We Study Billionaires - The Investor’s Podcast Network - BTC136: The FED Pause & Q2 Current Events w/ Luke Gromen (Bitcoin Podcast)

Episode Date: June 28, 2023

Preston Pysh and Luke Gromen talks about the current events unfolding around the Fed’s current rate hike pause, whether this is it or will they keep on tightening in future meetings. They talk about the energy market, its impact on treasury yields, the Bitcoin shift that’s currently taking place, and more. IN THIS EPISODE, YOU’LL LEARN: 00:00 - Intro 01:26 - The FED recently paused with their efforts to raise interest rates - what's happening? 04:08 - Everyone's talking about the TGA needing refilled, what's actually happening? 15:14 - How does the US Government need to issue 2.1 Trillion in the second half of 2023 and what's the impact? 30:03 - What is happening with the current number of cardboard boxes and why is it important? 37:52 - What's happening in the energy market right now? 59:14 - Luke's thoughts on Blackrock Bitcoin ETF. 01:04:25 - What's happening in US - China Relations right now? BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Luke Gromen's Newsletter. Luke's Books on Amazon. Luke's company FFTT. Related episode: Listen to BTC101: 4th Quarter Macro Overview w/ Luke Gromen, or watch the video. Related episode: Listen to BTC067: Russia Ukraine War & Global Macro Impacts w/ Luke Gromen, or watch the video.   NEW TO THE SHOW? Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts.     SPONSORS Support our free podcast by supporting our sponsors: River Toyota Range Rover Fundrise AT&T The Bitcoin Way USPS American Express Onramp SimpleMining Public Vacasa Shopify Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. Today we have back one of our most popular guests with Luke Roman. Luke is a super intelligent macro and geopolitical thinker. And on today's show, we cover all the drama currently unfolding around the Fed's current rate hike pause, whether this is it or will they keep on tightening in future meetings, how the Treasury is going to issue potentially $2.1 trillion of additional debt just in the second half of 2023 and what impact that might have. We talk about the energy market, its impact on treasury

yields, the Bitcoin shift that's currently taking place that was initiated with Black Rocks filing for a Bitcoin spot ETF and many other legacy financial businesses trying to enter the fold into the Bitcoin exchange market. This isn't one you're going to want to miss. And so without further delay, here's my chat with Mr. Luke Roman. Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey, everyone. Welcome back to the show.

I'm here with Luke Grohman. Luke, great to have you. Man, I got a lot of questions for you today. Thanks for me back up, Preston. It's great to be here. It's great to see you. Yeah, great to see you. So I think the first thing on everybody's mind is, so the Fed paused, are they pausing here

and are they actually going to start off? up like they're flexing that they're going to do? Or is this it? Are they done hiking? How do you see this kind of playing out from here? I see this as the latest attempt to ride two horses with one ass, as you and I've been talking about for a number of years. And to their credit, by and large, they've done a pretty good job of stringing the salon.

And what I mean by that is that they are into yet another intractable situation, which is to say, if they keep raising rates, they're going to make banking system strains worse, summer debt strains worse, commercial real estate worse, venture capital worse, and risk very much a nonlinear crisis of some description on the downside that we got a little glimpse of in March. at the same time, we still have inflation. The headline is whatever it is, 5.3 or 4%. Yes, it's come down. A lot of the headline decline has been driven by energy, which is, as you will probably talk about in a bit, maybe about to start going against them in coming months. Inflation is still too high.

And so they don't want to just say we're done. And so I think what they're trying to do is sort of ride two horses, one ass, split the baby, whatever, whatever metaphor you want to use, which is, okay, we're going to pause to try to sort of give the strains a chance to get their feet under them, while at the same time promising to get more aggressive or still stay aggressive in the back half of the year with the 50 basis points that they talked about with the dot plot that they still have on the menu, I guess. So I think that's my read of what they're trying to do, and we'll see if it works. Coming out of the debt ceiling issue, the general consensus on Bitcoin Twitter, traditional finance Twitter was this idea that they had the refill the Treasury general account. You even went a step further in your weekly report, and you looked at the second half of 2023. And this is a number that was way bigger than anything else that I had read anywhere else. and you said that you're expecting a $2.1 trillion dollar U.S. Treasury issuance in the second half of

2023. And here's the math on it for people that are wondering how you came up with this number. 1.1 trillion of it is just U.S. fiscal deficit, another half a trillion to refill the TGA with the general account, and another half a trillion for the Fed quantitative tightening that's currently taking place for a total of $2.1 trillion. Do you still stand by this? number, because this was probably like a month ago that you published this number, do you still stand by this number? And more importantly, the reason everybody's talking about this is because they're saying it's going to be a liquidity suck in the second half of the year.

And if it's truly a liquidity suck, this would not be good for risk on assets. And to date, since they've got through the deficit ceiling, it's been anything of the sort. The equity markets have ripped, absolutely ripped. Talk to us about what's going on here because this is crazy, Luke. It's been confusing to me. I stand by the number, particularly if you get the dollar rising, then you could even add to that number, right? Because we saw last year when the dollar gets strong foreigners sell treasuries, so

your net effective issuance. So I think the dynamics are still there. I think there's two offsets. I think, you know, the reverse repo rundown that you can get some liquidity to basically shift dollars from sort of the left pocket to the right pocket into the TGA and therefore not pull down on bank reserves, not pull. There is an element of that, I think, that is, in my view, it's timing. In other words, you can do that for a bit and there's some bidding up of, you know, relative rates to get the money from the left pocket to the right pocket, so to speak. But that can

buy some time. I think the bigger factor in terms of explaining what we've seen with the market just ripping despite all of that is, I think, positioning is I think, unfortunately, myself included in there, a lot of people have identified this potential liquidity suck as a serious issue. I've also added on, hey, you're going to have commercial real estate. You're going to be needing to do a lot of refinancing, et cetera, at much higher rates. You're going to venture capital and need you do the same. So the aggregate liquidity suck at much higher rates in the back half of this year, I think is still absolutely a key story, but I think it was a key story that everybody knew about and wasn't

positioned for in February when the market was ripping, hey, everything's great, great, great, and then, ooh, God, banking, March, April, markets were pretty tumultuous. And then I think everybody sort of swung to that side. I piled on that on May. I still think it's a real issue when you look out over the next six months. So I think it's really a timing standpoint of, hey, we have to unwind some positioning around everybody who's positioned for this liquidity suck. And so now you've kind of had like this short squeeze higher when it hasn't happened instantly. And I still think it's going to happen. But I just think it's a timing and a positioning issue, I guess, if you will, in terms of when we're going to start to see it play out.

So you're thinking it's more of a short squeeze because people weren't positioned for it to start moving up in the lag. They weren't accounting for the lag of what was happening. When you're looking at this move, doesn't it seem or look like maybe it's a little overdone? I mean, we're talking right now. It's the 20th of June right now. And it seems like this move might be a little overdone, maybe time for a correction. But would you say that the general move in equities is going to continue to bid from here? Because I can tell you from a momentum standpoint, everything that I'm looking at is suggesting that the momentum has shifted.

Like the selloff that we had in 2022 is over from a momentum standpoint. And it really is feeling and looking, you know, depending on which metrics you're using from a momentum standpoint. But it sure looks like the momentum is done on the bare market. And we're now on a bull market with respect to equities only. Interesting. Yeah. I think you still have to work through this credit issues. I think you're the liquidity suck of government, the liquidity.

equity suck of CRE, liquidity of VC net. Where could I be wrong is to the extent there is a shift in where we are going from a tipping point where these deficits just go to straight fiscal dominance, basically, where these deficits are now just inflationary and equity starts to reflect that. But I still think we're going to get, I still think the amount of liquidity suck you've got to have refill TGA, what's going on with deficits. what's going on with commercial real estate VC. And then I think what's going on with energy as well, that to me, when I said before,

everything, you know, I think the CRE VC fiscal is still, I think it's still, you know, the TGA, the liquidity sector, I think is very well understood. So those factors, I think are all very well understood. I think those are priced in. What I don't think is priced in is those three factors in the context of an energy price it starts rising and there's not a thing the government can do about it to get it back down with SPR, with shale. And then you start talking about second half of the year where, uh-oh, headline inflation is moving back up. Headlight, the inflation's back to six. It's back to seven.

And that, I think, is what is not priced in at all at this point, is really the overlap of that credit issue with what I think is likely to happen with headline inflation around energy specifically. I want to get into the energy piece and how this. This equates back to the bond market. But before we go there, I guess I'm really trying to zoom out and trying to understand why we're seeing what we're seeing in risk on equities. And you're also seeing it with gold. You're seeing it with Bitcoin.

Where does all this buying power that has manifest itself that has been jam-packed into fixed income for the last 40 years? It has to go somewhere. There's nowhere else for it to go. And I think anybody in fixed income is looking at it right now. outlook, and they're saying, they can't recover from this. They're not going to be able to control this. Is what I think the broader market is saying when they're looking at fixed income bonds. They're saying, none of this is under control. This has to keep selling off. They have to

monetize this debt collectively across the G7, right? I guess this is the question. Are fixed income investors, have they finally figured it out that there's no end in sight and that they're the patsy at the table? And they're now trying to front run that buying power. into something that gives them some type of scarcity. And that's either equities or that's gold and Bitcoin. Like that's the only place you can go. PE ratios, do they even matter, Luke? Do they even matter at this point if the fixed income market is that much of a disaster

and that's the general consensus as to what's happening? That is the $64,000 question. And as you know, this is something we've been talking about for some time, is that ultimately, you know, my view's long bend, ultimately the bond market's going to wake up and say, oh, God, we're the sucker at the card table and we need to squeeze into, like you said, equity, gold, Bitcoin, real estate, et cetera. And is it possible it's now? It is.

It is. And that's, I think, you raise a really good point in bringing that up, which is, it's so easy to get focused on, okay, here's the credit crunch. And if everybody knows the credit crunch is coming, then it's, you know, it's a lot of, it's the credit crunch no longer is going to be priced. You know, that's discounted. So what's the second derivative to the credit crunch? The second derivative of the credit crunch is, is, are they going to let the system

collapse in that credit crunch or are they going to go back to printing? And we know what they're going to do. The Fed has shown its hand. They fed showed its hand in March. Fed had a chance to end inflation now. All they had to do was stand aside. Say, Oprah, you've got all that money in Silicon Valley Bank and unsecured deposits. Good buy.

But we'll be goodbye. And if you'd have done that and you'd let a bank run happen and you wipe out on secured depositors, you basically take all that currency you created over the last, however many years, certainly a lot of it in the last three. And a big chunk of it goes, in one instant. And you would end inflation now. That was the option for the Fed ending inflation. And you get policy makers say, and a lot of account say, well, that was too draconian.

You can't do that. you can't resist on the bank's too big to affect. That's fine. And I tend to agree because there's systemic political issues of just letting it all go poof. However, there's no half pregnant. You either let it all go poof or you're now an inflationary regime. You're now in an Argentine with U.S. characteristics regime. And when you layer on sort of the excitement about AI, like the thing that's been making me

most uncomfortable about this sort of this next three to six months, hey, there's this credit contract coming is exactly what you describe, which is, what if we cross the Rubicon? What if we cross the Rubicon in March where now the bond market goes, okay, they're not going to let banks fail and they're not going to let the treasury market go get too bumpy. And if that's the case, why do I own duration? Why do I own bonds? And to your point, you're starting to see signs of it again. Like I was looking at Charcester that the 10-year guilt on the UK just broke out higher

September high. Where things were breaking. We're things were breaking. And we haven't even gotten to the oil part of this movie yet. And that's why when you read what we write, a lot of is this barbell approach of like, I have very high conviction in how this movie is going to end, which is they are going to print it all. They're going to do yield curb control.

They're going to basically make borrowing. They're taking real rates way more negative than anybody thinks possible. Negative 15% like they did at the end of World War II. be more via some measure of printing yield curb control, et cetera, et cetera. And bondholders are going to get killed on a real basis. It'll be a debt jubilee or restructuring on a real basis. And I've always said, though, is particularly in the last year, year and a half. Like, the short run, I have no conviction.

As much conviction as I have very high conviction at the end game, the short run, no conviction. And so it's that flexibility of that. But I would readily concede, is it possible we've reached that tipping point where the bond market is waking up again. Yeah, I would fully concede that and that that's possible. And you've got some inflationary factors that could be waking them up as well, right? Number one, the increasingly, the increasing idea, you know, it's talked about by Warren Mosler, Lynn Alden, myself, some others that deficits are inflationary. Rate hikes are now inflationary because they're adding to the deficit. And then some of the stuff that we've written about recently in terms of

energy, peak cheap energy and shale possibly rolling over that I think is another inflationary pressure on the come. Well, I mean, just look to that point, Luke, that these higher rates are inflationary. That's a really hard concept for a lot of people to wrap their head around. But when you go back to this number that you published recently for the second half of 2023, $2.1 trillion has to be issued. you're at a point now where they don't have the inflation under control. Sure, it's come down, but the amount that they're going to have to monetize and then we start talking about the oil

thing, which we're going to get to, is where I think the typical bond investor in the market, like the first year, I think they were all kind of like, oh, yeah, this is going to be transitory. This is just because of COVID, they had to do this thing, right? And then it's going to go back down into like a half a percent of inflation, like everybody grew accustomed to for a decade. Like, we can't produce inflation was the narrative prior to COVID. So everyone was just expecting that to come back. And I think you're starting just in the past six months to maybe nine months. Everybody in the bond market is starting to come to this realization.

And they're saying, hold on a second. I can do this math. And this math is suggesting that none of this is under control. And actually, we might be past the Rubicon, right? I think that's where they're at. I know. Yeah, I think the bond market is broadly, I think there are starting to be people doing that math. And when you look at the math, particularly, you know, the point that Warren Mosler makes were, look, what's the difference between a $600 billion simi where you hand the money to everybody and the Fed raising rates to increase deficits by $600 billion because of interest?

The money comes from the same place. The only difference is the marginal propensity to consume of who's getting that $600 billion simi-stimmy. or the $600 billion interest in me. And so when you see it just goes to wealthier investors. And so their marginal propensity to consume tends to be lower. They do things like invest. They do things like buying higher end, you know, vacations and things like that on a slower basis.

But the money ends up in the economy. So I think between, I think that's on one, there's a growing marginal part of the bond market that is seeing that. But I still regularly see bond, you know, I had a conversation. of the bond market veteran, you know, yesterday, like I was saying, you know, on Twitter where we say, look, you know, you get me a recession and the bond market, you know, rates will go back to one and people would be begging to finance, you know, to finance U.S. deficits at one. And, you know, my reply was that once you get over 100% debt to GDP and deficits of 8% of

GDP with unemployment where they are, if you take G, Big G, which is nominal GDP growth, if you take big G below rates, like the deficits rise non-linearly toward infinity, especially in a country that finances or that where marginal tax receipts are driven by the stock market, which we once again are seeing play out in absolute space. They're going to be the deficit's going to be X, and they'll say, oh, we'll buy that, except by the time they get there, it's actually X, you know, X times 1.3, and then they almost get to there, then it's X times 1.8, then it's, the deficit will just keep running away from them if big G goes below R. And that's like the math.

I still think the majority of the bond market doesn't realize that, you know, as I said recently, and I've said for much of this year in a couple of their presentations, like for the first time on record in any investor's living memory, the risk-free asset has risk. Treasury bonds have risk. They are either, they are no longer risk-free. They either have a duration risk or they have credit risk. Because if you're willing to go into deflation, again, it's this, once debt deficits get so big, it's the same problem with the banks.

You could have stopped inflation. Just let a bank crisis happen. Let uninsured depositors, money go poof. That was your choice. But if you're going to bail them all out, then you've chosen inflation. And right now, we're still in the sort of this belief that you can be half pregnant of, hey, yeah, they're going to not let banks, you know, unsecured deposits go poof, but they're still going to fight rates. We're going to pause for a second, but we're still going to do 50 more later

this year. And you raise a really good point, which is at some point the bond market's going to figure that out. I don't think it has yet, which is why I still think you get sort of, and I'm not sure the policymakers understand that. And that's my big fear is like, oh, they make one more mistake. but I would readily admit I'm being cute. And my personal positioning, my investment recommendations are a reflection of that recognition that I might be being cute because we've been talking about you want to own gold and Bitcoin and some of these inflation sensitive assets because that's where they're going versus, you know, do they make one last mistake?

What I think is also important to highlight here is when we're looking at these equity indices, these moves are being driven by like seven companies. It's not like the whole market. as being that is driving these indices. In fact, I think Apple has set a new all-time high, even through this big bear market that we went through in 2022. Apple is already setting new highs. One other key important thing that you sometimes reference in some of your writings is a comparison using TLT, which is a 20-year I shares bond ETF in the denominator of a stock comparison. So what do we mean by that?

Instead of looking at the NASDAQ in dollar terms, you look at the NASDAQ in 20-year bond terms. And what I think is so fascinating about this comparison, you also do it with gold, where instead of gold in dollar terms, you look at gold in 20-year bond terms. And if you would be making this comparison, imagine a chart where you have gold or the NASDAQ in dollars. and then you also have the same exact line, but you re-denominated into 20-year bonds. Since 1980, you would have never outperformed in that bond denomination in the denominator. You would have never outperformed the dollar up until the 2020 COVID event. But after the COVID event, all of a sudden, you're seeing that redenomination with 20-year bonds down in the denominator is ripping relative to the dollar. And that's because of this sell-off that I think, I don't think they're going to get this under control.

I think if a person is continuing to do that redenomination in the 20-year bonds, you're going to continue to see that comparison just rip away from, you name it, in dollar terms from here on out. And I think that that's a really important consideration because anybody, the all-weather risk parity portfolio is all about having a very sizable, a levered. position in long duration bonds. And anybody implementing that from COVID forward, I think is going to get just destroyed, absolutely destroyed moving forward. That's a huge drag, right? I'm curious if you would agree that you think risk parity at this point in time to whatever this event is that we're describing is a train wreck of a portfolio management

moving forward. Yeah, I've said the classic 60-40. is not going to work in what we're in and heading toward, which is to say, I, you know, or I referred to as a 6040-0 portfolio, right, which 60% bonds, 60% stocks, 40% bonds, 0% gold and Bitcoin. That is where the overwhelming majority of investors are, and I don't think that's going to work. I think the stocks will be fine, and I think long-duration bonds are going to get killed versus everything, but especially on a real basis.

but especially against goals, Bitcoin, equities, because the only way they can make the math work is with severely negative real interest rates. And this is just,

we're still in the sort of between two trapezes moment, the half-pregnant moment of, well, they can get it there. There's still, you know, where's the bubble? The bubble is in faith that they can get back to 2%

and sort of put Humpty Dumpty back together again. Because I agree with you, the Rubicon was crossed in 20, 2020 in terms of where that took us beyond the debt threshold. You know, there's been, you know, there's been great research on that by Ryan Hart Rogoff, Brian Hirschman and Hirschman Capital ran through that data and cited it. It said once a country gets to 130% debt the GDP over the last 120 years, 98% of those countries have defaulted on their debt, either via restructuring or much more often

via a sustained period of high rates of inflation that basically severely repressed, punish hurt the purchasing power of long-duration bondholders. And that's where we are. The one example in that whole case, the 2% was Japan. And we're even seeing Japan now having trouble, right? So it's forever. It's like, well, what's the 2%? It's like, well, it's Japan.

Oh, see, we're just Japan. So we don't have to worry. Well, even Japan is now going, oh, yeah, I think we're beyond Rubicon on it in terms of there's no getting back. There's still faith that we're going to get back. in terms of the capital management really as a time horizon thing, right? So for me, where I'm at in terms of this credit crunch side, it's a concern that these policymakers are willing to try to sort of one last fight out of credibility,

one last whoosh. I readily concede that we might not get one last whoosh, which is why I'm still very overweight, cold Bitcoin. I sell a lot of equities, very overweight industrial equities, especially tied to electrical generation in my own personal investments. But it's, I agree, I agree, like the math is done. Like that is like, it's all over but the crime. Now it's in the cake.

Now we're just sort of waiting for it to be marked to market and play out. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists,

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at Shopify.com slash WSB. Go to Shopify. That's Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. Look, one of the things that I think is hard for a lot of people to wrap their head around is the difference that you're seeing in these top 10 equities on these indices that are driving the indices to very high levels relative to what feels like a recession and

extreme difficulty for the common person as they're going through. If you have a small business or even a medium-sized business, it's a struggle to this day right now. Everybody, I think, is expecting a recession. So they're like, how in the world can these equity markets be demonstrating a momentum shift? And when I look around everywhere I go, you can see it, you can feel it that there's this recession brewing. I'm going to throw up a slide real fast here that was in your newsletter. And this is cardboard box recession. I found this to be a really interesting chart.

And what it is is it's showing the amount of cardboard boxes based on the square footage of the boxes that's shipped annually in the U.S. And what you're showing is that this has been going down drastically, which is, you know, for people that just want a simple way to understand this, it's just Amazon shipping a whole lot, less packages than they were a year before. And it's demonstrating recessionary levels of shipments right now, today, which I think demonstrates the middle class and lower class in the U.S. is struggling. They aren't able to break ahead because prices are so dang high. Help us understand this dislocation that we're seeing in the indices that are being driven by 10 companies

and the reality of what everyday people are experiencing in their economy. And what do we expect moving forward in the next six months to a year? Does that even become crazier or more dislocated? Like, what do people can they think about this? Yeah, I think it's a great point. It's a great framing is, you know, cardboard box, and that's a chart. I'll credit that to Jeff Kleintop at Charles Schwab. That's his chart.

I thought it was a great chart. So I highlighted it. You're seeing it in RV sales, which are a great leading indicator. They have plummeted two years in a row. You've seen it in heavy-duty truck net orders and weak for six months. These are things I've always used in a 28-year career.

They've been great leading indicators of weakness. U.S. federal tax receipts on a trailing three-month, or the treasury receipts, excuse me, this is all in. This is tax. Everything the government takes in. They are down on a trailing three-month basis year-over-year, down 20%. There's only two times in the last.

20 years that they've been down X-2016 a timing issue, only two prior times, 2008 and 2001. 9-11, great financial crisis. So you're seeing these signs that we're already in a recession in a lot of these metrics. And the fact that the markets are ripping the way they are led by whatever, very narrow leadership of tech around a theme of AI reminds me very much of early. my career in the late 90s. We went into, you know, you had a Southeast Asia crisis, you took the U.S. industrial sector into a very severe recession, beginning around summer of 98. And the U.S. industrial sector stayed in recession with some sort of bumping around,

some fake recoveries or faints of recoveries, really till 02, early 03, late 02, early 03. So you had this three-four-year period of time where it was just oil was death. industrial's death. And at the same time, the NASDAQ, around the theme was, hey, new economy, we don't have to worry about Parker Hanuffin and Eaton and Exxon Mobil and all of these old economy stocks because the internet's going to change everything. Productivity and earnings and earnings are so old economy. We're looking at eyeballs and clicks and it's to me very reminiscent of that time horizon where do I think AI is going to change everything? Yeah, I do. Do I think it's going to change it faster than the internet? Yes. Do I think the productivity enhancements that people

are excited about are going to come fast enough to offset the recession that's happening and those sort of a lot of other areas now? It didn't then, and I don't think it's going to going to now, you also had back then, if you remember, going into the 2000, you know, year 2000, oh God, all the computers are going to shut down and the Fed injected a little bit more liquidity, make sure the banks have money, make sure. And that sort of was the last little turbo charge of that run. So it's when you say, hey, how would you explain it? To me, that is the analog where you have a very narrow market with a theme that is very powerful theme. You know, to me, it's really interesting is ironically, if AI is more successful than expected, sooner than

expected, unemployment's going to rise, deficits are going to explode, and you're going to get bond market problems faster. That $2.1 trillion deficit, effective issuance number is going to get much bigger, much faster. You're going to have a bond market problem. And I just continue to be of the view that if you have a bond market problem, Apple's not going to go up if there's a bond market problem, full stop. NVIDIA's not going to go up if there's a bond market problem. Initially, the response to the bond market problem, absolutely. We'll send it to the moon.

Exactly. And that's why I go back to that that is still my base case that we're going to have another bond market problem for a number of different catalyst reasons. But I can see that the bond market just goes, you know, that it's possible, you know, that, hey, what we're seeing is the bond market going, well, screw it, they're coming back quick. Go ahead. When you say a bond market problem, are you really saying the, you're really saying the, you know, the mid to small banks that have all these bonds on their balance sheet, because we already got

a taste of that. It resulted in more bank failures per market cap than the 2008-2009 crisis, whether people realize that or not. Is that still system in the system? And is that still brewing, but just kind of has been kicked to the right a little bit on the timeline? Or did they actually get all this under control? The banking problem was just a U.S. fiscal problem.

And that's like that's the key is this. So they didn't get it under control because it's a deficit problem. They regulated these banks into buying this stuff since 2014 when foreign central banks stopped buying it. And the whole gambit was as long as inflation's low, then we're fine. We can keep this going. And inflation went up and then they had to raise rates. And realistically, they should know, but they should have just let inflation run hot for a bit and we probably have in a better shape than we are, you know, now we're going to worse shape.

They need negative real rates. They need a sucker at the card table to hold 31 trillion in U.S. federal debt at a negative 10 to negative 20% real rate. And that balance sheet doesn't exist outside of that. Yeah. Okay. And that was the point of that. They hold it at that rate for years.

They need to hold, and this is not like, oh, for just one year. They need somebody to hold 31 trillion in U.S. federal debt at negative 10 to negative 20% real rates for three years. But by someone with that vouchee, the vouchee's not there. But by implementing such a policy, let's say that you were, you could sit in both seats. You could be at the Fed and the Treasury right now, Luke, and you could implement whatever policy you want. The real result to the economy is further consolidation of enterprise.

These 10 companies that are driving all these indices on the equity side would just further get consolidated. And you would see just total destruction across mid and small cap companies. They just can't compete at this point because of these policies, which then causes further unemployment issues, which then, so like, we're truly talking about a dying patient when we're talking about any G7 countries. So like these policies, I understand what you're saying from a mathematical standpoint, It makes total sense. But it doesn't actually solve the social unrest that's happening in society because of these policies and what they're doing. And I'm curious if you would highlight any points in there that you disagree with me or that you think or even or maybe if you're agreeing with me, what is something else that we're not thinking about that that pops out of these policies from an everyday consumer market participant standpoint that the Fed.

is not talking about. They're just talking about the numbers and trying to make it all balance and keeping enough liquidity in the system. But like, we all know that they're turning society inside out through these policies. Well, there's two things they can't control. And I think both of these things are things that are not priced in. Number one is you referred to a bit with AI, right, with these technology consolidation of enterprise. You know, our friend Jet booth highlighted it is in his great book, The Price of Tomorrow, right? The deflation driven by tech is nonlinear and it's fundamentally incompatible with the money system as it exists. And AI takes everything he talks about in that great book and turbocharges it at an accelerating

rate. And so while people are excited about productivity and the improvement for earnings, it's going to be an improvement for earnings in the very short run in the grand scan of history. as companies, you know, you think about what this does. This takes unemployment to the moon. As you're placing high wages, it takes government receipts through the floor. It takes deficits to the moon. It takes unemployment up. And then you're basically, it consolidates power with a very small number of corporates

who have all of the power in a government that can't fund its military, can't fund its entitlements, can't fund its debt, can't fund any of it without the Fed printing the money. And so paradoxically, AI, the success of AI that everybody's excited about is fundamentally incompatible with the currency system, the debt-back currency system we have. AI ensures the death of the monetary system as it exists. You can't have a debt-back monetary system with AI. You will have to have the neutral reserve asset be some. something that is energy tied, something flexible face value, gold Bitcoin, that you have to have a

new truth. You could have in de facto be equities in theory, right? You could basically have surplus as deficits recycled into equities, which then again gets into your initial point of like, hey, the market's kind of acting like, wow, this is very possible. I would readily concede that. That's why I would never be, never completely out of equity. I always want to have a good size equity exposure because this is happening so fast you can't forecast it. So number one, the Fed has, I don't have any idea, and there's nothing they can do about it if they do. Number one, that what is happening in AI and tech that everyone's so excited about is guaranteed to destroy. It's fundamentally incompatible with the debt back currency system, number one. Number two is

the gambit that the U.S. government ran last March to dump the SPR, to bring oil prices down, to break Russia to break inflation. The whole gambit was it has to, Russia has to break and inflation has to come down before shale rolls over. Because if shale rolls over, they're done. Because shale has been 90% of global oil supply growth over the last 10 years. Shale's decline rate is very high. If you shut all the wells down today, it's going to fall 20, 30%.

That's 90% of production growth over the last 10 years. and the bottom line is, is they ran the SPR down, they got inflation down a bit, but now shale's rolling, which means they're done. And that's the other big thing I think the Fed has no idea is probably too strong. They're not factory, and the markets are not factoring, which is to say the decline in headline inflation from energy, inflation to deflation over the last 12 months is roughly a percent a half, as it says in the last report for me, whatever. That number is going to reverse, which means your headline number of 5.3 that everyone's

comforting themselves about without a severe recession that really drives oil down. Because, again, oil supplies are now going to start falling faster than demand has ever fallen in any recession in 60 years. You're going to take inflation back toward six and a half, seven. You're done. They're done. And that's the other thing I don't think they get. It's the markets don't get you.

Maybe bond markets start to look at when we see somebody's bond. But those two things, and that's part of the reason why I'm like, when you let off with, hey, is this possible? It is possible. It's why I keep talking about this barbell is anybody who tells you that, like, hey, here's for sure how it's going to go. Run. Because, like, no one's, no one's ever seen.

Like, I could paint you a couple different pictures on AI. I can paint on energy. I know the time of it. But this combination is so toxic, so unprecedented, with so much leverage. Like, wow. Let's take a quick break and hear from today. sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect

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Six counties in West Texas are now 100% responsible for all global oil production growth. And you're saying that that is rolling over. Am I understanding that? Okay. So when I read this, when I read this in your report, I was kind of like, there's no way that's correct. Like that sounds crazy to me that these six. counties in West Texas are the ones that are responsible for the global oil production growth. Help us understand what you're getting at here and why the shale rolling over is such a big

deal with respect to oil prices. Because I think people that are looking at the market with this 40-year track record of what happens next, they're looking at bond prices, they're looking at inflation coming down, they're looking at the Fed pausing, and they're saying, all right, Here comes the recession, which means oil prices are going to collapse. The oil industry is going to be behind the power curve, and we're going to get a drop in oil prices from here on out, is what I would think if you took a person looking at the history would be expecting. You're saying that you don't think that's what's about the play out. So explain to us.

100%. And I think every one of the hundreds of Ph.D. Economists are the Fed are doing that. I think most Wall Street strategies are doing that. I think the bond market's doing that. And they're not looking at the geology of shale. And they're not looking at what has transpired over the last 10 years. Now, that quote is from a report by Guring and Rosenzweig, great energy research firm.

They made publicly available their 1Q23 commentary on May 31 of this year. And I would encourage all listeners to Google it, download it, read it. It's unbelievable. And yes, that's what they highlight, which is they highlight six counts. companies in West Texas and the Permian are now 100% of global, not global production growth. They highlight, or excuse me, Emberus, another energy consultant on Bloomberg was quoted, 90% of global production growth over the last 10 years has come from US shale. You can see shale is rolling over everywhere but the Permian.

And what Go Rosen note in that report is the Permian's going to roll over in the next six to 12 months, 18 months at most, at current prices, current prices, which is a critical, critical caveat. And he says, well, that's fine. So what, Luke? Well, so what? Let's take oil to 150. Yeah, it's not rolling over anymore.

But if oil at 150, headline inflation is back to seven and a half. Seven and a half headline inflation, the bond market is throwing up on itself. Seven and a half inflation, Apple and video, all these tech go-go stocks suddenly are getting dumped like crazy. How about? From the banks, tell us what happens with the banks at that point, the retail banks. Oh, we go right back to it because you're going to have rates rising up against it. So now they're more and more upside down.

BTFP usage is going to be going to be rising. Stangflationary impulses are going to be rising. So there is a latency around what's happening in energy that is shocking to me. You can see very clearly, we know the percentage of global growth that Shale has been. We can see, I've highlighted it to clients. It's in the report you're citing that if you look at the big four U.S. shale basins, Burmian, the Bakken, Anabrara, and Eagleford, the decline rate of legacy production has gone from 5.8% last August, 5.8% per month to 6.1% per month in January of this year to 6.4% per month

in June of this year. Now, that's not to say you're going to decline at a 72%, you know, 6% times 12% rate. The rate of decline declines once you stop producing. So again, the annual rate of decline of shale, if you stopped all production today, would be probably 20, 25, maybe 30% at the high end. It's probably a lower end at 20 to 25%. Here's the problem that the street is missing. If you go back and look at global oil demand over the last 60 years, up and down annual production or annual demand growth, the worst, the two biggest declines in global oil demand growth were 1980, down 3.3%. globally. And 2020, when we basically shut down the world economy down, I think it's 8.3 or 8.6% year over year. So if 90% of production growth is now rolling over at current prices,

and if you stop it, it's going to fall 20 to 25 in a year, your marginal source of production is going to fall more than demand has ever fallen in any scenario by a multiple. And that is where the SPR comes in, right? So the SPR, they've run down. That's helped things. But again, by virtue of doing that, now the SPR's at this lowest level since 1986. And that thing is not infinite. In fact, it's not even as useful as they say, because you get down, I'm told you get down to the barrel to the bottom of the barrel and there's, who knows what's down there, it's crap, it might be unusable. And they don't know where that level is. They're pulling it out of caves. You're looking at an energy situation where unless oil rises,

a lot, which again, turn around headline inflation, turn around the entire, the Fed did it, narrative, turn around everything that is in the market today, or you're going to start having supply problems which do the same thing. And you're going to have supply problems with the banks, you know, where they are, with SPR, where it is. And with Shale, I mean, you need higher energy prices, the oil prices in particular, significantly higher to prevent a severe support. supply issue that will accomplish the same thing effectively. And that is not in the market. That is like that absolutely not in the market in terms of what that would do.

So as I'm hearing this, my immediate thought of, okay, well, how long is that transition going to take the play out where it starts manifesting itself potentially in higher prices? Because, you know, you hear things like this and then it takes a year, two years for it to play out. and it's kind of lost in the noise of other factors that are now driving the price, whether that's on the demand side or whatever. I'm kind of curious. Do you think that this rolling over that you're seeing in shale is something that could

actually manifest itself in the market in the coming three months? Yes. Really? Yeah, because the way I think it's going to manifest is I think you're going to see oil 70, 72, 75, 80, 80, 82, 85. And I don't know what the number on oil is that makes people go, oh, but people are going to start doing the math. I'm like, hey, oil at 78 is now in September is now up year over year on year ago. And up year over year on year ago means the energy on headline CPI is up year over year,

which means I need to take away the negative 1% benefit the headline from energy. I need to add, uh-oh, headlines now going to be six again. And when the headline goes from five, three, the whole market thinks headlines going to four to three to two. And when headline turns around, it goes to six to seven, then that's where I, that's why I say, I think in the next three, four months, you're going to start to see it because the energy situation is like it's rolling, it's rolling as we speak. And, you know, maybe I'm wrong.

Maybe it's six months. But I don't think it's a year. Where are they at with the SPR? So I know once it started taking off there at the beginning of 2022, they stepped, the government stepped into the market with the Strategic Petroleum Reserve heavily. Like, we were probably going to 150 plus if they didn't step in with the magnitude of, I'm going to call it printing, oil printing that popped out of the elsewhere. Those were oil swaps.

Yeah, those were just oil swaps with our, with our alps. Have they, because I haven't really been tracking it very closely over the last quarter, are they still aggressively in the market manipulating that price or have they really kind of ticking their hands off the SPR? I know it hasn't been refilled. I think they're still draining it slightly. What's the current status of that? And then... That's the last I saw. Okay. How much more, I know we're at all-time lows, but could they do another drop, I'm calling it a drop, like they did in early 2020 to stop the price from exploding higher if what you're saying is realized and the price does start to take off again.

Have they fired their shot? Are they done at this point? I would think they could. But again, that's something I don't know and I don't think there's a lot. I've not read anybody who knows sort of what the level they can go to. It's a little bit of a mystery because this stuff's been sitting at the bottom of salt caverns in whatever, Louisiana for 40 years, just sitting there. And it's not like they sent scuba divers down into this stuff to sort of, you know, do tests of what's at the bottom and what shape it's in. I've not read anybody that does that. So I don't know that they know how far they can do it.

But let's set that aside, say, okay, yes, they can do that. Then we start to get into a question, and it's almost related back to your initial point, but you get into a situation of an emerging market with FX reserves, right, where the whole market knows what an emerging market has in FX reserves. And at first when they intervene, the market goes, oh, right? They actually go along with it. They help the central bank. But there's a magical point in these emerging market currency prices where once they go too far down,

once they burn down their FX reserves too low, the market starts to work against them and goes, they're going to run out of dollars at this pace and at this date. And let's press it because once they're out of dollars, they have to devalue their currency. And then we know it. That's what George Soros did, right? It's what he did to the Bank of England, in essence. You saw it in the Southeast Asia crisis, Indonesia and Thailand back in the late 90s. Same thing.

There's a dynamic to this that the same thing will happen, in my view, which is to say the whole market knows where zero is on those salt caverns. The whole market knows that the reality is they probably can't get the zero. There's some amount of volume in there that is unusable. They know how much they burdened. it down and they know they've knocked the price down with it. If they come out and do, let's say they come out and do another big shot, hey, we're going to get it back down, you know, oil's up to 80 again. We want it back at 70. Two things. Number one, the market's going to go there. We don't know how much more they got, but they don't got that much. It's the same thing as an emerging

market with currency reserves. Number two, the whole market is going to start realizing, oh, my God, they are putting a second and a third and a fourth bullet in the head of shale by doing this. They're ensuring that shale is going to roll over, which just makes the, and so paradoxically, you could get into a situation like you get with a trouble to yam where they come out and shoot their shot, an oil goes up. And now they're done. Now they're done. Because now you've got to. And that's, to me, when I layered at my sort of tactical outlook near term of like, hey, you have this credit crunch coming. I think everybody knows about the credit crunch liquidity. I don't think anybody is really focused on liquidity crunch credits. credit crunch, liquidity suck, and banking stuff is overlaying what is possible slash likely going to happen to oil barring a very severe recession. And by virtue of what happens to oil, what happens to headline CPI, what happens to rates, and the daisy chain that I think that will reset off for a time. And to be clear, that will force more liquidity, et cetera, et cetera. And I fully concede, I could, you know, maybe the market is looking through the valley on that.

I'm there for that. I'm not fully there for that, but I've got a position in case I'm wrong on that. But that's the market is, like the bond market credits up. They're just not paying attention to this energy thing at all. Hey, let's transition gears here just a little bit on the Bitcoin side, Luke. I posted right before we started talking about an hour ago, I posted this post. I said, I'm sorry, but after watching BlackRock, Fidelity, Citadel, Schwab and now Deutsche Bank, all apply for Bitcoin ETFs, spot exchanges, etc.

only a few days after the SEC, dropped the TRO on Binance and Sue's Coinbase, how can't you think that this entire past year was a giant inside job coordinated between the Wall Street parasites and government regulators so that they could catch up? It's got 3,000 likes in an hour.

It seems to have resonated a lot with people. And I'm curious to hear your thoughts as somebody who's a very pro-Bitcoin that understands the rationale behind it and seeing everything that transpired this past year. And I just find it insane that you have, I don't even know how many companies apply for a Bitcoin spot ETF for the SEC to shoot every one of them down.

And then within a week, literally a week after they go and sue Binance through an emergency order. And then the whole time Gary Ginsler has been saying, well, we can't actually assess what's happening with spot. bought markets, and that's why we're not going to approve Bitcoin ETF. They slapped this emergency order lawsuit on Binance, and within a week, BlackRock, of all companies, files an ETF. And just so people were aware, their track record of having ETFs approved is something like

they filed 550 and only one has ever been disapproved out of their 550 that they've applied for in the past. So very high probability that this is going to go through. And I just, I just shrug my shoulders and just am disgusted by what appears to be just government, big Wall Street bank coordination. I'm curious to hear your thoughts. You're going to get me in some trouble with that, even. I have two thoughts. Number one, anytime someone tells me, well, we have free market capitalism.

Like, I kind of go, okay. Like, okay, guy. Yeah. Okay. And I think unfortunately, so, you know, there's some wild West, and this is, to be clear, this is not sort of saying, there's some wild West stuff that probably needed regulation in the crypto world, like of like the insanity offshore. I understand the need for some regulation on that crypto world, not, you know, whatever, said, but it's, if you've been paying attention, and I know you have over the last 20 years, seeing something like that as you laid out, you just, kind of like add it to the pile, right? Like it's not surprising to me. The other thing it does get my antenna up on, having spent as much time in gold as I have over the last 15 years, and really going down that rabbit hole, and it's something you and I've talked about before, which is historically the way Western policymakers have attempted to control gold's price is by allowing the unadulterated proliferation of unallocated paper derivatives on gold itself.

In other words, there's a bunch of demand for gold. Two things can happen. The price of gold can go up or the amount of unallocated paper promises on gold can go up. And gold's price can remain relatively static. And the latter has been an oversimplified version of what has happened really since the mid-80s on some level with some periods of time. where that wasn't the case where the price was allowed to rise for one ways or another. Point being, anytime I see favored governmental parties, BlackRock, I would say in particular, in that case, very politically connected, shall we say, looking to get into paper derivatives

around Bitcoin, I want to be, I want, it gets my attention. And that's not to say it's going to create the unallocated room. Just the creation of unallocated paper promises is a way, is the playbook for controlling gold. I'm not saying that's what's happening here. Maybe they're going to get a bunch of money and they're going to bid Bitcoin. And you and I've talked before, Bitcoin is very different from gold in that it's very, it's much harder to do to Bitcoin than it is to do to gold, centralized storage and, and,

and so maybe it's just an attempt. Maybe it's not an attempt. Maybe they just want to be there and it's going to be let the run and away we go. And hey, great, in which case, like, whatever. It's just an example of sort of, you know, government-connected people getting the contract sort of a thing. That's my stream of consciousness on it. I don't have a strong opinion on it one way or another. My antenna is up.

You and I talk about it. I don't think they can do what they, I don't think they can do to Bitcoin with the expansion of unallocated paper like they've done to gold centered in London for years and years and years. But those are, that's the stream of consciousness around it. I'm going to give you an option for the last question. Then we're going to wrap this up. Do you want to talk about commercial real estate or would you like to talk about the China-U.S. relationship? Let's talk about the China-U.S.

All right. Let's do it. What are your thoughts? Take that for a thousand, Alex. We're dating ourselves there. Some of the other view and he's like, who the hell's Alex? Well, what are your thoughts? Because, I mean, this is really heating up.

I guess for the audience, you're so good at being able to zoom way out and really, really kind of make things digestible for people. So like, what are the critical variables with this relationship that's happening between the U.S. and China right now? Like, what are the key things at play? And then maybe we can talk about things that are more nuanced that you really want to dig into. I used to play golf every Saturday with my late father-in-law, who was a teamster official,

never had a day of college education in his life. And we usually play with two of his teamster official buddies, two Italian guys, sue collectively between the two of them, never had a day of college education. They're like, and this was in the early 2000s. And so the China thing and China and the WTO, 801, and then they started seeing their, you know, their membership get, you know, the factories go overseas, et cetera, et cetera, to China, to China to China and, you know, these guys, but they're very street smart, right? They're for a number of different reasons.

They were very street smart. And these guys, their comments were always the same. Yeah, our factories go in there. I understand why our factories go in there. but why aren't they thinking ahead? Like this, we're sending jobs to a communist country. We're sending factories. This is, you know, great.

These companies are going to make more money in the short run, but it's going to kill us in the long run. And so you have three guys who never collectively had a day of college education between them. And this thing figured out in like 0.4, 05. And what's interesting to me is our think tank Washington political class now sounds like my late father-in-law and his two teams through official bodies 20 years ago. And they're educated, you know, they're educated beyond educated. Their degrees have degrees, have degrees. And you can see how much Washington has benefited from this China arrangement. And so when I, when I see Washington

squawk, the way they're squawking finally, they're squawking because they're losing. When they were winning, when they felt like they were winning, when they felt like they were the senior partner in the relationship, Washington wasn't squawking. They were saying, they were telling Teamster members getting laid off, learn to code. Now they're squawking about China. So number one, I think the fact that Washington is squawking tells you it ain't going well. We are, there is a, there's a serious, and it says I'm reading the book, Chip Wars by Chris Miller. It is so reminiscent of Japan. Like, They loved Japan. They loved it until they started losing to Japan.

Then it was a problem. So that's number one. Number two, Biden's running the Trump playbook. Like, people might not like Trump, but Trump created an awareness in Washington that wouldn't have happened otherwise. You look at what Biden's doing. Biden is out trumping Trump. I mean, we had a chart in our piece last week highlighting that the industrial,

U.S. private manufacturing construction spending is 190 billion run rate. It's like tripled in the last two years under Biden. So they're running industrial policy and it's the right move. It's inflationary, et cetera. I guess the third thing I'll close with and then, you know, we can kind of talk about is this idea of decoupling is the same lack of second derivative thinking by a lot of the same people in 2003 except on steroids, except it won't take 20 years for them to figure out how wrong they are. If you hard to couple from China, you are talking about instant severe inflation. Yes. Globally.

Supply chain collapse. Debt market collapse. Global central bank yield curve control. And that seems to still. There's no appreciation for how anything actually gets made or produced or where it comes from or how much of it is like just. zero for anybody that would actually suggest that with a straight face. I hear and it's, it's, you know, but I'll hear people say, oh, there's, you're crazy, you know, the U.S. economy way better.

And I want to ask people that say that, when was the last time you spent a lot of time in a not top 15 U.S. city? What was the last time you did? Because if you did, you would start to see a lot of these places look like emerging markets already based on what has happened over the last 20 years. there has been a hollowing out of labor capacity, of manufacturing capacity. And the military, you and I've talked about this before, has been squawking about this increasingly loudly for the last 15 years because to your point, you know, I think it was

U.S. Marine Corps General Barrow famous said, right? Amateur study tactics, professional study logistics. Military is in logistics business, full stop. You know, you can say, we're going to fight a war and let's just print the money. And you're like, that's great, but our tanks take diesel, you moron. And that's like an oversimplification of sort of a lot of the think tank world Washington which like we're just going to use the dollar. It's like that chip sale.

What? To do what? The dollar doesn't make it on a factory line. They don't, you know, they don't build. The dollar doesn't build. Now, you can do that and they're starting to do that. But again, there is still this belief in Washington. Well, I can rent the money and re-sure and I can keep the status quo financial system.

No, no, you can't. If you want to do that, if you want to reshore, you know, I said this at a conference in 2021. I said, look, the U.S. has to choose. Does it want to make stuff? And if it wants to make stuff and reshore, if it wants to compete with China in this global power competition, the bond market has to die on a real basis. In other words, you're going to print the money, build the factories, make the stuff here. But then inflation is going to go nuts. The Fed's going to have to cap yields because the U.S.

government's debt load has run up their debt doing stupid shit for 20 years, U.S. government can't afford more than 5, 6%. So the Fed's going to have to cap rates. The dollar will suffer. The bond market will suffer. And that's what we'll have to happen. And it is what it is.

It's funny. Like people say, well, China's the next Japan. But they always leave out. What was the first step we did to start to fight Japan? We devalued the dollar massively against the yen at the Plaza Accord. And they always want to leave that part out. So there's, yeah, so you're getting me animated now. This is why I gave you the option, because I knew you'd pick the good one.

Yeah, there's, there's, so yeah, the decoupling thing is, like, it might need to happen. Like, let's be honest. Like, if you know hard decouplings happen, your appropriate allocation to bonds and especially long duration bonds is zero. It's actually less than zero. You want to borrow as much money as you can that you can afford, et cetera, et cetera. But the appropriate allocation of bonds is zero because inflation globally, coupling with China was disinflationary. And it's strange credulity to think that decoupling in any way, let alone a hard decoupling would be also disinplationer.

Luke, this is always a pleasure. We could talk literally all day, just the two of us. It's funny because I know when I call you from time to time just to pick your brain on various things, it just keeps going. We just can't stop talking when we get together. and it's always a pleasure. And I know your time is very valuable. And I appreciate you always making time to come on our show and have these just amazing conversations.

Give people a handoff to your website, which I am a subscriber of. I get so much value out of your weekly newsletter, your book or anything else that you want to highlight. Oh, I appreciate it. First off, let me say it. I get as much as I learn as much as I share every time I talk with you. I appreciate it. I appreciate you to have me back on.

In terms of more people wanting to learn more information about where they can learn about our product, both mass market institutional, FFT-T-L-L-C-L-C- dot com, and they can find out more, or they can find me on Twitter at Luke Gromon, L-U-K-E-G-R-M-E-N. Luke, thanks for your time. Absolutely. Thanks for me on. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a

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