happy. You make Saudi Arabia happy that, you know, they extract at $13 a barrel, but then their brink even cost is at $85 because of all the subsidies that they offer.

So, you know, I think we're going to end up around fair value, but I think fair value is still a little bit higher than here. And I don't think it's going to have a material impact on the U.S. economy unless you see a prolonged war and a massive escalation, particularly in the Russian Ukraine also, which we haven't touched upon, where, you know, when you mobilize troops, you know, and you start building rockets, you know, you need energy, right? One last thing that I was going to actually say that I remember from the economist, Polzar from Credit Suisse, which I think was quite eloquent. He said that, you know, you can print as much money as you want,

but you can't print oil to heat and you can't print wheat to eat. And I think there are lessons that we learned through some of the supply chain disruptions during COVID, where we really saw that those that held the collateral held the upper hand because they increased their own purchasing power. And I think post sort of the weaponization of the U.S. dollar, there has been a tendency for de-dollarization incentives that have already started in the BRICS nations. And it's very evident. I mean, now China's buying oil in Kwan directly from Saudi Arabia bypassing the dollar system. So is the dollar doomed? No. You know, but ultimately there is a shift

there is a shift underway in the world today and it remains to be seen where this trend will go but I don't think that unless we go into this prolonged state of escalations and war I think so long as the US economy is ticking along it won't matter

one thing to that is a rule of thumb that basically there's a 10 to 1 ratio between US CPI and the crude oil prices right so like a 10% increase in crude oil would translate into a 1% CPI year and year, one-time move. So, yeah, it does matter.

Yeah, and one thing just for any of the crypto-centric people that aren't familiar, Brent crude is basically just the price of a barrel of oil in Europe. And WTI is what we were referring earlier to. So Brent crude's trading at like 81 and change, and the WTI version trading is $77. So there's usually some sort of spread, and sometimes they blow out some of the cases that we were talking about. But the one thing I would say, I'm with you, Nicos,

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Build better. Build on Stellar. Head to Stellar.org to learn more. So let's get into some of that. We can debate whether or not the Fed has helped to engineer a soft landing or whether it was the loosening of the supply issues. But let's get into what's going on with rates and the economy. Let's start with non-farm payrolls. Alex, I know you have some thoughts here. Yeah, well, the payrolls came in extremely well, and to the point that the market, we had 50 basis points,

cats priced in November. And I think it was 50 and 25. Anyhow, we took out one or two cats off this year. And furthermore, we also took out cats out 20, If you look at the distribution of price in cuts for 2025, the market had a very wide tail of, I forgot if it was six cuts or seven cuts, but for basically 2025, we had that many when the Fed signaled through the dots, its projections last FOMC, that they're looking at 100 bips, four cats for 25. So again, the Fed had signaled four cuts for this year and four cuts for next year. And the market had more this year and way more next year. And those basically were the market's expectations of the probability of recession hitting in the U.S.

And with payrolls, that pretty much evaporated very quickly. So you could be saying that as of now, the market, market is payrolls are indicating the Fed is right. That doesn't change the fact that rate cuts are coming. Liquidity is going to be flowing into the market. I think in my opinion is more about the U.S. than China, but it doesn't matter. Both help. Both go in the same direction. It's a reflation story. And that basically what it means, as Nico, I think said earlier on, is it means all assets go up. That's what it means. It means money is coming out of the short-term of the curve, coming out of money markets that's getting basically allocated to equities, bonds, crude,

gold. Equities are a growth story, meaning no recession, long equities. Rates coming down means long-term bonds. Trump is going to have an impact there. Middle East is long crude and gold. Real rates coming down means long gold, and what gives is precisely short-term money, right? Yeah. I think there's about $6 trillion in a ton of money market, it's just waiting to pull the trigger. So, you know, the average Joe Schmoe,

he's going to come in and buy the top or what are perceived top and just keep taking it higher, right? So perversely, also, if you look at history, you're meant to be buying equities every time there's a war. Yeah, that's right.

I mean, I think a couple of thoughts, I largely agree with everything Alex just said. The payrolls number definitely changed our viewed asymmetric on the 50-bifs cut that we were anticipating in November. I was actually on a podcast early last week and basically said, like, I think they'll do 50, barring some boomer of an NFP print. Surely enough, we had a boomer of an NFP print. I think every single bank on the

street was wrong in their estimates and the unemployment rate tick down. So from my perspective, that makes it difficult for the Fed to do 50 in November. Now, remember, nobody thought they were going to do 50 in September either. And there is still another data point that comes this week, which is CPI and PCE. And so does that influence the Fed's decision? Yes, of course. It's another data point. The employment picture has been kind of like, you know, they have a dual mandate, but they feel like largely they've tamed inflation and they've been focusing on the labor market. And so since we had this strengthening in the labor market in the last report, if you just look at that in a vacuum, it has less of a chance for them to do, say, 50 in November. And I'm kind of in this

camp now because I haven't seen. Obviously, the CPI hasn't come out yet. But I think there's another thing that, again, this is kind of the Jedi mind trick 40 chess stuff that's going on potentially behind the scenes. But if China does real QE, well, that actually has an impact on Yellen and Jerome Powell. And if China does like real QE and the kind that has been done with TLTRO and the GFC etc. That is going to, in theory, reverse what is now the 11th straight quarter of deflation in China, which is the longest run in forever in China. I think literally since they've been tracking it, but don't quote me on that. And so if they can actually get out of this deflationary environment and stimulate the economy through QE and cause some internal inflation, that's great. But that can

have an impact on monetary policy as well as the kind of toolkit that Yellen has been utilizing for the past few years. And so there is a case to be made that if China does something to the equivalent of, say, a 50-bips rate cut, not saying they would do that directly, but the equivalent of that, it actually would force the hand of the Fed to do something similar to keep up with that. Because if the United States wants to basically say, hey, we're going to be the growth driver. We let bricks do it the past 20 years. Now it's our turn again, so to speak. They have to actually kind of go toe for toe with what the PBOC actually does. So do I still think 25 as we see here today? Yes. But there is still a case to be made based on a potentially negative CPI print

coupled with what happens out of China directly influencing the Fed and the U.S. Treasury. Yeah, I'll throw some actual, some numbers. Basically what Alex said. that we're pricing, and what Joe said, we're pricing for 25 Bips in November, November 7th, we're pricing for another 25 on the 18th. And as Alex said, we were pricing for four for the rest of the years. They were basically pricing for three to four. But we're still pricing for four next year. So it looks like basically the market thinks we're going to get to around that three and a half percent Fed funds rate by the end of next year, some roundabouts, the end of 2025. Right now we're at 5%. But also the other thing to point out here that I would say is like

The Fed's QT is probably going to stop sometime next year. They're letting money. QT quantity of tightening. Basically, they're letting bonds roll off as they mature rather than rebying them. But at some point, they're going to have to stop. They're going to have to start buying again to maintain their level of reserves sometime next year. And their duration. Yeah, and their duration.

Yeah. So QE will tick up again likely next year, barring some, I don't know, some insane things that possibly happen. Which is almost a certainty at this point. We just don't know what impossible crazy thing is going to happen. Yeah. You know, guys, something of note there that I think is important. The market pricing out additional cuts usually would be bearish. Now it's bullish. It's flipped because those extra cats is actually the market thinking. What I was saying earlier is the market actually pricing a recession in. So we are in not, it's abnormal behavior on the rates market when it comes to basically recently resuscary. assets. Yeah, I will say our Bloomberg economics team and even our rate strategists are becoming more and more worried about the potential for a recession to begin sometime in mid-2020-5. I guess all I'll say

is I hope that they're wrong about their increasing worries, but I guess we'll see. I mean, if we see this massive spike in oil prices like we were talking about that, obviously isn't great. But you need to have a valve. You need to have a valve. You need to have a release valve. It's healthy for the markets, right? The problem is that we've never seen so much debt ever in the world forever. So while inflation has been really helpful because it's eroded the market value of that debt, you know, it doesn't mean that it's not there. It's not going to, we're not going to grow ourselves out of this, you know, crazy amount

of debt. Look at that the GDP ratio is across the board, right? So, you know, you have a lot of, it's good once in a while. I think it's healthy. You know, you don't want to get carried away because that's what asset inflation, you know, can be a self-fulfilling prophecy. And then if people start getting priced out, then you could. but like a lot of, you know, a shit ton of other problems to worry about,

namely the fact that we have a rising wealth gap inequality across the, you know, the Western world. And historically, you know, it doesn't take a genius to figure out that that leads to civil war of sorts, right? So there is an element where, you know, you have to try and get that balance correct. So once in a while to have that release valve kind of let off some steam, let the market cool down and then reaccelerate, it's healthier. If you go up in a straight line, that's what scares me. Yep.

Yeah. I mean, James, I'll do respect to the Bloomberg economics team, but, man, everybody has been calling for a recession every year. Yeah. Like, and I'm just like the Atlanta Fed increased their forecast for GDP last week. I mean, we have enormous CAPEX investment going into mega projects in the United States, right? I don't know. I mean, I'm sure there's some very reasonable reason that folks are saying that there's a chance of a recession next year. But like at some point, you know, people just, you know what? When people stop saying there's going to be a recession, then there's going to be a recession. Because everybody has been consistently wrong on this.

And specifically the U.S. economy continues to do extremely well, even in the face of, you know, record. debt GDP ratios, right? So, I don't know, like, I wasn't going to broach the topic, but since you mentioned it, I was just like, man, look, I hope we don't have a recession either. I don't think we're going to. Like, after the election is over, I've talked to a number of, like, you know, large hedge fund managers and PM's portfolio managers, and they're like, real money, meaning like pension funds, institutions, like, they're going to just plow a ton of money into the markets right after the election is over. because no matter who wins, the view is that the market's going higher.

And in fact, I saw this stunning stat. You know, the number one best absolute return year to date outside of Bitcoin is utilities. People focus so heavily on Mag 7. Mag 7 positioning is the lowest it's been all year right now. So the idea that like the economy is headed for recession, how was that the case given the positioning as well as like, you know, what I first forecast is like enormous amounts of money that's going to flood in the market post-election. It just seems a low, low, low probability. But hey, I want people to keep saying there's a recession so there won't be one.

I think you're on to something, Joe. Also the fact that vol implodes, right? So that's the last sort of event because you've got the Fed two days after that election and then we're done. People just want to close shop and go on holiday, right? Everyone's like, it's been a very volatile year for many people, right? So I think that once Vol implodes, it's the grind higher. And then if the CTA, that's going to pull in the quantum CTA, I'll go guys, right? As the wall comes down, they just keep buying, buying, buying, buying, buying. And the more they buy, the more it suppresses Vol. So you could have a Santa Claus rally out of nowhere for no reason post-election purely on the fact that Vol has collapsed and everyone's like relieved that we've got

all the big systemic risks out of the way. It happens every election. cycle, if you look at the term structure of the VIX, there's always a kink in the term structure right before the election, which makes sense, right? I mean, even if you look at like, you guys have probably seen the myriad charts that have come out showing October seasonals on like a day-to-day basis. And like the last two weeks of October, it tends to trend lower. We saw that starting again today here in the equity markets on Monday, October 7th, right? But then all of a sudden, the election is over. And what happens? It's almost always up to the right. Now, of course, anything could happen. We could have a

constitutional crisis. There's a lot of different things that could take place geopolitically as well during that time. But man, it really feels like Vol's going to get crushed again and we're going to see the same, you know, melt up grind higher. I've seen forecasts of another eight, 10 points, percentage points higher in S&P just for the last two months of this year. I don't think that that's far-fetched. Yeah, I think utilities are crushing it largely because people are betting on utilities having to build out immense power to meet the demands of AI and compute Bitcoin mining, things like that. So that's a large part of the other thing I would say is like one of the biggest things we were hearing all year is like it's been it's a narrow bull market. It's all just the mag seven. And that

has completely changed over the last couple months. Like this is this is completely brought it out. I mean, if you look at the SMB 500, I think it's like 70 something percent or above the 200 day moving average, which is like again like almost a sweet spot. Like you don't want to have like a really low number because that means that it might be a good time to buy. You're in a bare market. What have you. But you don't also want like 95 percent because that might be thinking. through overeating, like not every stock, but like it's a good middle ground where like some companies and stocks are doing really well and some are just having a hard time right now. And that's pretty standard of a way an economy should work. So there's just a lot of

this backdrop. I think I think the real risk here is geopolitical as far as I'm concerned. I mean, I'm obviously not an intense strategist, but that's the only, we keep talking about it. I mean, you go Russia, Ukraine, you've got what's going on in the Middle East. That's the real risk. But like what's going on in the U.S. right now in the broader economy, I mean, aside from the ballooning debt, which obviously is a big thing. That's why we're here talking about this. That's why people are so long Bitcoin and like Bitcoin. But I mean, yeah, overall, I just think it's geopolitical risks.

To your point about the broadening out in the markets, I mean, the equal weighted S&P 500 right now is about one and a half percent off its all time high from two weeks ago. Right. So like, to your point, this is not the headlines, no disrespect to the folks of Bloomberg or CFC, love you guys. Like the headlines are not the story, right? And I think that this only will continue to broaden out into areas of like the Russell 2000, where small caps have been really constrained by a restrictive environment, an interest rate environment. And as those rates continue to come down, I think you're going to see a broadening out of high performance in Russell 2000, right? If you see the equal weighted S&P and see what it has done in just the past call it two months,

certainly the past few weeks since the Fed cut 50. I got to imagine you're probably going to see something similar in the Russell 2000 as rates continue to come down. All right. All right. Let's go to the election. What's going on with the election? I mean, we're four weeks away.

So right now, so if you want to look at what's going on in the markets, I'm looking at predicted and polymarket. And something interesting has happened over the last few days. Basically, Trump has gone on fire with whatever's going on in polymarket. So Trump is at 53.6. That's the time of recording. and Kamala is at 45.8%. So that's like a seven point spread in favor of Trump. But if you look at predict it, it's not the apples to apples, but there's like a two point spread in favor of Kamala

or Kamala, Aris. So basically the two things that most people look at to see what the prediction markets are saying are saying two opposite things. Obviously, they operate differently. But I guess what are your guys' thoughts right now? What's going to the election? Obviously, we've talked about this at length. Trump seems to be way more pro-crypto. I will say I'm not a huge fan of his world liberty financial stuff. I wish he just wouldn't do that, but here we are. I'll turn it over to you, Alex. What are your thoughts? I'm what's going to the election and what's going on prediction markets. Yeah. Well, first of all, Polymarket and predicted, polymarket has a very strong right-ling bias. Agreed. And predicted, you could even say that

is the opposite. Furthermore, there are very small markets, especially predicted. There's very little liquidity. So to be honest, I mean, I know we like to look at this a lot and it's fun and it's entertaining. It could even be used for justifying various biases throughout time. I prefer to actually ignore those two things. And as I'm trading there, which I don't do. For me, the elections are a coin toss. I mean, I mean, thinking this for last a couple months, I got, as most of us here, very excited about certainty. Certainty is always good, which was basically right after the the assassination attempt, that basically it seemed like Trump was given and Kamala came in and she turned around very quickly and proved me wrong. So since then, it really feels that it's a

coin toss that is going to be defined based on turnout. That basically most people, they're already made up their minds and it's just a matter of basically bringing out the guys at the very end, guys and gals, to vote for you. And that's basically a marketing thing. I do wonder if the hurricanes, that had been, it's actually impressed what a disaster. It's impressive. It's like really, really bad, really saddening. But I do wonder if that's going to affect, for example, North Carolina, which has been like deeply affected. North Carolina is a swing state. So that could help Trump a little bit. But what I'm looking at the most is basically a pulse on swing states polls and swing stakes polls on average.

They are kind of like very, very tight and half going for Trump and half going for camera. So it's a coin toss. I completely agree with Alex on this. This has been my view. More or less since Harris became the nominee for the Democratic Party, this is a coin flip. And, you know, Alex and I are in a telegram chat together with some other folks. I'm sure you guys are all in various chat rooms and certainly see what's going on on Twitter as a relation to the polls and prediction markets. I just don't think any of that stuff has any signal anymore.

And I think part of it has to do with my view on what actually matters in elections now in a kind of call it a post-truth era. There's two things that really stand out to me. One is how much fucking money have you raised? right? Like whether you like it or not, money wins elections in the United States. It's a fact. And Harris is a fundraising machine. She raised, I think, half a billion dollars in September alone. That's an enormous amount of money to raise in one month. Now, it's not that the Trump campaign hasn't raised any money, but money matters a lot in elections in the United States. And historically, not always, but historically, the candidate that raises the most money tends to actually win.

The second piece, which is way harder to quantitatively track, is propaganda. And so, for example, if you look at the type of propaganda, and by the way, the term propaganda has sort of a negative connotation, propaganda, from my perspective, is just content that's created to manufacture consent amongst a particular, you know, set of, an audience. And so what I've noticed is that on the kind of called the Hollywood, you know, comedic sides of things, they are actively downplaying Trump and supporting Kamala Harris to the extent that I think I saw in Bill Barr a few weeks ago, him coming out and saying, you know, Bitcoin is like so bad for the environment, this and that, which really validated my hypothesis that they were going to use this as a way to divide people because

Trump being pro-crypto would be like, oh, let's be anti-crypto or make crypto look bad so people don't vote for Trump. The propaganda machine for the Harris campaign right now is unstoppable. And it is unfortunate that that's the case, but it's true. And so, you know, people's reality is their perception of that. And if they're being constantly fed information, whether it's from talk shows, it's from comedy shows, it's from the actual news, quote-unquote news itself, podcasts, Yes, right? If they get consistently fed this type of information, it doesn't matter if it's true. They're going to likely be, if they are actually swing voters, influenced one way or the other. On the Trump side, they don't have a reach beyond, say, maybe Fox News into mainstream media and

certainly not the talk shows and comedy shows. That's just a fact. You can, you could probably quantify that aspect. What they do actually have is a really powerful grassroots, I would say, like citizen journalism approach. The issue with this is there's also a lot of state-sponsored misinformation. I won't name the states, but you can imagine where it comes from. So it's very difficult to discern between what is actually truth and what is not. And so whoever wins the fundraising war and the propaganda war is likely going to win. And that's why I still think from Alex's perspective, this is a coin flip.

It still is, I'm going to be speaking at permission this week, permissionless this week in Salt Lake. I guarantee I'm going to get asked this question on all three panels, what's going to have with the election? And the reality is it doesn't actually matter because it's a coin flip. And after the election's over, then we have certainty again in the market. I think I mentioned this maybe a couple weeks ago. The vector for crypto as it relates to the election, the direction is the same. It's what is the speed that we move at? With a Trump win, clearly we're moving to 100K Bitcoin faster.

It's inevitable. even if he doesn't enact any of the policies he talked about, you know, perception is reality. And if it's a Harris win, it's probably more status quo. It's slower moving. The direction is still the same, but the pace is going to be a little less. Yeah, I will say Mark Cuban would argue that it will be better than Biden. I mean, seems to be that she says she's going to get rid of Gensler, but I mean, we'll see what actions actually happen.

Before, Alex, I wanted also add, I talked about what the markets were saying. Nate Silver, who I'm assuming most people know who that is, is basically also saying this is a coin flip. He has Harris at 49.2 and Trump at 46.2, which is essentially a coin flip. But yeah, go ahead, Alex. Sorry. Yeah, just on election night, I think is, as Joe is saying, after uncertainties removed, we change years. We go from election and other topics to mainly asset reflation, liquidity. But the election matters. So I think it's very likely that basically it's, Trump winning, we just, on crypto, at least, and slightly as well on equities, we just fly.

Like giving zero time to people to basically add risk to their books. If Harris, on the contrary, if she wins, I would expect a dip, basically dump and pump. I don't know if it's within the same day or within a week or something like that. It's kind of like a miniature version of election. Trump's 2016. You know what the beauty of that, though, is that in any case, it doesn't really matter. It's the velocity that Joe was talking about that matters. I think the trajectory is very clear. And ultimately, both governments are still going

to have to do QE. They're still going to have to cut rates. It's this vicious negative feedback loop that we're sort of like in the beginning again. We don't know whether or not we've deflated enough, given back enough. Maybe we're going to, you know, correct in percent. I don't know. Maybe geopolitics is going to, you know, create a blip. But we're definitely. I don't think about to blow up. And ultimately, the path, that trajectory remains the same, you know. Especially for things like Bitcoin, man. Like, the more I think about it, you know, you want to own sort of hard assets.

I think, you know, as a lot of these up-and-coming nations, you know, the bricks or the rise of the east, whatever you want to call it, as everyone sort of looks to diversify and de-dollarize slightly, I think the whole notion of what was perceived as, you know, I'm going to have all everything in a, basket of FX reserves. You know, that's quickly changing now into like, okay, well, that basket of FX reserves is now slightly smaller and I'm going to allocate another X percentage to hard assets, gold, commodities. I'm going to buy oil, hopefully by Bitcoin. Actually, I want to make a pretty crazy prediction that by the end of next year, I've got a bet on with a friend of mine that at least one major central bank is going to announce that they have bought one of the Bitcoin ETFs, which is the easiest way to get an on-ramp. And I think the two

most likely contenders, given a shitstorm that we're seeing, is one, the Bank of Japan for obvious reasons. And I think, two, the Swiss National Bank, because they're savvy, and they already own a significant portfolio in equities, and it would just be diversifying. But the minute you give it that credibility is the minute that you've just rewritten the rules for the game. We talked about you, Joe, I think it was Joe that talked about the BRICS nations like going off of using dollars in their trades. I mean, earlier in September, there was an article basically that Russia and India are like trading using like potatoes and fruit and stuff. And they're actually just exchanging back and forth rather than using a middleman or any sort of currency or anything. And I was like, honestly, like can't use gold because that's so expensive to transport.

They're not going to just trade gold back and forth. But I was like, honestly, that's like the perfect U case for like some cryptocurrency. whether that's Bitcoin or what have you. Obviously, there's volatility there. I'm like, I'm surprised like this hasn't even come into like the topic conversation in that world. But I guess we're just not there. James, imagine for a moment that Russia pegs oil to gold. Exactly.

That's where I was going. Yeah. I mean, look, like, think about it this way, right? If you look at Southeast Asian countries stockpiling an accumulation of gold over the past, call it, I don't know, seven to 10 years, they've seen what a strong dollar can do. And then everybody saw what happened with Russia and being removed from the SWIFT banking system. And, you know, to be fair, if I'm a country like Russia and I want to sell my oil to China, do I want you on?

Probably not. Look at that country, right? Like, look at the deflationary environment that they're in. What would you take instead? You'd probably take gold. And so, you know, gold trading, you know, all times. times highs over the past few weeks, you know, retrace a little bit, but not very much. I think there's a case to be made that, and I do think some, some of these trades have actually

taken place, basically using gold as a medium of exchange to, to effectively allow people to purchase commodities. It's not very efficient, but yeah. It's super. And this is, and this is like, you know, for us in crypto and Bitcoin, we're looking at this and go, could you just use Bitcoin because it's so much easier and like, you know, faster and like all this kind of stuff, right? Now, I do think this week, whether you like it or not, Russia is supposed to start utilizing

cryptocurrencies for cross-border payments. A lot of people in the United States and the Western world aren't going to like that. But, I mean, this is what happens when you remove somebody from the Swiss banking system. And I'm not saying, I'm not justifying either way. This is just a natural result of it. But more importantly, like, it actually is a better system. I have this really ridiculous anecdote. So this young woman who is my babysitter for my two kids, she's a senior in high school.

She just turned 18. And she was, you know, complaining to me about Venmo. And I was like, do you have, you know, a crypto wallet? And she's like, no, like, I've heard about it, but I haven't done anything. I kind of spun her up with, you know, I had her download Phantom. I was like, here, here's a little bit of salon. I'll show you how it works, et cetera. She only wants me to pay her in USC now.

Right? She's like, and she texted me when she was babysitting me, like, kids over the weekend. She was like, hey, do you know how long it's going to take for my money to end up in Bank of America since I sent it out of Coinbase? I was like, you have to wait for the banks to open. And she's like, this is ridiculous. I'm like, I know. And so whether it's Russia doing cross-border payments with crypto and or other nations going down this route, especially if they're already transaction thing in gold, to, you know, Gen Ziers that are seniors in high school going like, I can't even use Venmo regularly because of XYZ reason.

Why would I not use anything but crypto? It feels like there's going to be more of this, you know, bottoms up, top down approach to the kind of mass adoption of crypto that we've all been, I think, waiting for. Yeah. I mean, on the gold thing, like Bloomberg had an article out today, which has been talked about a lot. Like Costco is selling hundreds of millions of dollars of gold in one ounce

coins and like little bars every single quarter. It's kind of insane. So, like, people are buying this stuff hand over and fist. They were buying it before a gold price started running up. I mean, everyone's so much central banks are buying more and more gold. This year, it's obviously, I mean, over 30% this year. It's just kind of a little insane. Gold is outperforming the S&P 500 year-to-date.

Think about that. That's nuts. We're running up on time. Do you want to talk about the Vicks at all or you think? I think we want to talk about what's going on. I think we could talk briefly about meme. So it's like they're running. Some of them are having some absolutely insane runs.

Yeah. I mean, yeah, there's a few names. I don't know if you want to name them or not. Why not? I mean, they're really right. I mean, sorry, guys. If you're buying something after just did 50X in a month, you're not doing it right, right? You need to find the next thing or wait for the deep.

But yeah, there's like something called like XPX 6900. Hats off to Murad for like the way I say it's like he's triggered this run. and it's really impressive on very high volume. XPX-900, with what else, Popcat, it's like some funky names out there. And the rationale for these moves is partly the fact that

if you've been in the market this year, most people didn't make money in crypto as they were on either Bitcoin or mincoins, on certain mimcoins. So when you got new people coming into the market, like a second wave, by the way, I'm paraphrasing huge.

I just listened to him talk about this and I was like, yeah, it doesn't make sense. If you have a second wave of retail, a bigger one, you turn around and you talk to your cousin and you talk to people, you know, and say, okay, how do I make money of this? And they mentioned you meme coins, specific names. And the other thing that I think is very important is most, as we call them BC coins, like really like the great majority, they had years where, they literally went down like 75 to 99%, more like all of them, more like 85 to 95% down. It's been a real bloodbath out there.

And that's partially due to the fact that too many of these teams, they had a combination of bad lack, poor tokenomics, and unfortunately way too many cases, like really bad management of investor funds, token funds, and in many cases outright fraud. So the perception or the narrative in the market right now is that meme coins are a more fair asset, which actually I deeply disagree with that, but perception matters, right? That there are more fair assets where you don't have pre-sailers and insiders and prod investors basically dumping on you. Anyhow, a short TLDR is like, you look at those charts, those meme coins are really running.

And I think they would outperform if what we're, talking about is right, at least in the short term, like, say, three months. Yeah, I mean, look, I obviously have been in meme coins for a while. I've somehow gotten pigeonholed as the meme coin guy, but I'm definitely not. At least I hope. Yeah. No joke. I mean, even this morning, I got an email asking me to be on a third speaking session at permission lists, and it's literally the title is, look, like, should institutions invest in meme coins?

And I mean, it's wild to think that this is where we're at, the year of the Bitcoin and Ethereum spot ETFs by the largest, you know, asset managers on the planet. The talk that Marad gave at token 2049, irrespective of you know who this guy is, yes, he blew up his fun in 2020. You know, he's got some pretty eccentric views on meme coins as cults and this sort of stuff. Doesn't matter. I think there's a couple of key takeaways from his talk that I do agree with. One is that the token is the product. And for a long time, you've had VCs raise tons of money and invest in projects that retail could not get their hands on and got in at very favorable terms. I'm one of these, by the way, but certainly in last cycle they did.

And they also bloviated through blog posts and LP meetings as to why these things were the greatest things since sliced bread. And you saw valuations wrote up dramatically in 2021 for all kinds of reasons, only to see those tokens today wildly outperform tokens that literally have no product. And so if you're a company or a protocol, you have three things to manage, community, the literal technology product itself and the token. Well, what does a meme coin have? Community and the token. So they're at an advantage relative to any project in crypto.

There's no technology to manage, right? Furthermore, anybody can launch a meme coin. Click two buttons on Pump.com or FOMO 3D and boom, you've got a meme point. It's that simple. Now, there's some nuance there, obviously, but you catch the drift here relative to, I want to start a technology project. I need to domicile it in the Caymans or Panama Foundation, all of these other things, these kind of hurdles that are in front of you as a founder,

when somebody could just create a meme coin. Furthermore, I do think that meme coins have by far and away onboarded way more people into crypto this year than probably anything else has. I don't know of another reason why people are going to go learn and adopt crypto and play around with it beyond my babysitter use case, right? To like, I don't know what they're going to do. They're going to stake their Ethereum. They don't even know what that means, right? But they know what gambling is and they know what speculation is. And that's what meme coins provide, right? They provide this kind of 24-7 casino-like environment, which I've said many times in the past,

ends up leading to other new use cases. So to Alex's point, these meme coins are ripping. There is a case we made that funds that don't have exposure to this for whatever reason are going to underperform. And I'm not suggesting every fund out there should go and buy like a huge basket of meme coins because the realized vol in these things is just, impossible to stomach. You watch them rip and you're seeing everybody else owning them getting rich and you're like, I should buy some and then what happens? It just faceplants on you, right? So there is, I do think, you know,

I talked about this on another podcast last week. There's three categories of meme coins is how people, at least how I think about them. There's your blue chips. These are ones that I qualify as billion dollar market cap or above and have sustained that market cap. There's pre-blue chips. These are things that are probably in the range of 100 to 900 plus million market cap that haven't really got to a billion yet. And then there's everybody's favorites, which the technical term is called shitters. These are your nano-cap, like 10,000 million market cap coins that have tiny amounts of liquidity. But all meme coins tend to start out this way, right?

Like whiff, I think, went from like a thousand Xers. Exactly. You start off with a few hundred thousand dollar market cap. And before you know it, you're over $3 billion or whatever. I have to say, that's a slice of the market that is just remarkable. Like, if you think about what you're buying, because there's literally, you know, hand on heart, I've got no idea when it comes to meme coins, right? I'm like sort of a Bitcoin quasi from the macro-esque kind of.

But I totally recognize that, you know, it's become almost a part of the social fabric of the investing community, you know? You kind of have to own a slice of it if you want to kind of be in the game. It's actually, it's the brand. You're buying a brand. What kind of brand? It doesn't matter. I don't know. If the branding is good and there's a narrative behind it, people are going to buy it.

And it's almost like a cultural thing. It's like a cult that I'm really surprised. I'm really surprised, I have to say. I mean, you could say DJT is a mincoyne, right? The Trump stock is up today. I think it's up like 15% on there you go. Yeah. But Joe, do you think that this continues? Do you think it continues to grow in terms of like the, and they experience the same rapid growth? that we've seen over the last year or so? Absolutely.

I may be obviously biased in this view, but I have been pitched dozens of startups trying to do very interesting things, specifically around meme coins. The entertainment industry is very much paying attention to meme coins. The headlines that the media loves to put out there to drive traffic to their sites, you know,

kid puts $2,000, into Moudang and makes $9 million, right? Like those headlines, they're not going to stop coming, right? And as long as those keep coming, you're going to have people drawn into it. It's just like this, you know, the school bus driver buys 20 bucks worth of lottery tickets and wins a hundred million bucks or something. Like the media cannot help themselves with these types of headlines and stories. And that draws people in and think, hey, that could be me too.

Oh, and also, like, you know, what else am I doing on my phone while I'm watching football on a Saturday or something, right? Like, it's that type of mentality that is going to cause this thing to continue to explode. I honestly don't think that there's a, there's a model or a method you can apply to the size and scale of what will happen when you can programmatically tokenize culture. That is what meme coins are, you know, this this mudang. It's what is it? like a baby hippo. I don't even know entirely what it is. It doesn't matter, right? It's some cute picture of a hippo. People meme the hell out of it. And boom, it's like multi-billion dollar mark cap listed on all these top exchanges. How the hell does that happen? What we're doing is we're taking

kind of like the kind of hive mentality of the internet and programmatically through software, tokenizing it, creating meme coins, and then distributing it around the world at the speed of light. no one has a model for that. And so that's why I think like when I hear people, I saw whatever the guy's name is Vance from some VC firm was saying like, oh, pump dot fun is over. The meme coins slow down. It's over.

Solana's going to go back to zero or whatever. Nonsense. It's complete nonsense. It just shows a fundamental misunderstanding of what is happening with the tokenization of internet culture in real time. Yeah, I mean, there's one thing on here. where I am not the person to be talking about and it's MNcoins.

I get what you're saying and I pulled it back in, but I just like, I just don't really care. You know what? You're going to happen. No, no, no, James, you're going to have to start covering it

because Bonk has an ETP coming out. Is there an ETF mincoy? BBJ, BBG ETF. Maybe something. I'm checking here. I guarantee you. I guarantee you someone.

one's going to create on this episode. All right. Last topic. This is a long one. So let's move on from being clients to something a little more hardy. The HBO documentary is released tomorrow night where they have claimed to have found Satoshi Nakamoto. One, I guess like real quick, let's keep this real short.

Let's give your like a one minute thought on like what this is doing and who do you think it's going to name. I'll just say real quick, there's a polymarket odds. I didn't realize this until just checking it 10 minutes ago. I thought it was going to be last. Sassiman, who was like he was at 40% as of this morning. But now Nick Sabao is at the top at 28%. Adam back is third at 15% and how thin he is fourth at 3.3% on polymarket.

So one, I guess I'll start real quick and be like I'm so, I have very low expectations here. I mean, this has been so heavily researched. And honestly, I think it'd be better if we don't actually know who created Bitcoin at this point because it's evolved into something so much more. But I mean, I'm surprised the CIA NHS, the NHS, CIA, NSA Lab League, like, his theory is not here, but whatever. Yeah, I don't know. I just think it'd be better off if we didn't know. Like, I don't really want to know who Satoshi Nakamoto was.

I don't want to know what his, like, sports teams were. Like, I'd rather just, he's better off as a mythical figure or a group of people or something in my mind. But that's all I'll say. I thought they were going to say Lent Assamon. So, but yeah, oh. Hey, so, yeah, let me ask you a question. What is HBO's business model? Clicks, really, views.

And subscriptions, right? And so think about it. Do you think if the NSA or the CIA or any government agency for that matter, the IDF, etc, knew the actual, like actually knew who Satoshi Nakamoto was that it would end up in a documentary on HBO? Like, this is complete nonsense. I'm sorry, like, you know. by the time this airs, it'll be on HBO and people are going to be like, everyone's going to watch it, and then everyone's going to be so disappointed. Because it's going to be nonsense again, right?

Like, there's just, it makes absolutely no sense that some guy or gal pitched HBO, this story, they bought it and said, we have the guy or gal or team or whatever is Satoshi Nakamoto. There's just no way this is true. I'm sorry. All of those predictions are just, I think it's free money to short all of them. unless Craig Wright is directing it. That is fair. That's a good point.

She's at less than 1% odds. So maybe you buy Craig Wright and short everything else. Any other thoughts real quick? No, no views there. I don't think there's something funny. It's like people started getting bearish about it. It's like, oh, this is going to impact the market. It's so bearish that we find Satoshi.

I don't think we're going to find Satoshi. Even if we do, I don't think it matters at all for prices. And if I had to guess from those names, maybe Fini, maybe back, but I have no idea. The only way it's bearish is if it actually unlocks the Satoshi coins. Like if they get unlocked and start moving around because it actually is, this person, you start selling it. It'll make some people nervous. Yeah, yeah, that's about it. Like, that's the only way I could imagine this.

Like, I think we're all completely in agreement here. All right, two last things. One, Joe already mentioned he'll be at permission list this week. So if you're listening to this, go watch some of Joe's panels. He's speaking three times. I'm only speaking once. This is a little commercial. I will be debating.

I will be debating Jim Bianco on Wednesday morning at 1030 about the success or failure of the Bitcoin ETFs. But I'll be around all week. So reach out. And then lastly, we mentioned it briefly. Hark goes out to anyone who was impacted by the Hurricane Helene that hit the Western North Carolina. And also, if you're on the west coast of Florida right now after you just had to deal with the lean. And Milton is, as of today, went from like a category three to a category five storm in like less than five hours, which is just absurd. Good luck.

Our thoughts are with you, I guess is all I really say. Because it really is, it's looking rather scary. So anything, you guys have anything to add? No, I think we good. All right, guys. Thanks for joining us for this episode of Bits and Bips. We'll be back in two weeks to discuss more about how the worlds of crypto and macro are colliding. Till then.