← The Wolf Of All Streets
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- [00:03]
A
Bitcoin dropped below $72,000 today on of course Macro News but also probably on the fact that Sailor broke his never sell doctrine and finally sold a little bit of bitcoin stating that it was to pay STRC dividends. We're going to pack unpack that and everything happening in the macro today. What a time to be alive.
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B
Let's go, let's do, Let's do.
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A
Good morning everybody and welcome to Macro Monday. The whole crew is here slash. I'll waste no time bringing up. We got Mike James and of course Dave. Oh wow. What did I do? Everybody's gone and they're back. Morning gentlemen.
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B
Morning.
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A
Dave's got the Knicks. I, I see that, I see that and I respect that. The, the Knicks. The Knicks shirt on. What a run.
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B
I've long suffering fan.
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A
I I have a feeling you might be longer suffering in a, in a week or two but
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B
well we'll see but getting to the NBA finals is definitely not
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A
that was amazing. All right, so let's dive into it. Mike, you're going to give us the morning meeting and then we're obviously going to talk about Saylor among other things but go ahead.
- [01:29]
C
So Anna Wong came on and said pointed out that the ISM manufacturing is expected to pick up Regional feds show nothing but a pickup price index has spiked to the highest level since 2022. She thinks it's mostly mimicking metals aluminum, steel tariffs, copper but she expects that price index to peak in a month or so. Jolts and non farm payrolls expect improvement and strong labor market expecting 95,000 in non farm payrolls in May higher than the consensus of 85,000. So she thinks that we're basically above true break Even now around 50,000 economy solid and in probably in the first it's a first part of first one third part of a business cycle that just starting to kick in. The birth death model has improved and all things have picked up. Isms are showing rough roughly nine months into a business cycle. So all positive on the US economic standpoint for Anna. I did my commodity outlook but we can save that for later. Let's go to Chris Kane in equities. He pointed out we've had 22 new highs this year in the S&P 500 record highs in 2021 set the record at 70. The market's been overbought at most RSI since April 15th which shows the underlying strength and it's just then been an absolute earnings blowout season almost 29% year over year growth in the S&P 500 versus 12.4% was expected preseason, so that's just a shocker, he pointed out. Google year over year growth was Earnings growth was 80% on the top, only healthcare did not grow and mostly incredible earnings per share growth in techie, he pointed out. Beyond the market cap indices the picture is much more moderate, he pointed out there's still a record spread between equal weight and market cap valuations on a 25 year basis. Audrey Freeman pointed out that she's what was quite bearish the dollar at the beginning of the year has turned over to quite the compelling cyclical bias for the dollar as we point out the strength from Ana and the fact that the ECB might be hiking rates into a bit of a stagflation period might not be so good for the euro, she says stuck between 115120 and had made a few comments on Sterling, but maybe because she's based there Most of us don't care about Sterling, but it's just a fact. I mean getting up in the morning listening to Bloomberg News, I'm like yeah, sorry, your London politics just don't matter. I mean English politics just don't matter for commodities anymore. So I switched to something else. So Ira Jersey pointed out the two, five and seven year auctions were very boring. That was last week. That was quite significant. He thinks markets showing decent demand the primary auctions as we move past the day to day nuances of what's happening with the Gulf and crude oil settling the ranges, but most curves are still flatter since the Iran war. Fed's on hold two. You know the 4% means it's a signal that Fed's going to be hiking and he doesn't really bias into that. And my commodity outlook is for crude oil. We're stuck between 80 and 100. It's very political. What does Mr. Trump need for midterms? I think that December contract around 79 is going to be closer to 50. I pointed that out. It's not alone. We had major pumps in prices in corn and soybeans at the wrong time of year to buy at. Hedge funds are way long, so unless we get a drought, those prices are going down. And then I pointed out for metals abroad, Bloomberg All Metals index it's up 11% on the year and so is the S&P 500. So metals are completely dependent on S&P 500. And then I reiterated my bearish views on Bitcoin and I don't want to piss Dave off so keep those quiet back to you.
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A
What a segue, Dave. Are you pissed off?
- [05:18]
B
I mean, you know it's like does, does, do you get pissed off at the wind when it blows? I mean do you get pissed off at the sun for rising when you're tired? The answer is no. I mean think some things are the way they are. I mean I, I look at, at, at bitcoin dropping and crypto dropping because Sailor sold the 32 Bitcoin that we saw move to those wallets last week as effectively. Sure. I mean we sat here on Friday and it was trading around, around a whopping $240 higher than it is now with the rounding error and everyone on Crypto Town hall was bearish. We're going to get a chance to buy, you know, well below 72, probably around 70 this weekend and, etc and so here we are Sunday night, you know, Monday morning before the markets open and we are not even as far down as the average person thought on Crypto Town hall last Friday because of news we already knew about. What else are you going to say? We are going to be printing to infinity. I mean Larry Lard is getting looking more and more right by the day and the, it really, it really is going to matter. Right? You know, I don't think the market understands what a coordinated Fed treasury policy is going to be. And I'm queuing up my friend James here because obviously this is your biggest gig but I think the market totally underappreciates it. I posted a chart this weekend which is literally, it shows you just how the market does things. So you might remember a few months ago we were talking about software stocks and we were saying AI is going to kill the SaaS model. And so the software stocks in a ripping market dropped 30 plus percent on the index and obviously the winners have done dramatically better. Meanwhile, last week we had days, literal days where multiple software stocks had double digit percentage rallies. 20, 30, 40% because people realize, well wait a minute, it's not really going to hurt them. Look at the earnings. And once that, that became obvious to people, I mean it wasn't just on earnings, it was, you know, whatever. And you look at that chart, the fact is. Oh wow, someone else picked it up. Yeah, I posted it on Saturday from the gym.
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A
Yeah, I happen to have seen, literally happened to just sort of see it in my scrolling this morning. And as you were talking about it, I searched it.
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B
Yeah. So I, I tweeted it out. It, the chart looks exactly like I expect the bitcoin chart to look, which is this, this Catastrophic bad underperformance. And then guess what, a few months later people wake up and say what the hell are we doing? And that's exactly, I think what's happening. There's literally the reason for selling bitcoin here is either you believe it's going to fail like Mike, or you think it's going to, you're going to be able to buy it back lower like a lot of people who aren't going to be able to because there's a lot of fundamental demand drivers. I mean the. When you talk to the retail platforms. I saw three different interviews with retail platforms this weekend. Every one of them said the same thing. They said volumes are way down, the people who own aren't selling. You get some speculators on the edges. But this is the strongest hands kind of, you know, situation we've seen in a long time. And look, retail left the building. But the truth is that the demand drivers for bitcoin are intact and are likely to accelerate. So I personally think that a macro backdrop where we know, we know with absolute certainty that the head of the Fed, the head of the treasury and they've been talking about it, obviously the president needs it need to try to run things hot. How do they do that? They need to. You saw a dissent set. He talked specifically about reshoring manufacturing and re bringing up supply chains. Things I've been talking about in this show for six months. They're starting the narrative train. They're doing everything they can to justify lower cost of capital for business. I'm not going to say lower interest rates because that doesn't matter. It's lower cost of capital for business and another deregulatory push at the same time. That's what's going to happen. If that's the backdrop that you're going to sell an asset where most of its buyers believe its goal is to hedge against the potential fallout of that situation. Go for it. You know, all I can say is go for it. You're literally, you know, spitting into the wind. But that's okay. You know, you could be right in the short run and maybe very well. And so we may very well stay like this for a while. We could stay like this. It wouldn't stun me, Scott, if we stayed in this sort of range bound, low, shitty trading environment through the summer like it did a couple years ago.
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A
I mean, it's that not always, but I mean, you know, I would say
- [09:55]
B
that's, you know, seven, that's my rant now. As far as oil is Concerned. Look, I think Mike has that one nailed in a sense. I don't think it goes below the cost of production, but 55 is a magnet. It's going to draw it there at some point when the, there's. People aren't worried about how they're going to get it through the Persian Gulf, from the Persian Gulf and everywhere else around the world. And that is going to be a tailwind to a lot of stocks. That's going to give the Fed the opportunity to do what they really want to do, because that's the component. Reversing that part of inflation is the only transitory inflation we have. Inflation is a monetary phenomenon in the long run, mostly on asset prices. But never forget, oil shocks are transitory because technology and the ability to pull it out of the ground and move it around the world is improving every day. And so there. I think that's true, but that kind of aligns with my macro outlook. Anyway, that's. That's enough of a rant. James, I'm sure you have some opinions on what I just said.
- [10:55]
D
No, I agree on quite a bit of it. You know, going back to the sailor narrative, you know, I was on that call. We asked him questions about selling bitcoin and what his philosophy was about that. And, you know, he made it clear that there's. He there, there as an individual. If you buy bitcoin and you put it in cold storage, you want to hold on to it and not sell it as a company. You, you have to maximize your ability in corporate finance to create more Bitcoin for underlying shareholders. And so that sounds counterintuitive when you hear that, you know, you wake up Monday morning, you see that Michael Saylor with the company that owns the most bitcoin, turned around and sold some after telling you never sell your bitcoin. It sounds like, it sounds pretty negative on the surface, but if you stop and you pull back and you actually think, you know, and you don't just react emotionally to it. You heard him say he wants to inoculate the, the well, he wants to inoculate Wall street and retail from him having the ability to sell bitcoin and just, he might just do it to kind of set people straight and, and, and, you know, show people don't panic. The bitcoin's not going to drop to $10,000 if I sell some. And why would he do that, though? Well, you know, he does need cash to pay dividends. He can sell some higher cost bitcoin at a loss and then turn around and buy it, and it strengthens the balance sheet on a tax basis, number one. Number two, he's showing ratings agencies if he's willing to sell bitcoin in order to pay dividends on these securities. And why does that matter? It matters because they need a rating and, well, they don't need it, but it would be nice for them to have a rating in order to be included in the S P500 index. Why does that matter? Because we're seeing what's, we have to probably talk about Tesla and SpaceX here at some point because, you know it's going to matter when you get included in an index. So much of just all, every day movement in the market is, is dependent on ETFs moving in and out. And ETFs are being bought by RET, they're being bought by IRAs, you know, and some 401ks. And so these, the, these indices are extraordinarily important and it's not. And 401ks are buying, still buying mutual funds, which are essentially indexes in most of them. And so, you know, it really does matter and that I take it as a positive that he's willing to do that, show that he understands corporate finance and that it ultimately will be better for the underlying shareholders. Now this morning you see that bitcoin's reacting pretty negatively to it. And I think that that's a lot of what you're seeing in the price action of bitcoin this morning has to do with it. And look, you've got holders of bitcoin that have been around for, for a decade and they're, they're, they're getting a little bit fatigued with the whole situation. And there's definitely a faction, as, you know, as all you guys know. But Scott, you really understand this from talking to these guys every single day that there's, there's a faction of bitcoiners that believe it's, it's freedom money only and they don't want Wall street involved in it. And they, you know, which I, I understand where they're coming from, sovereignty, self sovereignty and all of that, but, and I agree with it, but there's just no way that you're ever going to have bitcoin grow to a certain size without having institutional involvement. It's just the reality of the situation. It's because of the way our, our money systems are set up. It's just, it's just what it is. So I take it as a, ultimately as, as a positive net net and you know, I'm again, my hedge fund. We own MicroStrategy and we're not selling any. And it's not upsetting me, it's just what it is.
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A
Yeah, I think he had to do it. I don't think he has a choice, to be quite honest. I think that he launched a SEC registered security and STRC. And you can't go tell retirees that their 11.5% yield is guaranteed by an asset that you're also screaming you'll never sell. And I think that that's just it, right? I mean, he sold 32 Bitcoin. We're talking about two and a half million dollars for a guy that owns 800 plus thousand Bitcoin. This is exactly the inoculate the market kind of sell that he would do to follow through with that promise. But you also have to be, I think, sympathetic to the people who believed he would say never sell and don't understand the semantics. Right. I mean, there's plenty of people out there who I've listened to Michael Saylor say, never sell, never sell, never sell forever sell a kidney, right. But, but never sell your bitcoin. And so, you know, if you're not sophisticated and understand the mechanics that you just described, I can see why it would cause some ripples for some people.
- [16:36]
D
I mean, like, just put it in perspective. If he was to sell 10% of his holdings, that would be, you know, we're talking about 80,000 bitcoin. Like this is like selling a few Bitcoin is just exactly what you just said. It's just a, just a little bit of a pin prick to say, you know, look, we'll do it just, and, and we'll show you that it's okay. And you know, if he's buying it so well on the way up, he'd be able to sell it in similarly on the way down. And it, you know, it shouldn't impact the market except psychologically. People get, they're just bent around this concept that, well, he lied. He's not, he, you know, he said he'd never sell it. And it's, he, he. There's two different communications there. And as the CEO of. Or, I'm sorry, he's not. See, he's a chairman of, of the, the company he founded and he, and he's running this strategy. He's got to show the market that he's willing to do exactly what you just said. That's, that's right. So, and it's just a reality of the, of the situation. He's got STRC is backed by the bitcoin as balance sheet and he's showing that he's really backing it. And so that's what it is.
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A
Yeah, I mean just like inside baseball, as I've said and I've maybe mentioned on this show. But, you know, I woke up that Wednesday morning with, you know, Dave and I were meeting up at Consensus and my headline was Saylor, you know, says he'll sell some bitcoin and inoculate the market. And I had Saylor on the docket at 8:30am for an interview. And I'll tell you something, I've interviewed Saylor a lot of times. I've never had his team say please submit the transcript for clearance from the SEC before you release it. And that happened this time. So now, now when he does an interview, the SEC needs to see the transcript before we're allowed to release those interviews.
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B
All that means is he doesn't want to do. He does. He doesn't have the money. Elon Musk has to fight the SEC because he's gotten in trouble for his interview statements. But look, I just did a post which I think is. Is important for people to understand. I made the statement that if I worked for, for Fung Li and and Sailor and strategy as their, you know, a trading advisor 100% it is true that selling small tactical amounts when I have tax losses would be a major part of the strategy to help me buy algorithmically cheaper. It is undeniable. I actually in my book which I have now submitted to the publisher, it's not going to be evidently I'm like
- [19:05]
A
80% through the book.
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B
I don't know if you got to the part where I fought with color compliance over literally over this. This the following and, and I got a no which was can in a buy algorithm you sell in order to push the price down so you could buy it cheaper if you detect such actions would be helpful. And compliance said no as a part of a broker dealer because you're holding orders and you have to do what the orders say. But that is absolutely not true if you are the end buyer, if you're a hedge fund, if you're whatever. And, and so a lot of people know that there are liquidity times and signaling times in the market when zigging when you zag. Obviously doing the opposite of what people expect in a loud way allows you to acquire cheaper or sell at a higher price. It is well understood in market circles. I actually tell a story in the book about how when I first Went to talk to our first NASDAQ trading meeting and I was watching them train a NASDAQ trader and they had just gotten a buy order for Microsoft for 250,000 shares. And so you know, Tom was doing the training and Dan was the trainee. And Tom says, Dan, okay, the first thing you do when you get it in order to buy a large block of stock is put a sell offer out in the market. That was back in the day when it was their own quote. So it was quote legal. It actually that would be called spoofing today but back then that was de rigueur. It is completely normal. And so this notion that people think they know what's going on when Saylor said in the SEC approved transcript or not the compliance approved transcript that we may be selling but during that same period of time we're more likely to be a net buyer. Understand what that means? That means market, you no longer can look at these moves and trade off them reliably. So which explains partially why you know, a sell of a few thousand or a few Bitcoin, you know, basically has had. I mean it's, it's rounding error, it's a couple percent in bitcoin that means nothing. It's not anything close to what people would expect because smart traders know, hmm, you know, we could be getting faked out here. And so looking at this objectively and I'm not saying they're doing it smarter. I honestly I've been a huge critic of, of sailors trading strategy from the beginning. I think that they've left a lot of money on the table and as a shareholder it annoys me but you know, that's a different story and I'd be happy to have that conversation with any of them to explain why in detail. But it is if you're trying to trade based upon public news about at the same time, by the way, Strive bought more, a lot more bitcoin than Saylor sold and who knows what, you know, what strc if he hadn't bought converts and retires probably going to buy this week.
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A
I mean let's be honest, right Flat out he's like I'm going to be a net buyer.
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B
Right, but, right, but the point is is that trying to. All you need to understand is the capital inflows via STRC and via and on Stripe's product, the SATA to understand that there's net more buying than there is mining selling. And so the sole question is are there holders who are selling more? Is the price elastic at this price to Supply, et cetera. And to quote Mike, because he's right, in a solid, strong market environment on other risk assets. Are you really going to see Bitcoin underperform here? And probably not. It's probably going to end up with beta and I think it's going to be catch up like the software stocks.
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A
Yeah, I want to know, Mike, I want to know your take on Sailor. And I just want to add very quickly that Sailor's not the only seller in the market. His is obviously tiny. But we had the story last week and Dave, we can get. I think we unpacked it, but the $1.3 billion ibit seller that basically sold in one tranche, we've now found out they sold actually at a discount and basically sold at a discount. So they were trying to get out of the market pretty fast. And we have the longest outflow streak ever in Bitcoin ETF spot history. Now almost $3 billion in 10 straight days. I just want to add that as context that, you know, there's a lot of panic about sellers in the market and Saylor is kind of coming in at the tail end of that. But Mike, you know, you've been critical of Saylor, obviously tempting the market gods, taunting Warren Buffett. Now he's selling well.
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C
It was a flip for me because it was very lonely in 2020 calling for Bitcoin to go to 100,000 when it was 10,000. And when he jumped on board, it was like, oh, thank you. And I just remember doing yard work and listening to a podcast who was quoting Roman bridge from 2,000 years ago, pointed that example. So the thing is a lesson I learned with and like to point out to Mr. Saylor and James, you mentioned, yeah, he's getting corporate finance, but he did not get markets. It's the number one thing. And I think some of us here are too in the weeds. Understand you're in the middle of a really significant bear market that's just getting started. That's what he did. He helped put in the peak thinking he's still not understanding this might be just getting started. So I'm going to show a few screens and show you all a few screens. I think you need to see this, particularly after. What if some things are sent on. So here's just a simple chart of the Bloomberg Galaxy crypto index. It's broken down below 2000. I don't see what stops it going to 1000. It was 4000. At the same time, bitcoin's breaking down. But the bottom line at the same time stock market's breaking up. This is a classic sell signal. I mean you're just supposed to say, okay, thank you. Give me any rally I can sell in this failing asset. Put stop above and prove me wrong. Classic sell signal. So I want to tilt over to also what I think a simple thing is. Same thing, crocodile jaws. Here's Bitcoin's 200 day moving average. It's holding resistance. It's simple stuff. It almost never does it that easily. I just think that's the problem. It's been too easy at the same time. 200 day, it used to be the same as the S&P 502200 day moving average. That's a crocodile jaw. That's a significant bear market that says sell me. Obviously you don't get it yet, but markets, people, some I think Dave doesn't get it. But I'll point out a key thing that you said about Larry is Larry has been some great literature. The point, as I point out, he should have published this in 2019. And this is the point I want to point out in this chart is if you are buying gold now and selling Treasuries, you're doing it at the worst level in 44 years. Sorry, good luck with that one. But I just want to point out this is a chart of the Bloomberg total return bond index divided by gold. This is about, you know, back in 2021, 22, 23 when McGlone said it was going to go above 2000, I was wrong forever. And then finally it breaks out and now it's just so expensive versus Treasuries. I just say this is any chance you get. That's a problem with the long bond at 5%. Why would you hold a rock when you can get guaranteed returns and the Fed potentially tighten. That's what's changed. Trump has pivoted a little bit. He's kind of supporting wars. The same thing I want to point out in this chart though is we have gold versus its 60 month moving average. It got to the highest in about 40 years. And gold versus the Bloomberg commodity Index potentially peaking from the highest in about 40 years. And just another key theme I want to point out is this one I was early on, I've been waiting for. It hasn't happened yet. TLT vs USO. The last time it dropped like this. The velocity of this was right before it was right 1h 2008, I was on top of that trade. I remember jumping on board and when I could short things. Now at Bloomberg, I Can't. But the key thing that people need to Understand is the US stock market cap has jumped to 2 times total debt. People talk about how bad the debt is. Well, we're back to two times stock market cap, total U.S. treasury debt. And I point out, looks like crude oil looks like it's going to go down to this December level about it's 80 now. I think it's going to go to 50. Managed money net positions, hedge positions. Looks like they just peaked in crude oil. Same thing in grains. Look, they just peaked the thing in crude oils. They only peaked from a year's high. Markets really got it. The hedge funds were like, yeah, sorry. We know what happens to crude oil goes down because it went up. But in the grains, this is a key theme. If we kick into a little bit of normalization, grains will plunge. That means corn, soybeans, wheat. Why are they important? Because that's all biofuels. And then I want to point out one key theme in all cryptos. Tether. It's on its way to be number two. Right now it's number three. All you need is Ethereum to drop to near 1600s and Tether is going to be number two. So the most enduring trend in cryptos, I fully expect it to continue. And that's tether flipping and everything. So there's my macro outlook. And I think be careful of getting into the weeds. This is a bear market. Respected.
- [27:19]
B
Okay, can I just make two quick points? Point one, if you do the gold chart and you normalize for the amount of money that's been created, it looks very different. And I think that that's extraordinarily important because that is literally the reason people buy gold. Because in economics, when you have a supply of something goes up, price goes down. And when you flip that, when the supply is money itself, price goes up. And I think that matters. So your treasury bonds, to use Saylor's melting ice cube analogy, you're being paid back with dollars that are likely to be at the current rate somewhere around 40% less valuable at the time that your 10 years is up. And so, yeah, you're getting 5%, but it's more than eaten away by the amount of money supply growth. As long as money Supply growth is 6 to 8% and bond yields are under that, you are literally getting paid back with less valuable. Your interest rate is not covering you. And that economic understanding doesn't show up in a chart. But that is a very big difference. And I think investors around the world outside of the US which is where the gold buyers have been understand this. And so that's the gold point. Right, you know, right there. And, and that's why I hate using charts. I think of them as voodoo in many cases. Sometimes they work because traders follow said voodoo and that's true, but you need to normalize them. So that's point one and point two when it comes to tethering crypto. I totally agree with you. Look, I am not an Ethereum bull. I, I, I have on Ethereum so many times on crypto town hall, sometimes I do it to troll people to get them to talk. But the truth is I don't see the value. I don't, I think, you know, I did the analysis. DTCC is depending on who you believe because it's a private company and it's owned processes quadrillions of value. You know, they process a lot more than Ethereum does. It is less than a tenth of the market cap of Ethereum. The token. Right. I don't see Ethereum's path with fees to get to evaluation that is tremendously bigger than it is today. It doesn't mean it's going to fail. I don't it's going to fail. I think it's going to grow and I think it's going to be important. And yes, it's not a pure utility. So it'll probably be worth more than a DTCC which is a utility. More people have to own it, et cetera. But do I expect explosive growth from these levels that Tom Lee does? No, I think Tom Lee is literally wrong. I think that he's had a lot of great calls in his life. But I think Ethereum's, you know, use Ethereum's investment case isn't there. Now does that mean, does that change the fact that if we get a bull run in Bitcoin that Ethereum might go back towards 5,000 again? Of course not. Of course it could happen. I mean I'm not shorting it, I just am not a believer in it. And so if I'm right about that, that Bitcoin dominance will increase except for one thing, that hyper liquid will become trend, not the opposite. I mean hyper liquid is up because hyperliquid has real revenues. But it's still kind of expensive. But it's basically kind of expensive the way most tech stocks are kind of expensive. Will there be more crypto tokens that actually generate real revenues? Will there, will, will them be, will they be able to pass that through to token holders? Well, maybe. And that's going to be A trend too. So the total crypto, what the index will look like 10 years out is very different than the index today. So when you start looking at the Galaxy Crypto Index, which is mostly, you know, Bitcoin and Ethereum, you know, understand that there's a lot going on underneath the surface. But, but generally speaking, you and I agree on one thing, that a lot of crypto needs to be shaken out and the winners will ultimately. Well, where we don't agree is I think the winners will be ultimately worth a lot more than they are today. That's a long term outlook. Now short term, your guess is as good as mine. I think sideways, then up, you think roll over, then down. Look, if the stock market doesn't crash, then I'm going to be right. If the stock market crashes, you're going to be right. I think it really boils down to that. That's my general opinion and I hope we do get to talk about Jamie Dimon at some point today.
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A
We can choose that one next if you want. Jamie Dimon obviously said all the quiet parts out loud and went on national TV and said shit. The woman's reaction when he said it was pretty, pretty astounding. But he said clarity, Clarity act is dead on arrival. Banks will do everything they can to fight it. Called Brian Armstrong once again full of shit. Said the world will not bow down to this one man and his company who's spending hundreds of millions of dollars to lobby for the Clarity Act. The nuance I don't really understand is that the banks are trying to now kill the Clarity act because they don't like the stablecoin provision. But if they kill the Clarity act, they're stuck with the Genius act which is much worse for them because it allows coinbase to offer straight up yield.
- [32:08]
B
I mean, I'd like James has a chance to respond and talk before I talk, but I definitely have some thoughts here and I think they're kind of amusing.
- [32:15]
D
I mean it's, it's obvious you've got like, who, if you're, if you're Jamie Dimon, you, you're, you don't want to turn over your free deposits, you know, basically where you're paying, no, you're paying no interest on them, then you're getting, you're taking that cash, you turn around, you can lend it out numerous times, you know, in the fractional banking system. Why would you want to be in a market now that, that is, you know, allows you to pass on that the yield from your stable coin, which is ultimately for people who are listening, who don't know what we're talking about, Stable coins are pegged to US dollars, Tether is pegged to US dollar, USDC is pegged to US dollar which means that they have to have fungible securities that can turn into dollars on, on a dime. Right. So if they need dollars they can just turn around and turn them into dollars. They act like so what do they use? They, they use money market fund tactics. They can use the repo market if they, if they want to, they can buy short term treasuries T bills and that just provides liquidity to the U S government. So there's a push and pull here. The government is saying and they understand, they're like we need stable coins, we need tether. It's one of the largest buyers of treasuries and that is why Mike, it's becoming the, the, one of the largest cryptocurrencies. Obvious, you know that, we all know that. And so the Treasury's pushing hard for this, these provisions to, to get done so they can find pockets of liquidity
- [33:59]
B
all around the world.
- [34:01]
D
And you know, Jamie Dimon and the other bankers don't want a provision that says that they can pass on yield to the customers because that will just cannibalize their, their massive margin product of deposits turning into, literally just turning into cash cows from them. They don't, they don't want to cannibalize that. I get it, I understand it, it, but the reality is, you know there are, there are agreements that USDC has with, I think they have an agreement, I don't know if it's still going on with Coinbase. I saw it a while ago where they were offering parts more money on
- [34:42]
A
USDC than Circle does I believe or at least there is a point where they did.
- [34:46]
B
Yeah, yeah.
- [34:47]
D
So of course that's what they're fighting. And are the bankers going to win? Probably, you know they'll probably win and get some sort of you know, ruling that, that says that they're, they are not allowed to, they are restricted against passing on yield to their customers and that way they ring fence the, their deposits, they just move them into this and they turn around and fractional fractionalize this instead. And so that's, that's kind of where I think that that's, that sits. Now the more important question is timing of it because we can't get this done in the Senate by July 4th. Apparently it's going to get kicked to the curb until 2027 at the earliest. And so you know, that is a
- [35:32]
A
challenge in with Democrats having at least one house most likely. Right. So it's a different environment also for trying to do it, I think, because
- [35:40]
D
then you have the, the Democrats who have, you know, historically been anti cryptocurrency and it's become a political thing. It shouldn't be, but it is for whatever reason. So that is, that is a challenge for sure.
- [35:55]
A
Is there a devil's advocate approach here where Jamie Dimon can be wrong and right at the same time? I mean, he's obviously protectionist, so that's wrong. Right, because as you said, he wants to protect the yields and the bank deposits. And we all know that stable coins are better, faster, cheaper and can offer for those yields to customers. So there's that side. But like money market funds have blown up in the past. Right. And so his, he does make the point, hey, stable coins are, you know, if a stable coin issuer blows up or if Coinbase. What if FTX in this environment went bankrupt and was holding $10 billion in USDC or something? I guess. Right.
- [36:32]
B
And I respond to that.
- [36:35]
A
Insurance, there's no backstop. So I'm just trying to play devil's advocate like.
- [36:38]
B
No, no, it's a good devil's advocate because it's points out the absolute absurdity of his argument. And Cynthia Lummis said this, so this is not me inventing it. One of the multiple things that are very important about the Clarity act is that in the event of another FTX or a bankruptcy, investors for any regulated entity under the Clarity act will have their assets ring fenced and therefore they won't be subject as a general creditor in a bankruptcy. That is a massively important investor protection, which the only way you get is from Clarity. Which means in the world of debate, we used to have an expression, this is called a turn or a turnaround. It means that Jamie Dimon's own argument absolutely eviscerates his position. Think about that. And that's very important because I just explained it in seconds. Right. Understand, without Clarity, investors are literally subject to FTX 2, 3, 4, 5, 6 7. With clarity they are not. Because the only way that that could happen, that investors could lose money is for a company that commits absolute fraud and does so at scale. And even then the the investors would get first dibs on the assets and not what happened in the case of ftx, which is massive fees to the lawyers or happened in the case of Celsius, massive fees while we're doing it.
- [38:09]
A
So that that's the platform. What if, and I'm not saying this would ever happen. What if Circle blows up?
- [38:14]
B
Same thing
- [38:17]
A
As a retail holder of usdc, I don't have a relationship with Circle. Where I was issued the stablecoin directly.
- [38:24]
B
USDC would be. Holders of USDC would be remonetized in any bankruptcy and the corporation stock, the equity will be wiped out completely first. That does not happen without, you know, without. Well, actually the Genius act may actually do that in the case of Circle, but it certainly doesn't do that in the case of any crypto firm fund. That's the important thing. And the Circle one, the other big part of this is why. Why I know his head's up his ass. I mean I did a post about my father. His father used to have a lot of pithy sayings. One of them is mad is bad. He obviously was pissed off and he let the world see it. He's pissed off because he doesn't like the tone of the negotiations because he realizes people act mad when they're cornered. And Jamie Dimon feels cornered because he knows that genius, which he let get through. Which of course they let get through. I mean, you know, the banks don't control the political process. They just spend a lot of money to buy the political process and they up and they let it get through. And so it got through and it became law. So now his.
- [39:32]
D
Because Warren wasn't in control of the narrative anymore.
- [39:35]
B
Right.
- [39:35]
D
You know, so politically the only way
- [39:40]
B
they can, they can derail clarity really is ethics provisions and claims about the Trump family. That's it. It, the, the bank stuff. They're going to push the money at it. But he's pissed off because he knows that if he doesn't get a Clarity act that everything he's saying is true already. Just think about that. And at the same time everything he's complaining about is made far, is far worse than if you have, if you have that act. So he's pissed and so he's trying to get concessions on other stuff because that's how you do it when you negotiate. But when you let your, the mask slip like he did, that was a fuck up. That was a what the hell did I just say live on TV that I can't take back moment. Because he let the world see that sometimes he's pissed and why he's pissed and it doesn't take a rocket scientist to figure it out.
- [40:27]
D
But let's go back to what you said, Scott. I mean one of the, one of the main provisions of the Genius act, as I understand it, is that there will be required audits for all these stablecoin issue. You know, it's a, it's a different thing because back in the day of ftx, I mean tethered was like, yeah, you know, we're, you know, we're, we're doing it. We'll just tell you that we're doing it. But there's no proof, right, that we're buying stable US dollar based assets. But now if they want to operate here in the US they have to, they, you know, you already have what's considered the gold standard of auditing for its stable coins, which is USDC and, and Circle. I mean it's a, it's a private equity group LED company basically. And they, they understand it's based here in the United States, they get it. And so that is an important thing that you know, it's it. They're going to have to demonstrate that they have what they say on their balance sheet that is pegging this stable coin to a US dollar based security basically or basket of them. And so that, that brings down that risk of what you just described. Incredibly, you know, like that, that brings it down not to zero, but it brings it down, you know, quite significantly. And so it becomes a more of a non zero probability that you have something blow up because they don't have the right assets.
- [41:56]
A
Okay. I don't know Mike, if you have a take on that, but we just had something breaking that I do definitely want your take on, which is breaking. Iran announces it's ending all negotiations with the US and ballots completely block the Straits of Hormuz. Iran said it's ending negotiations due to repeated ceasefire violations, including Israeli strikes in Lebanon. Iran also threatens to block the Baba Mandeb Strait. Good time.
- [42:17]
C
Yeah, that's what I was, I was watching that as crude oil popped to up 6%.
- [42:23]
B
Yeah, there you go.
- [42:24]
C
And the comments. And we have this bi energy chat. It's very sarcastic. It was just so funny the things that people are writing about. All right, well I guess that's it for the day. Next. Stock market's down so you got to buy it. It went down, now it's back up. But I think what's tilt over to the macro. We're going to be fighting this battle in Trump's war. We need to point out in the Gulf for a while and he'll figure it out. He's just going to have to cave because he needs to get elected and he doesn't want the next president to be Democrat. If he doesn't figure out it's almost guaranteed even stock market goes up is bad now because that's inflationary. But that's a cool thing I really enjoy from this conversation about stablecoins. It's the macro I think people are missing. It's one thing that really kept me bullish cryptos for quite a while is we could. Yeah, they're going to figure it out. We should be able to track this place in ETFs. And he had the traditional tradfi pushback and finally they figured out, boom, that was great. And then we finally all Knew what Trump 1.0 didn't get was okay, so the whole space is migrating to the dollar. They're investing in Treasuries. What do you not get about that Trump 1.0? I just so love writing about it. Then what's happened now is that is what is becoming for they will figure out how we contract the dollar like a money market through stablecoins. How do they do it? I'll let you guys hash it out. But what that means 90% of these silly tokens that are worth billions and track nothing will go to zero. It's just a question. And that's already started. That's my point. That's my point is this is just a matter of time that the number one crypto on the planet will flip in Bitcoin. It's just a question of when. And that will be tethered and people just need to fight yourselves. That's the trend.
- [44:01]
D
That's not surprising. If it's. If that is the direction of the U.S. the U.S. treasury wants this. And if they want it, it's going to happen. They want it because they need pockets of liquidity, period. That's happening. It doesn't matter what's more interesting, that's kind of that path. But what's more interesting now is turning to the markets. And this is really important part of the macroeconomic backdrop right now, which is this. We have a company that's coming to IPO in the next few weeks, the next two. Two weeks, two and a half weeks in SpaceX that is literally changing rules on, you know, for the SEC to, to bring this thing to market. And this is, this is something for me, this is a little bit of a canary. And you know, you're talking about this wildly, wildly popular IPO. That's the first step. You've got SpaceX, you've got Anthropic and you've got Open AI are all coming soon. And I mean yeah, buckle in because this stuff is, this is something that is that this is a dangerous moment for us.
- [45:16]
A
And why get into index funds like violating all the previous rules that they had basically. So Everybody, you get SpaceX like Oprah, you get SpaceX, you get.
- [45:26]
D
And removing the lockup of IPO shares like you know, pre IPO shares. Pre IPO shares. I mean this literally allows the, the dumping of shares for retail become, to become exit liquidity for the founders. Like that is a, that's an important thing to, to notice here. And why is it important? It's because I think how much is coming? 75 billion. Mike. Dave, like, like we're talking about just a tiny fraction of the $2 trillion valuation we're looking at here. Now why is this important? It's important because I am literally getting phone calls from friends and family members on how do I get into this thing? I need to get into this ipo. I want some shares, I need some shares. And you're like hold on. Do you understand what the valuation is here? We're talking about something that we're talking about 90 to 95x sales IPO. Like that's what the multiple hundred.
- [46:29]
B
James. Buy it, buy it. But sorry, sorry, sorry.
- [46:32]
D
I mean that's right like that this is the point. Like, but the retail doesn't understand, they don't understand that. They don't care. They just want it because they think it's going up. And so, and they're probably right for the short term. But the problem here is does this kick off this ridiculous blow off top that turns into the bubble of you know, the, this AI just frenzy feeding frenzy. Why is everything AI related up, you know, up in the market? Because you can't buy the actual thing yet. You can't buy the anthropic or the open AI. So people are buying everything around it that they can, the picks and the shovels and you know, know it's anything they can get that that is related to it and they're, they're buying it up and so that me that this gives you an indication these are going to be wild IPOs and it could cause a cascade on the other side. That's what worries me about the market. That right there and the SpaceX IPO and the way these rules are changing around it and, and it's going to force S P indices, you know that, that and Trackers, whether the ETFs or mutual funds or whatever to buy this thing because it's, it's going to be, it's it's, it's, it's wild. And so this is something that's going to be important in the next two weeks, like, buckle in, people, because I'm not so sure that's going to turn out the way that you, you know, you want it.
- [47:58]
A
And really quickly, he's not perfect, Mike.
- [48:01]
B
Chat.
- [48:01]
A
GPT is not perfect, but it, the image is really impressive. And they very quickly came up with this. I wasn't thinking you should be handing out the actual rockets, but, you know. Okay, go ahead, Mike.
- [48:17]
C
Well, no, yeah, James, you just echoed exactly my sentiment. The questions I was getting years ago from, you know, institutional investments about bitcoin and cryptos were so like, yeah, I got to be bullish in space. And then the questions I got after the launch of ETFs were exactly what you described. Yeah, what really tripped me up was when Trump got elected and put in that big peak. But what happens in markets like this with unlimited supply? The cryptos have unlimited supply is the higher plateau, makes a lower low, and we're nowhere near that. My point is that cycle started and cryptos are warning you that, yeah, you probably shouldn't be buying into this, but the last thing I'm going to do is express bearish things about stock market because I've been wrong forever. I just look for alternatives. The alternative forever was bitcoin cryptos that died last year, and then for most of that time, it was gold and precious metals, and that died particularly. Larry's book might have helped put in a peak. Now there's only one game left, and when that game's over, watch out. That's when I think long bonds will drop from 5% to 3%.
- [49:15]
D
I don't think it's, as, you know, it's. There's a little bit of zero sum here because you're moving this hot ball of money from one asset class to another, and it's moving around, moving around. So it's going to move somewhere. And so something is out of favor and something else is in favor, and then it moves. Something's out of favor. Something is in favor. It moves around, around. It's like it just disappears, you know, now you, when you do a cascading liquidity event, it can all disappear. That's the scary part is when everything washes out. We've seen that happen. 1987-1998-1999-2000, 2001, 2008. Like, we've seen all this movie play, like, a number of times. This is not something new. But, you know, the ball of money. Money is, is always around. It's just, where is it headed? And so I, you know, this is what scares me or scares me, concerns me about these IPOs that are coming to market right now. And so we're gonna see, you know, how, how much appetite investors have for insane amounts of risk on the back end of these valuations. Because what is the, what it, what was the, the next closest highest valuation of a stock that came to market? I mean, there was like six times sales, right? Not 90. Like this is just, it's ludicrous level.
- [50:40]
C
So, so I, I back you up on that. That's my point is there's only one game left in town right now. It's the stock market. Certainly not cryptos. Everybody's getting out because they made the mistake and now they're for what's left. They got into precious metals. That one they're getting, I mean, there's only one game.
- [50:56]
D
Game.
- [50:56]
C
When that game ends, that's your big trade. And so this is it. We're in the, in the end game. The question could last for a while.
- [51:04]
D
Well, I mean, you're, you're, but you're, you're. So your trade is to buy the long bond because you think that people are going to go into riskless assets. The, the Treasuries on the side of a market collapse.
- [51:20]
C
Wealth reversion. That's all. It's just what you point. It's what's happened in cryptos. You just take wealth and poof, it disappears when prices go down. We haven't had that. Most of the people who trade on this environment, lifetimes. Now you, we've seen this before. Just a little wealth. Just little. Okay, here's one simple thing, one little fact. Right now, gold volatility is 2.3 times S&P 500. Crude oil volatility is like 3 or 4 times S&P 500. That's the most in almost 20 years. I just fully expect volatility in stock market to migrate toward normalization. And I've been wrong. And, but it's only May, actually 1st of June. So let's, you know, see how things look by October.
- [52:01]
D
Yeah, I think it's going to be an interesting summer to say the least. And I don't expect the market to crash between now and the end of the summer. But, you know, you never know when a black swan rears.
- [52:13]
C
That's the point. Nothing can make the stock market go down.
- [52:15]
B
Now, can I ask some questions? Because we don't know the answer. I don't know the answer to the. Do we have any idea how much of the of SpaceX private stock was bought by index funds and are are held by index funds in anticipation of going into the index? I asked this question because if you don't know the answer then you can't speculate. I'm not talking about you guys, I'm just saying anybody can't speculate without knowing it. Index funds have gotten very smart about anticipating index inclusion events. My guess is half. I would, I would be surprised if the large indexes didn't hold half of what they'll need at least. And if they, if they didn't understand that now they will of course not raise cash because they can't afford to be ever out of the market. But I think that plans are very.
- [53:04]
D
Yeah, I don't know though, David. It's like $10 billion or something they need to buy so.
- [53:09]
B
Oh, there's no doubt. There's no doubt. Now you know the question is float weighting versus non float waiting. I mean years ago S P adopted in their global indices and a lot of indexes are float weighted. The float weighted index means you don't buy as much as you think, you know, until the shares are unlocked. But once they are unlocked, that, that creates that buying. Now why is this important? Well, what you're going to get is the insiders selling to index funds. So it's less of a. I think,
- [53:41]
D
I think the Nasdaq is a 3x right.
- [53:44]
B
So the index fund will have to buy what the insiders want. And so it's a, it's a straight transfer. It doesn't, it's. I'm not saying there's no impact. I'm not saying that at all. I've been one of the first people, I said it months ago that this is going to be a, a movement inside markets unless money market funds are at high levels because people are, you know, raising cash to be able to buy this thing. The 30% retail is a big deal and it means retail will be selling retail high flyers. That, that is true but you have
- [54:17]
D
to the retailers, the demand from retail is what's driving this. That's the reality.
- [54:24]
B
Well, yes, and for, for lots of good reasons because retail loves a narrative. I mean we just saw one of the most important narratives in, in stock market history over the last week when Micron hit a trillion dollars. I told everyone, I told, I can't remember it was on this show or one other show, but I made the point that Micron was overvalued for decades. I mean literally in the 90s people were chasing it because it was a big retail story way in excess on every metric because well, this is going to happen and this is going to happen and at the time they couldn't get anywhere. Well, 30 years later it got to exactly where its narrative had originally said and history is showing a lot of these things and retailers can hold. So, you know, we'll see. I personally think Mike is, is there is a very real risk that we get into rebalancing season in the fall that we could have, that there could be a, a serious problem this year, particularly if the geopolitics aren't, aren't sorted out. I think before that any, any crash in markets or, or weakness, real serious weakness in risk assets needs to be bought because I think we'll recover. And if you look at 2000, you get your clue. Everyone remembers March of 2000 when NASDAQ dropped 15% in a day. We don't see a lot of days like that, but I remember that day it had fully recovered by July. Right. If we get a major sell off on the back of SpaceX and other IPOs in June, July, it's going to fully recover by September. Now it doesn't mean that it can't do what it did in 2000, which is have a massive sell off as we get the midterms looking like, like it's going to be a wipeout, blah, blah, blah, blah, blah. There's any one of a number of reasons that could cause that. I actually don't think it's going to happen. I do think it's possible though and therefore train.
- [56:13]
D
Dave. I think the markets have been trained to expect the, the, you know, the Fed to step in and the treasury to step in and stabilize the markets and the drawdowns are going to be sharper and, and less, you know, they're going to be lower, more like they're going to be shorter lived, you know, and that's, and that's. It's going to be really difficult.
- [56:36]
B
It's better because as Mike would point out, volatility in the, and implied vols are really low. Right. You know, there's not a lot of fear and risk in the markets. I mean, you know, it's when you look at volatility that is not trivial,
- [56:50]
C
it's actually actual volatility realized.
- [56:54]
B
Right? No, I realized volatility is very low too, but implied, they're also low.
- [56:58]
C
Yeah, well, the Vix, what are we doing the Vix now 16.
- [57:01]
B
I mean, look, I've seen it as low as 8 in my professional career. So, I mean, you know, it, it can get lower, but you know, look, volatility is to be sold right now until proven otherwise. And the more that that happens, the more people lean on it, the worse it gets when volatility regime breaks, breaks. Just, just remember that the more volatility that's sold, the more puts calls are sold. Absolutely, the sharper the actual move. And so, you know, it could go from 16 to 8. And in that case, you know, people are sold. Volatility, people will tend to sell more and more and more. I mean, I, I, I, we've all seen this movie before, but the, the, the fact, the fact is, you know, you look at this Iran move and, and literally the impact on markets and yeah, oil is up 7% or 8, depending on which one you're looking at. But, you know, the stock market yawn flat. I mean, down less than a quarter of a percent. Bitcoin, I mean, what are we now, 300 or 200 from where it was when they announced it? I mean, 3% are underpricing risk because they just, they've been inoculated to it. Now that doesn't mean risk isn't real. It means markets don't give up. You know, they don't give a, they just don't care. And so understand in that environment when the selling doesn't materialize, the first people who sell look like Jon Snow in that scene in Game of Thrones. We ran ahead of the cavalry and would have gotten destroyed if more cavalry didn't come in. And that cavalry, they're coming in is Kevin Warsh and, and Scott Bessette at the top of the hill saying, oh, damn, there they go again. And, and, and that's what people are expecting. I mean, we literally have that, that, that, that scenario. That's what you were saying, right, James?
- [58:48]
D
That's exactly right. That's, that's the scenario that everybody's expecting right there. And God help them if they don't come in because they'll get pretty ugly pretty quickly. But yeah, that's true. They know they have to. I mean, it's just, it's just math. They just know they have to, it's not, it's not anything new. It's, this is the, you know, this is a mature phase of the FIAT experiment.
- [59:13]
B
The mature phase. Well, it is what it is.
- [59:15]
A
But anyway, yeah, I see the Iran news and I'm like, who believes anybody on any headline on anything? I know, I just kind of like, you know, when we talk about, like, the market pricing this in or reacting to headlines and. No, there's no reaction. I just don't think anyone believes anything anymore.
- [59:36]
B
So, like, why would you react? It's all true. Well, I'm about to do. I'll report back next week. I'm about to use Tesla full self driving to do pretty much the entire trip from Miami up to New Jersey.
- [59:48]
D
So you won't have to touch the wheel. It's.
- [59:51]
B
It's not.
- [59:53]
A
With James in Vegas one time.
- [59:59]
D
My wife's got the full self driving on the. On. On. In her desklets.
- [60:02]
A
Does it still ban you if you look away? Like, does it lock you?
- [60:06]
D
Yeah, I got in trouble for eating fries. All I know is she got put in the penalty box for like a week, I think.
- [60:15]
B
Yeah.
- [60:15]
A
That was a long time ago, though.
- [60:16]
D
Yeah, that was a long time ago. Yeah.
- [60:19]
B
To summarize, Jamie diamond, full of angry, acting like a spoiled child and letting the entire world know that he wants his hundreds of millions of dollars in subsidies. And he's pissed that he. That he gave them up last summer and now he wants to get them back, but doesn't know what to do about it and is willing to sacrifice investors for it. And it's. It's. It's unfortunate because, you know, I used to have a pretty high opinion of him in general, but I think in this particular case, this was. This was bad.
- [60:48]
A
He's doing the thing he's got to do, like.
- [60:51]
B
No. By. No, no, no. The thing he's got to do is recognize reality and not wish that that reality were different and get mad about it. Yeah. And. And he was literally the best at that. In the global financial crisis of all the executives in the banking industry, which is why JP Morgan emerged so strong once again.
- [61:09]
A
I just don't understand the angle, because if they talk this out of being passed, they're in worse shape with just the genius act, so.
- [61:16]
B
That's right.
- [61:16]
A
I get it.
- [61:17]
B
Yeah. Which is why he used the. That's why he lost his cool, because he knows that's true. He's trapped. People who are trapped do stupid things, lash out.
- [61:26]
D
What was that?
- [61:27]
B
And look, I'm happy to say it. I'd say it to his face. I mean, it's like you're in your career. This was the single dumbest moment publicly that he's ever had because he let the mask slip because he was frustrated. Yep.
- [61:39]
A
All right, guys. Well, we made it to 1003, so we gotta run. Thank you, everybody. That was great. Macro Monday. Really amazing stuff. There was a lot more I wanted to actually talk about with the stock market at, you know, all time highs relative.
- [61:50]
B
Well, next week's another week. It's going to be around the same.
- [61:54]
A
We'll get there.
- [61:55]
B
All right.
- [61:55]
A
Thanks, everybody. We'll see you. See you tomorrow. Bye.
- [61:59]
B
Let's do.