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- [00:02]
Dave
That's dope. Let's dope.
- [00:18]
Noah Latcheson
Hello everyone. I'm Noah Latcheson, author of the Crypto Is Macro now newsletter. Filling in for Scott again. You'll be relieved to hear he should be back next week. It's good to be here with all of you. So much to talk about. As always. Before we dive in, do please hit the subscribe button and if you've already done that right next to it you'll find the like button. If you like the show, do please hit that as well. And with that. Hi, good to see you without James today but really glad to be here with Dave and Mike. How are you guys doing?
- [00:48]
Dave
I'm doing okay.
- [00:50]
Noah Latcheson
Excellent. And Mike is coming into us from Austin, Texas. Mike, could you kick us off with what Bloomberg is thinking?
- [00:57]
Mike
Yeah, it was a decent meeting. Anna came out with what she expects the Fed is doing inspecting and focusing on so they're right now their core inflation target or expectation for 2025 is 3.5% and 2.8% for 2026 they expect unemployment this is the Fed she's saying is to probably jump up to around 4.7% for this year. She says they are somewhat potentially expecting a recession in 2026 though she doesn't think Chairman Powell is going to say that real GDP 2025 expecting around 1.3% and based on their estimates she thinks the Fed should be cutting 20 to 30 basis points this year and maybe 100 next year based on current estimates and that's probably going to show up in the dot plot. But one thing she did note I think was significant is the majority of the FOMC is very hawkish and I do enjoy the my takeaway from that it was just point focusing on what the Mr. President, Mr. Trump is only focusing on one person but the whole FOMC is somewhat reluctant to cut rates. So Ira Jersey pointed out he thinks that and he's been nailed in this said long bond 5% is attracting a lot of duration attention expects that's going to continue. So he doesn't see that US long bond saying saying much above 5% where and he did see that expects the Fed is going to be easing they will be having you know there will be a lower term structure and he's still expecting the bull steepening to kick in by the end of this year. So Gina Martin Adams is not in today but our chief equity quant guy Christopher Kane focused on he said they take point out higher oil is not necessarily bad for stocks and he pointed out if we continue at this pace we might have the fastest recovery from a 15 drawdown and S&P 500 ever. The last two cases that were close was 1982. I remember that one vaguely was a bit younger. And then 1998, the aging crisis. I focused on the low price cure trajectories that I wrote about at the start of 2025 I'm focusing on and my midterm outlooks and that's clearly in the grains. We're basically still heading towards that low price cure trajectory because prices went up too much and now we still have overhang of supply and demand picking up so much and similar crude oil. I just focused on what I wrote about at the start of the year Still a key estimate fact in that space is demand estimate revisions remain downward. Supply estimate revisions remain upward. It's clearly a bull market. We've just had a spike. Is it going to reduce supply and increase demand? No. And so I point out I fully expect price of crude oil to continue to gravitate towards those 2019 levels which was average price was $57 a barrel and the US cost of production which is as Dave points out and knows very well that that's usually what happens in commodities. They go their cost of production but typically you have to get below those levels to change that. And then I shifted over and focused a little bit on that gold. Still quite the bullish market. I don't. I think a key thing to push gold lower was if the US stock market continues to make record highs and stays there and rates stay high, you know, why buy gold in that environment? The key thing to push gold above 3500 an ounce is the U S Stock market rolls over. And one of the best indicators for I think the stock market remains bitcoin. And that's it for me. Back to you.
- [04:33]
Noah Latcheson
A couple of questions though before I throw over to Peter who has just joined us. And I give Peter Cheer a chance to introduce himself. Mike, is the team worried about tariffs or more worried about the escalation of geopolitical tension? What's the simmering concern?
- [04:50]
Mike
All the above the tariffs I would say it's much more the latter. The obviously the things you cannot predict tariffs are much more predictable. And as far as what the team is thinking about then what she what Anna Wong said, she thinks that the Fed typically when they sense short term inflation it's their provocative to preempt that inflation but it's not really in their forecast so they're staying away. Clearly staying away. The key theme I point out is from a tariff standpoint is there's only one force that really made Mr. Trump pull back on those tariffs and that's when the stock market dropped and it still means so much. So he's emboldened now with the strong stock market. So overall it's like the focus from our team and the Fed means is we can't predict the geopolitics right now. They remain isolated. I mean if we get a nuclear war, sure, we can't predict that. But from an energy standpoint, from my standpoint, US Energy traders know every time you get a spike and things like this, it's almost always been a chance to cleanse up, clean out shorts, reset the the producers have been selling forward like in the land I'm in right now in Texas, have chances sell forward and bring out more production and it usually accelerates those preexisting bear market trends.
- [06:07]
Noah Latcheson
And meanwhile, we got potential sparks coming from Canada and the G7 meeting this week. Peter, welcome. Thank you for joining us everyone. I'd like you to, I'd like to introduce Peter Cheer. Could you tell everyone a bit about what you, well, what you do and how you got here?
- [06:21]
Peter Cheer
Peter Perfect. So my background is much more in the fixed income and credit space. I wound up trading, probably traded a trillion dollars of credit during the financial crisis. Have since been mostly working with asset managers and large corporations, kind of advising them. And I'm at Academy securities. And the neat part there is we have 30 some odd retired generals, admirals, two CIA people, so get a pretty good sense, I think of what we think is going on geopolitically and then able to incorporate that into my macro.
- [06:47]
Noah Latcheson
Outlook, one of the most powerful contact books in the industry for sure. Peter, can you bring us up to speed on your macro outlook? I know you probably missed part of what Mike was saying, but what's your take on the number one concerns in the macro market now and what assets could that spill over into?
- [07:04]
Peter Cheer
You know, I think right now and I'm we seem like we're making it through the Middle east crisis or you know, the fighting. And I think that's a relatively positive and I think it actually makes sense. Right. Israel clearly has the upper hand in terms of where we're standing in the fighting. It's been very curious that the proxies have been very, very quiet. So I think we're actually starting to price in. Okay. Iran is going to be afraid to escalate this. Iran's not going to block the Straits of Hermos. China's probably been whispering in their ear not to do that. Anyways, we're kind of moving on to from there and I think now we can kind of look where are we with the Fed. And I actually think we're going to see a fairly dovish Fed this week. I think people got higher oil prices wrong. You know, I think the Fed screwed up transitory a lot. But they will ignore this move in prices in oil and away from that, you know, inflation's under control. If we remain at this kind of 10% sort of global tariff rate, which seems likely, we're probably going to get more pauses. I think it takes time for that tariff inflation even if it comes to work its way to the system. So we've got that coming down. And then, you know, it's ironic, when I look at the jobs data I see nothing but weakness in the jobs data. The only single part of the jobs data in the past month that's been positive was the establishment survey headline number. So that's what we all see. Revisions were awful. Household was awful. ADP was, you know, weak. And the establishment survey one, the response rates incredibly low. So I don't trust that. And they rely heavily on the birth death model to create jobs. And, and you can even google it or you know, go into chat GPT and look at it. There's a lot of kind known issues with that, most noticeably to me are twofold. One, it really hasn't picked up the gig economy. So I think now when jobs get weak, people actually apply to start their own businesses. Not because they're going to start their own actual business, but they want to be an Uber driver. They want to do something. So I think the Fed has a lot of ammunition to switch to a more dovish tone. It would keep Trump off their back a little bit as well, which I'm sure that's not driving their decision. But it'd be nice not to have Trump yelling at you every day. So I'm looking for a dovish Fed.
- [09:00]
Noah Latcheson
This week and plenty of other things to worry about for poor chair. Poor chair Powell. I actually was looking this morning at the chart of the number of prime age workers that's actually coming down. I mean prime age and the number of full time workers is also coming down. So I totally agree with you. There are signs of weakness even if the headline news is good. And before I throw over to Dave, Peter, what's your, what's your personal outlook? Regardless of what you think the Fed will do, what's your personal outlook for rate cuts?
- [09:25]
Peter Cheer
This is year I think we're going to get three to four. I think we get one as soon as July. Again, I'm very, very nervous about the job situation. The other things I look at, it may sound insane, but you look at law school applications, they've gone way up. And that tells me if you're a graduating student, you're not sure what to do and you can't find a good job. I might as well apply to law school, MBA school. So all these signals to me tell me that there's weakness indeed dot com. You look through there, you see some weakness. And it's not just, you know, entry level workers, it's white collar workers. So I think we are seeing a slowing economy that's going to force the Fed's hand. We get three to four cuts. I'm not sure that's going to turn out that great for the market because I do think there is this overall slowing. The one thing about all these tariffs and the uncertainty, I think every company's encouraged not to be aggressive or maybe discouraged about being aggressive. I think that all feeds into a slowing economy though day.
- [10:17]
Noah Latcheson
What do you think this means for risk assets?
- [10:20]
Dave
Well, I mean, the market's telling you what it means. The market is, is continues to price pretty much, you know, all systems go on the liquidity side. I mean, as Mike is fond of pointing out and is correct, you know, the market cap to GDP of the S P is, you know, continues to be in worrisome territory. There hasn't been anything major. Volatility. Both the stock market volatility and bitcoin volatility have been really low. Excuse me. Looking at bitcoin volatility, all I can say is we've been in a range of a 3 or 4% range in Bitcoin. Now for going on six weeks last year we saw a range and we thought, oh, okay, well this is a range and this is boring. And people were worried. But put it in perspective, the range was somewhere in the neighborhood of a, a 20% range or a 25% range that went in for the summer and we within a 3 or 4% range, you know, now for like five or six weeks. That is crazy low. And so you and the stock market too, I mean, you know, a 10% dip, you know, will cause people to freak out and thinking that was going to force it. And Mike always talks about what it would take to get the Fed to be forced. Personally, I don't think the Fed is forced to do anything. You know, it's a question now. It's Almost a personality thing. The underlying jobs numbers are clearly showing, softening. Peter highlighted a few of those. It's going to be weird data because in the jobs numbers, of course, illegal and legal immigrants, there's no distinguishing between them. It's just what the companies report. And so companies that lose meat packers in California losing 75 people who are here illegally. I mean, it's going to make the numbers kind of messy. But. But the labor force participation rate is still low, has been for a while. As Peter mentioned, people going to school differently is part of that. So we'll see. I mean, everyone. I don't think we've ever seen this amount of political pandering. I mean, it's one thing, we've had Presidents Biden saying it and Trump saying it. We've had other people saying, hey, lower rates help the economy. But this has been at every measure of the administration. You have the Treasury Secretary saying the, the Fed should lower, should lower rates here. Right. You know, that's kind of a unique political situation. And one wonders, you know, where they're coming from. Personally, I still think that liquidity is going to be more relevant than the actual price of the interest rates. I mean, I'm worried about, you know, when you, when you get rid of the supplemental liquidity ratio, etcetera, you know, what goes on with the reverse repo. I just don't see any version of the world where they could avoid injecting more liquidity into the market. And so from a risk asset perspective, the question is what's going to be the beneficiary? I think it should be Bitcoin and gold. Bitcoin has been trading recently more risk asset than gold, although that depends on what time frame and whether you put a lag in there. But that's sort of my base case is you're sitting in a range. And I think that geopolitics continues to be very relevant. Right. You know, and there's no question about it. I mean, I would think I'd be very curious because given the number of people in your company, Peter, who have significant military experience, I mean, I don't know what they think about what's going on, but this is, this is a non, this is a big deal. I mean, in the 80s, the same thing happened. People forget that, that Israel took out Iran's nuclear program in, in the 80s because it was making strides. And, you know, that that turned out to be a major stab influence in the Middle East. And so whether that's going to be the same here, I do not know, I'm not Karnak the Magnificent. I don't have that sort of crystal ball. But your firm, you probably talk about this every day. It is kind of a big deal and we'll see what happens. But if the Straits of Hormoz continue to flow, oil will fairly quickly retrace its recent gains and the inflation cover will be there for the Fed to do something if they want to. That's sort of my, my kind of overall base macro case. I think it's by far more important because of the price, if its impact on the price of oil than the other conflicts that are going on around the world. But who the hell knows, right? You know, at the end of the day, war is really good for risk assets because war means lots of destruction and it means lots of money printing. Now should it be? Is that a good thing? No, of course it's not a good thing. But as Scott is fond of pointing out, we're supposed to talk about macro and markets and not the human cost, the human cost being undeniably bad from war. So I am not. This is not me saying Weisberger says war is good. No, no, this is not Weisberger saying war is good. This is Weisberger saying as, as unfortunate as it is and as bad as it is, it is actually good for assets that will. You're looking for, you know, liquidity to be injected because it invasively forces it.
- [15:45]
Noah Latcheson
Peter, do you want to react to that?
- [15:46]
Peter Cheer
Yeah, I think one, you make a greater point that we all have to separate the bad things that come out of war. And it's hard when we talk about this from a pure military strategic standpoint, but we'll try and do that. And I think you're kind of spot on that this has the opportunity to kind of clean up what's been going on in the Middle east, right. For the last two years there's been really a shift that it's more Iran that's isolated. Right. The Saudis, most of the Middle east really wants to move forward. Right. They are trying to develop a post fossil fuel economy. Saudi Arabia wants to become the data center capital of the world. So I think this pressure on Iran could very well work. I think that's good. And this fits into one theme that we've been talking to a lot at Academy is deterrence. And I think we lost deterrence. It probably started a lot under the Obama era. Right. You can't deter and say, well, if you cross this line we're going to do something. Oh, you crossed that line, well, we're going to move back. So deterrence is a very kind of, you know, tricky thing. There's a really good piece out there on the Rand Institute you can find. The reality is, right, you have to be clear that you have this capability and you are not afraid to use it. And I think we kind of lost that. Right. Every time our enemies saw this, they saw weakness on our part. And you're starting to see, I think now it's not necessarily us, but it's Israel leading the way here. And you have to use force. That force has to be there as a deterrent. And the other thing that's kind of catching a little bit is we've been talking about China and everyone talks about will China invade Taiwan or not. We don't think so. We think there's a lot of question marks. But I think this weekend adds one more question mark. You had Russia. Everyone was very worried how strong they were going to be. They proved to be a little bit of a paper tiger. North Korean troops went to Russia. We were, oh, will that change it? They were supposedly a disaster, right. They attacked on mass, very much like it was a World War I trench warfare and they were completely gunned down. And now you have Iran, who had this vaunted missile capacity. And we thought about a year ago when they launched that thousand missiles and drones, that it was not a fake and that they wasn't well telegraphed on purpose, that they were actually expecting many to get through and they're, they're just not that sophisticated. So if you're China, are you really going to threaten and posture geopolitical might after seeing three other people have not been tested and our generals point this out and, you know, it's unfortunate, but the US has been in war for the last 20 some odd years. Right. There's been brief pieces, but we actually have a fighting force. We understand, you know, how to get this and I think I'm going to butcher the term, but it's, you know, tactics is kind of for fun. Logistics is what really drives these. We have that down pat. It's very unclear anyone else does. So I think this could actually, if it works out, and especially if we get some sort of regime change, really stabilize the geopolitical situation as deterrence comes back and our enemies are maybe a little bit more cautious.
- [18:33]
Noah Latcheson
Yeah. And the difference between hardware and, of course, software and the legacy of each. Mike, what's your take on the potential impact of the shifts that we're seeing both in the South China seas and the Middle East.
- [18:45]
Mike
Well I really like how Peter mentioned it. I'm going to bring up an event, I'm sure it's going to ring his bell and maybe you too, Dave. Operation praying mantis 1988 the US wiped out the Iranian Army Navy in about eight hours and they came to terms after that. So I think that's what somewhat we're seeing from when you hear Trump say let him fight it out he knows I think that there's this complete upper hand let's not underestimate U. S Intelligence and this is going to be way over for Peter to adjust here. If they really want to go there, don't force us to test some of our new weapons that a lot of people would love to try to test and it would just so and I knew that would get a little snicker which it's like please don't because we don't want to do that. But it is the world's most powerful military and believe me there's ever had move a lot of family members. It's in the family son of marines, father of a U.S. marine, a son and a captain in the army. There's a lot of very motivated, dedicated, very smart people in this country that they'll never want to fight but if forced will do what they can to prevent it. So that's why I look at it from a market standpoint that and completely backing up Dave, you know we have, I have a lot of family members in harm's way and we this is horrible but we have to think from markets. Let's just focus on markets. What does it mean? And bottom line this is what something has to escalate horribly and I just love how they people focus on the bulls who want to cover their longs and get short career focus on potentially closing the straight of hormones. It's never happened and it would be suicidal for Iran. It would hurt China in exporting countries the most. The GCC would be upset and in the meantime when people say that and cruel bounces it's like okay sell and that's what's happening so far but to me that's the macro that Peter started out and Dave mentioned it. The macro is we do have a world heading towards recession clearly estimates from I think global GDP are down to the lowest in 50 years or so outside of contraction 2% and then downward estimates remain. US tariffs are there. We've had this spike in energy, it's heading lower. We've had a little bit haven't even had a bounce in grains and Gold is the best performing asset. Maybe bitcoin too. I mean so far this year the key thing I want to push back on is if we do head towards this recession which I think is inevitable, it's just a matter of time how long we can avoid. It's better markets can remain irrational for a while. Then the key thing that's going to happen is I think here's what's on going I'm, I'm expecting to happen from this is we have the markets completely priced in for a 10 increase in S P500. So the risk is it goes down 10%. Gold gets that. The bitcoin hasn't figured it out yet. And I think when that if that happens, bitcoin will be the first to reload. Right now it's all about pine sky. We got to buy high and sell higher. And that's where I look over from my standpoint is it's still showing up in the fact that I'm, I'm concerned I'll end with this. The key thing that's. I don't want to go back from this year and say May 22nd was the high for bitcoin and the high for bondage because I'm still worried that that was a sign that you have this risk asset going up. Risk assets go up. Fed actually has to tighten in that environment because it's creating inflation. And I think most of the smart money in the world is realizing that I can lock in 5% and the T bond after an extraordinary period of markets doing very well and US risk assets and you have to back off. So at some point, if we can, if Misha can show some of those charts, I can talk to those that. Because I think it'll dress through those subjects and if not we can just tilt over to the rest of the discussion.
- [22:25]
Noah Latcheson
I know Dave's going to want to react to that, but Mike, before, before I let you go first. The dollar. The dollar surprised everyone last week by not jumping when Israel attacked Iran because it is supposed to be the world's safe haven. And it was a tiny blip but really not very much. What's your take on that lack of a reaction and where does it go from here?
- [22:44]
Mike
Well, it's part of the breakdown of the trend. Since the bottom 2009, the dollar has been same chart syndrome with the US stock market divided by the rest of the world. Now that's already started to roll over. The dollar's rolling over with that and so dollar's in a bit of a bear market. And to think that US is going to try to reset global trade without a weak dollar is kind of silly. So the Trump administration might not say it, but when you say you want to cut rates 100 basis points, that basically means it it the same thing. So to me that's part of the reason that's wonderful for gold. It's maybe it's just much less of a factor for high volatile cryptos. I love when people point it out for bitcoin and things like it's like a scale 1 to 10, it's a 1 versus the speculative buying. For gold it's almost the 9 or 10 and somewhat for copper. So I think that's going to continue. And the number one thing to really make that legitimize that weaker dollar and make it accelerate is if the US stock market rolls over.
- [23:38]
Noah Latcheson
Dave, any pushback there?
- [23:40]
Dave
Well, I agree with him on the $100. I think that, you know, where Mike and I disagree is on the nature of bitcoin and you know, this notion that, that people are opting for 5% yields vis a vis bitcoin is just, I mean it's delusional. I mean the data is very, very indicative of that. The money coming into bitcoin are boomers and people who would be the ones that actually would want 5% interest rates and that the selling is coming original holders of bitcoin who are saying, you know, at a hundred thousand I could buy a house, I could buy a car, I could do this, I could de risk my life. And so a lot of the OG Hodlers and this has been going on now for a large part of this rally. Every time we get to this point it's been a rotation and that rotation matters. But I'll just say this. The reason the price is still here and we didn't get what would be the normal 2030 pullback in the bitcoin price from the all time high. We didn't get that. Why didn't we get that? Well, that's easy. You know, we see it, it's because of corporate treasuries accumulating bitcoin and if that trend continues, the supply will not be there at these prices. Now what do I mean if that continues? Simple math. You know, Sailor talked to 2400C, you know, CFOs and we are at less than 200 who have even talked about buying bitcoin. And so we're early there and those are the ones who showed up to actually listen. You know, it's one of those things In a copycat market, you know, companies that, that see stock prices, I mean they, they want their stock prices to go up. Every company does. And so that's a big deal. At the same time, the clock is ticking. We know that by the end of the summer all the banks will have, you know, plans in place and announcements to offer bitcoin trading services and being allowed to, to do it, including, you know, firms like, you know, Academy, probably one of the last ones. But you know, the fact is every single broker dealer, and you don have to admit or deny this, Peter, but if they're not talking about offering it, when they look at Robinhood making three times more in crypto than they do in equities, then I really wonder about the sanity of their leadership. And if I were on a board of any securities company, I would be. We just had very important news. People don't look at it as important, but it is important. You know, my friend Jamie Selway was just announced as head of trading in markets at the sec. You know, I've talked with Jamie a lot of over the last few years. Jamie was on the board of several different crypto companies, understands digital assets, yet no one will confuse him with a crypto bro. He is extremely smart, measured and careful, but understands how digital finance is going to revolutionize markets in, in a very great way. And so when you have someone like Jamie running trading in markets with Paul Atkins, who has already said self custody should be a fundamental right, and that was earlier, the week before, you understand that there's going to be this whole sea change. Markets move on supply and demand and, and we always forget that we always talk about the macro rates. But why do rates matter? Rates matter because it influences the valuations that people look at. And so that changes supply and demand. Bitcoin becoming more and more gold like is a trend. It will be a meta trend that we will see over the next five years. Right now what you're seeing is major supply, demand things going on. But this lack of volatility is because you're seeing these things collapse into each other. In the stock market you're seeing the same thing, but the difference there is that you have people who need, and I repeat word need the stock market to go up because the wealth effect is what's keeping the US economy afloat at the same time as valuations are stretched. And so that's why you're seeing the stock market where it is. And so I have the same worries that Mike does that as we get into the fall season where Seasonality is against the stock market that it could be a bit of a rocky road. But I guess we'll see, right. I just wonder what would happen if we went into full blown crisis mode. It seems to me that if there was any crisis in the stock market, I don't think anybody believes that Powell will be able to resist the call for cutting rates. You know, I personally don't think they'll cut in July. I think they're going to leave it the way it is until something breaks.
- [28:05]
Noah Latcheson
Peter, do your clients love piggyback on that? Yeah, sure.
- [28:11]
Mike
Just my piggyback on that. And I'm sorry, I have to go. I have the honor of going to the Bill Perkins private conference and presenting in Austin. I have to go for a few minutes but I want to show a few charts. Maybe Misha, if you can bring this first one up to respond to Dave that the problem now with first look at what these we have the pylon effect in. In cryptos in bitcoin. And Michael Saylor nailed it in 2010 when he discovered Bitcoin it was around 10,000. He as he was a good salesman and went to a hundred thousand and now he's 100,000. Prudent thing to do maybe lighten up a little. But now we have the masses joining history is probably not going to view this. Well now I get what Dave says. Limited supply, increasing demand. It's certainly clean increasing demand. But this now is a. Just checking. Can you see that chart? I have to look at another screen because I'm on a laptop.
- [29:00]
Noah Latcheson
Yes.
- [29:01]
Mike
Bitcoin goal has. Okay so the key thing I want to point out that Dave mentioned there is we do have. I'm just in the. In the or in the one chart I show is SB 500 diverted by divided by GDP. It's basically a way to look at the Warren Buffett model. But on the terminal easily you have to go back to 1929 the last time we had an end of the year basis. We're two times gdp. But also I want to overlay what's happening is now we have people. What Dave said is nailed it. The market is so it so needs to go up now and it's so high. It's classic human nature is only one thing to make it go down going down because you will not stop buybacks. You will not stop the corporate. The people buying stock market everything buying dips or anything until it stops. And this is the way it works. So I want to show you this. We are the highest ever but I also overlay this with bitcoin. The gold cross is when bitcoin was launched during the last great recession on the back of one of the biggest money pumps in history. And then it peaked recently on the back of the biggest money pump in history. And now everybody's on board. Typically what you get in this environment that I show on the screen is deflation and corporate treasuries are buying it for buying the last big trade. The next big trade is buy bonds, buy long bonds. Another chart I want to show you is this one here. If you just look at an annual chart of bitcoin, there's only been two down years for the S P500 total return since bitcoin's been around. And I just overlaid it with the gold, the bitcoin to gold ratios every single time it's gone on this year yet. Stock market's up. What's the sore thumb here? If the stock market stays up, sure, I expect bitcoin will probably come back, roar back and maybe be gold. But for now, goals winning. That to me is my indication that something bigger is happening here. And I think the risk is do not jump on board. It's just the pile on trade. It's so risky now to buy when we're at a hundred thousand versus ten thousand. That's my thing is we're going to look back at this from history and to point out the key thing that's the problem now is when Michael Sailor liked Bitcoin at 10,000 in 2020, there was maybe a couple competitors you can call independence or wannabes. Now there's 12 million. It's unlimited supply in this space. To me that's very indicative of a commodity that has a lot of competition. And it's very and very indicative of a market. I think history is going to look back at it as we did. The peak in 1929 in the US the peak in 99 in the US the peak in 1989 in Japan and look at it very unfairly. So I'll end with crude oil. We did speak about crude oil a little bit. This is a chart I put out Friday. One way to really look at markets is this is corel with its 200 day moving average. We bounced. It's a commodity. Commodities go down because they went up and go up because it went down. It's still going down because it went up. This is since 2022. But what it bounced to was to the highest volume price. Peter Stoudemire, some of you who used to trade, I Used to trade. There's a commodity that faces massive supply, is going down because it went up. And I think that's the risk in bitcoins. People tell me it's not a commodity, but at these levels, when you have people look at it as something more than just a number on the screen. Have to be careful.
- [32:16]
Noah Latcheson
Awesome charts, Mike. Thank you so much. And the relentless climb of the market capitalization, relative gdp. I was looking at this the other day also on global level. It's the same on the global level. It reminds me very much of that Super Tramp album, I'm dating myself, myself here. I know. Album crisis. What crisis? If any of you remember that one. Excellent. And it very much sums up where we are now. And thanks, Mike. If you have to hop off, we will miss you, but really appreciate those charts you shared. Thanks very much and good luck at the conference. Peter, I want to hear your take on the whole risk asset crypto outlook. Do your clients look at crypto at all? And if so, how do they look at it?
- [32:52]
Peter Cheer
So, you know, we're a relatively small firm. We're about 170 people. 50% are veterans. Our regulatory capital is up to about 80 million. We've grown quite rapidly since I've been there in the last eight years. We are definitely looking at what's going on with the sec, the tokenization, the ability to use this. So, you know, given our capital base and our size, you know, we haven't been aggressive on it. I think we're, you know, the CEO, cfo. We're all very familiar with it. And now we're trying to see, I think, for the first time, whether the SEC is going to make it easier for firms like us to participate. So we're definitely in that stage of, okay, how do we participate in this? How do we do this? I think there's real opportunity. It does feel like more and more people are expanding into looking at this. I would say we're probably a little bit less, you know, bitcoin, slash crypto focused and the blockchain as a whole, how all this technology, how the tokenization is going to fit. But again, it's evolving. It's something worth spending time on. I think it is going to be a growth area potentially for Wall Street. I would say, you know, to me, when we've been kind of, you know, somewhat bullish, bitcoin, not horribly pounding the table, but Certainly back at 80,000, we liked it. And the one thing is, Trump does do what he tends to do, what he says. And this administration Wants to buy cryptocurrency, they want to put it in a strategic reserve. I have no reason to doubt that they will not do that. They will come up with some form of announcement. Right. I think he's already been very, you know, I'll use the term interesting and how he's used Trump coin and offered dinners to the biggest holders. So all very weird things, but all point to an administration that's comfortable with this. And I think when we talk to a lot of state, I. I think you can see the red states kind of following very quickly. There is this, you know, energy. My one thing that I keep pounding the table on, whether it's for good or for bad, is I think the cryptocurrency community has probably become the biggest lobbyist community, most effective lobbyist community out there. Right. If you look at how other lobbyists behave first, they don't have the money. Right. The cryptocurrency, you know, you now have a very large market cap and it's completely united. Right. Big pharma. Each pharma company might have their own agenda. Right. Military producers each have their own agenda. You have crypto pushing hard. I think that's all forward momentum. The one thing I would really like to see, to get really, really comfortable is I'd like to see the strategies of the world have the premium to their holdings disappear. Right now it's almost too easy. As Mark was saying, you create a new company, you invest in this and you trade at some premium to your holdings. I think hopefully that that disappears because I do see the ARB right now where you'd want to be short those companies long crypto. I think it's almost too easy for people to make money doing that. I would like to see that disappear and then I could really pound the table. And that's kind of the two offsetting things for me. I just don't love that these companies are trading at a premium to their. And having said all that, I do think the world is looking for alternatives. As you see, the US Dollar is no longer everyone's favorite. And when we started the year, I kind of viewed the world as you had China orbited by the three evil, you know, Russia, North Korea, Iran, and then kind of the autocratic resource rich nations aligned with China. And then you had the us, Canada, Mexico, NATO. And that's been fracturing a little bit. I think we're trying to put it back together, but I think people are looking to alternatives and people are experimenting.
- [36:05]
Noah Latcheson
With Bitcoin because of the alternative financial Rails as well as the alternative asset that it.
- [36:12]
Dave
There's one point that just has to be made and you know, I just, just don't understand sometimes how you could keep making the same point. So if you go back in history and you look at any version and you know, I could present, but it doesn't matter, it's the same chart. You know, any version of bitcoin's price and you don't take into account the growth of the network, then you're effectively what you're doing is you're saying that the commodity Bitcoin like oil exists the same today as it did, you know, 10 years ago, which is a completely ludicrous assumption. You know, the, the hash rate, the power of the bitcoin network is six and a half times what it was in 21. And it is, I mean it's one of the strongest charts in the history of charts. You know what the growth of the bitcoin network and, and you know, I'm looking at the bitbo one right now and I, I guess I could present it. Share screen. Where are we? Chrome tab window. No, let's see if I can see it. Do I have this right one? Yeah, for some reason I'm not seeing it. Okay. It's on a different one so yeah, forget it. I'm not going to kill myself to try to worry about it. But it's the same screen up and.
- [37:30]
Noah Latcheson
To the right with a steep slope.
- [37:31]
Dave
Right, Very steep slope. And yet even in the last week we've seen multiple sovereigns. I mean the of France said that they're going to be using bitcoin mining to help stabilize their network. That came out last week. I mean it is a very big deal. So if you're trying to look at the price of an inelastic commodity and remember I keep pointing this out, it's a first year economic student should be able to understand that a commodity where the increase in price does not allow for an increase in supply. You and you look at the growth of the network over time and you try to evaluate that commodity as if it's the same thing as gold. Which by the way when the price of gold goes up, more miners can pull more gold out of the earth. You can't do that with bitcoin yet the network is much stronger. So my problem with Mike's analysis of bitcoin gold, I look at that bitcoin gold chart that he showed before and it's very volatile but it's an up into the right chart. And so that up into the right chart is I think, the major deal. And, you know, a hundred thousand sounds a lot in an objective sense. But in terms of bitcoin relative to the global asset base, it's tiny. It's still one tenth of where gold is. And what, what, what has not been said by Mike but is, is the gold bugs understand is that it is likely that at some point in the future that whether it's gold or bitcoin or combination of two, that the aggregate of the two will be a higher share of global asset prices. In a world where every single government wants. Wants to propel asset prices higher and keep a lid on consumer inflation, that is the policy goal of governments. Now, are they going to succeed? I mean, who knows? But the most likely failure isn't going to be asset prices collapse. The most largest policy failure is likely to be they lose control of consumer inflation. That's just what history shows in fiat money. And so you have to. If you're asking yourself, will the governments of the world fail in their bid to keep asset prices high, I would say that seems exceedingly unlikely. If you're asking me, will they fail because consumer inflation might get out of control, that's probably more likely. What's more likely still is that bitcoin and gold. And bitcoin will continue to close its gap on gold and continue to eat into it together will ultimately be the strategy that people use to combat that almost inevitable outcome of increased liquidity. So that's the way that I look at the world, and it's a bit different. And every time I try, unfortunately, Mike's not here to respond to that. But, Peter, you talk to a lot of people in the traditional financial sector when you have these conversations. Anytime I hear the words blockchain, not bitcoin, what that tells me is people haven't aren't really. You're not talking about anybody who cares about gold or sound money. You're not talking about Austrian monetarist types. You're talking about, okay, what do I do today with my portfolio types?
- [40:38]
Peter Cheer
Right, Yeah, I think that's fair. And I think again, especially on the corporate side, there is a lot of conservatism. So I think people are kind of experimenting, okay, what's this? And the fact that the SEC is much more favorable or seems to be headed that direction is giving people that ability to, like, start analyzing this a little bit more carefully, see where they want to dip their toe in. I think not everyone's going to be a Mike sailor and super aggressive, but we are at the stage now where people are like, okay, what does this mean? How does it look like? And again, I think you've seen when I do some writing for thestreet.com and stuff, you know, people have been experimenting in the Bitcoin ETFs, right? And we can argue whether that's the best way or not way to own them. I also think it's going to be interesting to see, you know, if some of these stable coins can actually figure out how to pay a yield. You know, the one thing that is the big difference, right? Money markets, 5% stable coin, zero, depending on how it's used. If rates come down, that makes it more interesting to give up that interest because you're giving up less. Or some of these stable coins can figure out ways, and it sounds like some are kind of coming up ways around it that you don't get yield per se, but you get more of the stable coins. So I think that's going to be an interesting evolution.
- [41:46]
Dave
Do I think that that requires that? I just want to, I really want to jump on this because our audience cares about this. Look, the Genius act hasn't passed yet. The, the, the, the banks and the donors and the advertisers in the Wall Street Journal are still pushing back against this. I want to make two points. One, and I like teles demos, but he wrote one of the dumbest articles I think he's written in his career yesterday. And I'm going to flame it in on, on X in a little while because I'm appalled by the stupidity of people around the Genius act and how little they understand it. My fellow co conspirator who by the way is, you know, is the opposite of me politically. You know, I'm, I'm a, I'm center right. He's center left is Austin Campbell, who's an NYU professor who's been spending a lot of his time debunking the morons who keep talking about the stablecoin Act. Let's make two points. Point number one, whether or not stable coins are allowed to. Allowed to provide yield and within a year will be irrelevant. I'm going to say this again. Irrelevant. Now why is it irrelevant? It's irrelevant because tokenized money market funds already exist and it will take not. It will not be hard for financial institutions to offer automated sweeps into actual tokenized money market funds if you're once your stablecoin enabled. Anybody in the crypto sphere understands that the major reason stablecoins are a massive improvement are because instead of three days to move money from one financial institution to another. Where the sending institution gets the float on those three days, it's not even three seconds. Meaning you can move money from one place to another, one asset to another instantly with no friction. So have. Offering an account to clients that use stablecoins as a checking account and have a savings account that is using a tokenized money market fund will not be hard. And oh, by the way, the regulator for that is not the securities regulators necessarily, but the SEC is going to be totally cool with that. So all the brokers that want to offer that service will be able to do so and banks will be able to do so because of where the direction the OCC is moving so that within a year is certain. So yes, it is ridiculous to not allow yield in stablecoins. It is stupid. And it is basically just because of lobbying from banks saying, well, wait a minute, if you can offer yield in this product effectively, it means that checking account yields will go from less than half of 1% on in the national average to 4%. Well, we're gonna, we're gonna lose all that money because right now the banks are making that as a subsidy.
- [44:28]
Noah Latcheson
But Austin has done an amazing job. He's an amazing job in refuting every single argument against the yield bearing.
- [44:36]
Dave
Very big deal, Noel, because something you care about, which is once you have stable coins underlying the entire financial system, and that doesn't happen overnight, but once you have it, the velocity of money goes way up. And that is a very big deal from a macro point of view. What does it mean? It means that people no longer have to have $6 trillion in trapped assets earning nothing. Right.
- [45:03]
Noah Latcheson
And that's even before going into the impact on the demand for not only the dollar, but also the Treasuries underpinning those stablecoins.
- [45:11]
Dave
That's right. And the other big, big point about stablecoins are that as they become legal and US merchants and every merchant around the world starts to use it, it effectively cements the dollar as the currency of global finance. And so your amount of assets that will be held in Treasuries, for lack of a better word, because that's where it will ultimately be, will go up. And the dollar, not necessarily its price, but its use, goes up, but that will definitely impact its price. And so effectively what you end up with. And there's a lot of countries around the world that are already on a dollar standard. You don't think about it that way, but there are many, many countries that have that officially back their currency with dollars. There are others where they manage their exchange rate to the dollar effectively. What stablecoins will do in the global economy is make that even stronger and easier by the way, dramatically easier. And so those are, those are big deals and people don't understand it. I think the banking lobby understands it because you know, effectively that's why they're still pushing against it. I'm not going to count my chickens until it's hatched but I'm just tired of the silly rhetoric around it.
- [46:24]
Peter Cheer
I find myself pointing people to is USDXX. So it's the BlackRock Mutual Fund that holds circles assets and to me. Right. That's a level of transparency we certainly haven't seen from tether. And it's again it's something I think gives people that comfort. I'm not sure that ETFs are the ultimate way or mutual funds but this is something that you can pull up if you on almost anything usdx it's the blackrock Circle holdings. The information's there. Right. And that to me it's a huge step forward. Right. It lets you know, traditional people tie this to things that we are comfortable with. With. Right. And that I think the more you can tie this to things that you're comfortable with and does lead to that obvious question, well if they only if they hold all these Treasuries, why can't they pay interest? But that's a separate issue as you pointed out.
- [47:10]
Noah Latcheson
Yeah. And speaking of getting comfortable with once everyone is comfortable with stable coins, well then tokenized securities are the next step because stable coins make all of them possible and easy. The Genius act I believe if last I read goes to the vote in the Senate tomorrow. Right. And if it passes it then moves to a House vote. But it is looking pretty close and that would actually be astonishing the fact that we have a very first ever in the United States, home to the world's largest financial market, the first crypto friendly or crypto supportive regulation. And another thing that you don't know if Peter, you see this in the people you talk to, the number of people and I know Dave describes him as well the number of people that are assuming that everyone in crypto is against regulation when that is precisely what we have been fighting for all these years. We want the regulation, it will be a big vindication that all this fight has been worth it.
- [47:59]
Dave
Yeah. One, one point that just to harp on something that Peter said before. It is true that the crypto industry has been singular and unique and probably is why Trump is sitting in The White House. But the reason for it is not well understood. And that is because unlike any other industry I have never seen, with a possible exception, you can make an argument that the cannabis industry suffered the same thing. The crypto industry was targeted by Elizabeth Warren, who ran the Biden administration's policy and economic policy for extinction. She tried to kill it. And it was, it was as brutal a reason so as you can imagine. And so all the people in crypto who look at the, all the idiotic protests this past weekend are like, yeah, well, you didn't have your family targeted by an administration for extinction. You weren't censored, you weren't denied banking access. You weren't effectively tried to be eliminated by an administration. And now this one is offering, is offered freedom. And so, yeah, there are people who, you know, can say whatever they can say. And the politics this weekend was just silly. I mean, some of the interviews of some of the people protesting, it's actually funny how dumb they are. I mean, they make themselves look so. Well, he's doing X. It's like, really, you know, and, and it's like, it's interesting. The cult of personality is all people can get to. But crypto as an industry, why was it so organized? It was so organized because the industry was. Is promising financial innovation. It will create a better financial system, a more inclusive financial system. It is not left versus right. It's Elizabeth Warren versus everybody else. And that is why the industry was so organized. Organization was because of necessity. I mean, there are lots of people in this industry who want to fight each other, you know, you know, fight each other in a big way. But you give a common enemy and people fight. Now we have the opposite. Now we have an administration who is arguably trying to profiteer from, you know, from the industry. And so. Okay, well, whatever. I mean, I, I don't want to take a position. I'm not a big fan of Trump coin. I'm not a big fan of any of this stuff. What I am a big fan of is having a modernized financial system with intelligent, principled regulation, which, by the way, is the, the default position for most of the crypto industry. Most of the crypto industry doesn't want deregulation. What they want is what are the rules will play within the rules.
- [50:26]
Noah Latcheson
Exactly. And this in the world's large. This in the world's largest financial market. One overlooked feature of operation choke point 2.0 with the oppression of the crypto industry is the international impact it had. I was reading a paper this morning by the latest financial stability report by the European Central bank in which they cite. And one of the risks of the crypto industry is hey, look what happened in the United States where crypto brought down a bank, which we all know is actually not what happened.
- [50:54]
Dave
It's the opposite. It's the absolute opposite.
- [50:58]
Noah Latcheson
Exactly.
- [50:59]
Dave
Silvergate was liquidated because the regulators were putting it out of business. It was orderly. No investor lost the money. The only bank that lo. That that went out of business, business that was assassinated, was, was, was signature, was assassinated with the regulators. But it's the only one that would have lost money was Silicon Valley Bank. And crypto had nothing to do with that. That was literally. They lost money because they took too much risk. And Circle, this is the other thing I love about Stable coins. The European Union, how they got it wrong. Circle depegged. It was the only DPEG we've seen in crypto since, you know, some of the tether fud that's gone back and forth and, and we could talk about tether. I tend to agree with what Peter said. I think transparency is good. In fact, Solidus Labs, the company that I'm working with now uses sunlight as the best disinfectant on their T shirts. So it's a good thing. But the only depeg we've ever seen in a major, what would be regulatory approved crypto was Circle because they had 30% of their assets in Silicon Valley bank and had the federal government not backed it out, they would have not been asset backed. That is a hugely important point because people keep ignoring, and God knows the European Central Bank's going to ignore it, that fractional reserve banking is inherently risky and probably doesn't need to be as risky as it used to be. The reason we used to need fractional reserve banking was because capital wasn't global mobile and we had no information flow. And so the only way you could get loans to a small business in Peoria, Illinois was from local banks in Peoria, Illinois. These are the ones who would do it. Well, that's not the truth anymore. It turns out that a huge percentage of bank assets are actually used. They buy Treasuries with it. So what do we do? Depositors. It's exactly the same as the stablecoin model, only there's no way out. Right? Depositors put in money, they get half a percent interest and the bank buys 4 or 5% treasuries. Although the reason the banks are in such bad shape is because they actually bought 2% treasury and now face huge losses. On their balance sheet unless they, if they, if they actually had to liquidate.
- [53:05]
Noah Latcheson
So, yeah, the impact on the actual plumbing is going to be huge. But, you know, we only got a few minutes left. And I want to come back to Peter with something that I've been thinking about while we've been talking and that is if Powell cuts rates, July say, why would we not see what we saw in September when Powell cut rates? Why would bond yields not, not react negatively or in other words, head up even more were we to see that?
- [53:31]
Peter Cheer
You know, I, I think at that point it was viewed a little bit as they'd given up on the inflation fight that they weren't afraid. And that was kind of the negative reaction. You know, I think people, I feel this time people aren't as bullish. So one, I think people are kind of positioned fairly bearish. I hear much more talk about the 10 year hitting 5% than 4%. So I think the market from a positioning standpoint would be susceptible to a pullback. I do think we've kind of been ignoring some of the job risk. Yield curves are fairly steep. There is some risk, but I'm fairly comfortable that this time it doesn't happen that we might get a slight steepening, but the cuts will more than offset that. And you know, I kind of view 4% on tens as my target, maybe 450 on 30. So down a little bit. You know, again, I think people are mistaking one of the messages that, that Powell was very reluctant to cut when tariffs were potentially Liberation day tariffs. Right. You had no idea what these things were going to do. They were unprecedented. You'd never seen any of that. And I think some of that's off the table. And that actually gives Powell more room. Right. If we stick at these pause type levels, I think Powell has that ability to say, okay, I think we can understand what 10, 12% tariffs does to the economy. It slows us down probably faster than the inflation comes. So I can cut. The level of uncertainty was so high. And I think that's where people, I think Powell was actually spot on. Even though we were scared about the economy with Liberation day tariffs, he had no clue what this was going to do to prices, what this was going to do to supply chains. So he had to be cautious. I think it actually, this calmness lets him proceed a little bit. And I think that's where rates can take a degree of comfort. The other part I keep coming back to this is when we look at the deficit, for example, everyone's now talking 7 trillion or whatever. The number is risk. And everyone gets all worked up. That helped push yields higher. What they will forget is that it bleeds in slowly over time. It's a billion here, a billion there. So you don't get this massive all of a sudden, oh, we have to issue all these treasuries today. 2. You know, I'm not a big fan of tariff policy, but it is generating revenue. So there is revenue coming in from that tariff that will offset some of this, and that's not calculated in any of the official calculations. So we could get some positive headlines from that front as well. So I, I think the market just got itself too worked up about these things and it'll calm down a little bit and Powell will give that right ammunition this time.
- [55:50]
Noah Latcheson
Yeah. And after all, September was a very long time ago. A lot has happened since then. We are in for a hectic week this week. Peter, thank you so much for being here to share your insights with us. It gives us ammunition with which to deal what's coming. I mean, this week, not only do we have potential fireworks coming from the G7, we also have a lot of unfortunate potential fireworks coming from the Middle East. And that's even not taking into account we're still waiting on China's reaction to all of this. It's going to be interesting. Yes, of course.
- [56:21]
Peter Cheer
Sorry. Next time, I'd love to bring my chart. I call it Maslow's Hierarchy of a Credit Bubble. And it takes Maslow's hierarchy of needs and looks at where credit or bubbles, you know, financial asset bubbles start. And it always starts in safe assets. It never, ever starts in risky assets. So when we're worried about sustainability, systemic risk to the system, it's always safe assets. You can go SNL, Crisis, Russia, Ukraine, Enron, WorldCom, AAAs. So I think people allocate risk very appropriately to risky assets.
- [56:49]
Noah Latcheson
That is actually fascinating, especially since these days what we understand to mean by safe assets is changing. So we're still figuring that out. And thank you very everyone for joining us today. Thank you, Peter. Thank you, Dave. Talk to you all soon. Tune in next week.
- [57:21]
Dave
Let's do.