← The Wolf Of All Streets
The Wolf Of All Streets
Bitcoin Drops Below $88K Amid Gov Shutdown! Is The Market About To Crack?
01:02:59
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- [00:01]
A
Bitcoin dropped back below 88,000 and we have yet another government shutdown apparently on the way. On top of that we have potential new 100% tariffs on Canada. President Trump actively looking to acquire Greenland. The US Armada heading toward Iran. The DOJ investigating Fed chair Powell blackrock CEO is the likely next Fed chair and President Trump calling for $2,000 stimulus checks and 1% interest rates. And that's like half of the things that we have to discuss because the biggest one is probably the never ending rally by silver and gold and people's belief that that means we're going to see an inevitable rotation into our beloved Bitcoin. We're going to talk about all of that and more here on Macro Monday with Mike, Dave and James. Let's go, let's, Let's do Good morning everybody and happy Macro Monday. You can see that we are here in snowy New York City and you know I've got Dave, Mike and James all here today and the four of us would like to remind you all that you just move to places where you don't have to live in the snow. You can just go to places with sun and no taxes.
- [01:24]
B
Just avoid the whole not up yet.
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C
But yeah, my, my wife and I were in the pool on, on Saturday and I said, you know, maybe we should send a picture of you enjoying the pool to your friends in New York.
- [01:37]
A
It was like 85 degrees. Yeah, we were, we were sitting in an outdoor restaurant by the ocean eating oysters. It was very, very rough. But listen, as easy as living in Florida is, the situation out there is a little more rough when you take a look at the map map macro. Mike, I can't even imagine what your morning meetings are like right now.
- [01:56]
C
Go ahead.
- [01:57]
D
Some, some good information starting with Anna FOMC meeting. Her quote was the dissents might be most significant partly because due to the White House and DOD DOJ pressure on Powell, Waller is seen as more objective but likely a minus for the White House. If he dissents will he and you know for an ease so because if he does doesn't dissent, he's out of the race. So and if then he does get chosen as for chairman, it's political like okay this is fun. Gold loves that. But FOMC has upgraded his growth estimates. GDP fourth quarter 4%. It's not consistent with rate cuts. This is from ANA. Consumption staying strong despite shutdowns. People are dipping into their savings to sustain consumption. And a key quote from her is only sustainable if the stock market continues to boom. Durable goods should remain resilient. A lot of that she said is related to the wealth effect stock market Ara Jersey pointed out he's our interest rate strategist. JGBs are pushing up yields but mostly about Japan not so much here partly because what's happening 30 and 40 year stuff is very illiquid and it's the 10 year note that really matters next Monday Monday is our funding will be a quarterly funding announcement and sorry next Monday the funding is needed in the quarterly funding month announcements a week after that on Wednesday and he thinks there's a non trivial chance that the treasury could announce a reduction in 10s and 30s so this will be something for James to focus on later. Trump administration wants lower yields and there's focusing on T bill issuance so he said there's a potential for some bull flattening now that's just more of a probability. Michael Casper, our stock market strategists came a little bit less bullish this time. Growth is the main concern now. He pointed out how the Russell is very overbought. The RSI measures were similar to the peaks in 2021 and last year. So far it's been a dud for an earnings he said about 8.6% about expected revenues not much of a beat 1 basis point above consensus price reactions are skewed somewhat negative hopefully further beats will drive performance was his quot and the JGB sell off was not much of an equity factor initially but he thinks it was just temporary and that's obviously been addressed by the bank of Japan in some buying Audrey Chill Freeman says she's a structural dollar bears have returned she's bulls to Swiss franc BOJ invention boj intervention should increase volatility and that is and she doesn't buy into the second Plaza Accord outlook and I just gave my outlook I think there's potential peaking there's trickling down potential peaking in silver now that's different to short it potentially peaking in copper potential peaking in natural gas Obviously today is probably the high for the year and then still potential for that high in bitcoin for this year to be a peak. Back to you.
- [05:12]
A
I don't even know where to start James. Should we go to Japan Because I think there's a lot of misdirection here. I listed all of these things that are happening in the world and none of them were the fact that that the 4 year 40 year bond in Japan has hit what is it the first over 4% and for the first time in over three decades I do have Your newsletter here, we just bring it up.
- [05:31]
B
Yeah, I mean so Japan's, they've painted themselves into a pretty tight corner, you know, and that's something, something we've been talking about for a long time.
- [05:41]
D
Right.
- [05:41]
B
We've been, we've been focused on Japan even before August 8th of 24 when they had, when we had the carry trade implode on a bunch of hedge funds. You know, we, we were, we've been worried about the fact that Japan's been the free money ATM to the world for decades here and that, and it's clearly that that game is over and you know, the, the punch bowl is being taken away and you're seeing a little bit of fits and, and frustration from markets about it, but it's just reality. So that 40 year yield, yep it, it jumped over 4% and that was, that's kind of a wake up call because that means that Japan has lost the, the long end of the curve and they, they can't keep rates low. They're suddenly in this phenomenon that the rest of the world has been experiencing which is, oh my God, this is, there's inflation. And, and so I, I would it. Bond vigilantes is probably a strong way of putting it. It's more just realistic outlook for bond investors to say that we need, we need more yield than we're getting because we expect there to be inflation now in Japan. And it's, it's pretty simple. So what happens on Friday? You, you saw a really sharp, you, you saw a sharp sell off in the dollar and you saw the yen get stronger, meaning it's reversed. For everybody listening, you know, the Yen's trading about 153 per dollar now and it, and it had been up to almost 159 just last week. And it's a massive move in the yen for, for just a couple of days. And that's the yen getting stronger against dollar. That means the, the dollar is buying fewer yen. And so there's a lot of speculation about what happened. I don't know if there was any, if there was actually any coordinated effort by the treasury and, and the Fed. The way it works is the treasury will say we want to go support the, the yen or you know, make the dollar weaker. And then the Fed goes out and, and, and executes it for, for the treasury executes that, that trade for the Treasury. I haven't seen anything on swap lines or to suggest that that occurred, but just the mere rumor, you know, and just, just the, just the, the possibility of it happening made Traders reverse out and, and, and go long the yen versus the dollar or cover trades. And so that's kind of where we're at. We're going to see what happens from here. But why would they do that? For everybody listening and saying okay, that's all, that's great, that's what happened. But why would they do that? They would do that. Why would the treasury do that? Why is the treasury even care? The treasury cares because they don't want Japan selling U S Treasuries to get US Dollars to sell US Dollars to buy yen.
- [08:58]
C
That's why.
- [08:58]
B
That's, it's as simple as that.
- [09:00]
A
They just like in layman's terms, since I'm a layman, you have the, basically the United States looking over to Japan saying these guys are going to lose control and we need to effectively step in and intervene on the yen because of its implications for global markets. So much like we intervene in our own affairs. Going over there and buying yen to help support the end, which obviously means spending dollars, which means dollar down, yen up.
- [09:27]
B
Yeah, and we can't have, we can't have the, we can't have the, the bank of Japan out there competing with the treasury in selling bonds. Like you just heard Mike say that the treasury is considering not selling as many, what did you say, 10 years and, and 30 years. So there, the Treasury's concerned about the long end of the curve here. They know that the, you know, it's impacting consumers. The tenure is the rate which, every, every single rate is based off of, you know, car loans, you know, credit card loans. The, the mortgages are all set off a 10 year and the 30 years kind of an indication of that. But the, you know, the, the treasury knows that they can't have these rates spike higher and cause even more pain on consumers for the cost of borrowing. And so, and they don't, they, you know that they don't want to be in a situation where they're competing with Japan for the market for, for buyers of, of these Treasuries. So it's pretty simple. It's not, it's not as complicated as it sounds. It's just the treasury is, it's, it's defending itself. It's what's happening. It sounds like they're defending the yen, but it's defending itself.
- [10:49]
A
Yeah, that makes perfect sense. And how, I mean anyone can answer this, but this is sort of a narrative that's persisted because we thought that the yen carry trade had closed last April. Right. Almost a year ago. We were Doing the same story, you'd have to imagine that considering the rates have been rising this entire time that people would have closed that trade and have not been looking to the yen as the piggyback.
- [11:13]
B
Rather, I don't think, I don't think there's a danger of the yen trade, carry trade blowing up like there was last year, you know, a little over a year ago. I don't believe that that's the, that, that that's the danger. It's just, it's clearly, it's just clear that the, the, the bank of Japan has lost control of the long end of their curve. And so that is what's giving people some, some pause here. And, and they're, they're a little bit worried. And what do you think that spills into it? Spills right into the, the carry or, I'm sorry, the debasement trade. Where are we going to be printing dollars here to, to shore up the end, you know, to make sure that we, we, we can sell more Treasuries. And what do you want to own in that situation? You probably don't want to own dollars, you want to own gold. You know, it just leads right into the same debasement trade that we're all, that we're all focused on.
- [12:10]
A
I, I have such a good meme for you. There it is. When you're right about currency debasement. Bitcoin instead of gold, silver or copper.
- [12:22]
B
Yeah, it's about, that's, that's pretty, that's, that's pretty accurate right now.
- [12:26]
A
Yeah.
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B
And it's frustrating, it's really frustrating for, for long term bitcoin investors because they know that the, you know that bitcoin is, there's, there's, it can't be debased.
- [12:38]
C
It's so good.
- [12:39]
B
Yeah, they know it can't be debased, but the market is just, it's bucking that. It's saying no, this is a risk, this is a risk asset. This is not, this is not safety. This is, this is something that is, you know, out on the risk curve. And so, and it's going to continue to be like that until the majority of, of investors understand it to be the opposite. And it's just going to continue. So in my mind, you know, it gives you opportunity. Now let's be clear. The market is all time highs here. I mean like this is, we are getting into some really kind of scary territory. And if the market does sell off, I, I maintain that the bitcoin will sell off with it. I, I Just I don't see a situation where it won't. I mean unless there's some sort of banking crisis where people are worried about their dollars getting, you know, getting taken by banks in order to shore up investors there like we saw back when Silicon Valley bank blew up. But I don't see that as an issue for, for the United States here in the short term. I don't see that as the black swan. So you know, I mean for me it's just, hey, if Bitcoin goes down 20, 30 for here, from here, that would be a tremendous buying opportunity in my opinion. But you know, that's, we, I differ from, from Mike on that and, and he's been right on the gold versus Bitcoin trade in, in the short term here. But we'll see what happens in the next three years. I do expect on the other side of this that we are going to get more debasement, we're going to get more money printing and bitcoin will, will reflect that. You know, it's, it's hard to say these things benefit from them. It's not benefiting like gold is not benefiting from the dollar going down. It's just reflecting it. That's what's happening. And the same thing with bitcoin, it will reflect it. And so that's my expectation long term.
- [14:40]
A
Yeah, I remember when bitcoin surpassed the market capital of silver and we celebrated and it doubled its market cap anymore.
- [14:52]
B
So yeah, it's, it's, it's, it's insane. I don't, you know, now that what, what does, what does concern me. And this will feed into Dave and, and, and, and Mike's understanding of long term markets and, and bubbles. I'm starting to get text messages from people should I be buying silver here? And God, and that, that concerns me, you know, because when you start having normies come out and these are not dumb people, they're just not every, they're just everyday people. They're not professional investors. Are like, God, am I missing this? Do I need to buy silver? And it's, it's that do I need to own Nvidia thing.
- [15:29]
A
You know, it's like I texted Emmy this morning right before the show and said when we moved, did we give away all of my grandparents and great grandparents silver?
- [15:37]
D
And.
- [15:40]
A
I want to go buy a nice dinner.
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B
Right?
- [15:43]
A
I have, yeah, so sell all the silver in the house. Dave, I know you've got a whole box right there.
- [15:49]
C
Well, I have a small little box right here that I put on the Desk when silver went past 50 and you know, I got, I, I tried to find out. I mean just some, you know, some half dollars. I mean, you know, got these things, you know, the.
- [16:00]
B
It's getting heavier, Dave.
- [16:02]
C
Yeah, it's funny. Look, two things as far as silver is concerned. There are two things to keep in mind. Look, the first time people talked about Nvidia, it was about a fourth of where it is today. And just so you know. Yes, it is. When everybody's talking about it and doing it is when it, when you're there. I, I'm gonna be blunt. I thought that 100 would be a little bit tougher a level to get through that we would fail there and retrace and then make another push up toward 150. Etc. I, I don't know what to make of the fact that we're sitting at 110 right now. I'm not, it's, it's gone past where I thought. I. Look, I still think that silver will get to a silver gold ratio in the mid-30s at a minimum and probably touch 30 in the crust of the earth.
- [16:53]
A
That could be gold coming. Oh, in the crust there. Okay, yeah, I was gonna say that could be gold coming down and not silver going up.
- [16:58]
C
It could be, it could be. But look, the truth is that silver relative to gold in the earth in terms of recoverable reserves and for literally thousands of years traded somewhere around where that was, which is 20 to 1. They're both, you know, it is. That's just the truth. So you know, that's it's the great greatest stat arb trade in history. But you have to go back a little bit longer before Bloomberg existed in order to get the, get that data. So I do think that that is true. I think that is where it will get to. And supply demand does tend to win in the end. You know, we learned that in Econ 101 and there is way more demand for the available supply of silver right now. That is not likely to change for a decade. And honestly, given the use of silver, it may very well continue. At the same time, there are still people out there who said aha. Remember, silver is money and those people will come out of the woodwork. So look, I do think that that trade will happen. Now the problem is that we keep talking about the dollar as if the dollar isn't moving. And as a good friend of your show, Mario Mauricio, sorry, you know, from Leaden, is fond of saying when you buy houses, it's not that housing prices are going up, it's the dollar is going down. Well, that's what James was saying. When James says it's being reflected, what he's basically saying is, listen, we're printing more of this frigging stuff. And so everything that's pri. That isn't moving, it's, it's that question. It's a Copernicus question. Right. You know, is who, what, what's moving? The Earth or the sun? Well, the truth is we know from, from data that it's the Earth, but human beings for most of recorded history thought it was the opposite. Thought the sun moved in the earth sky. Well, the truth is silver and gold may not be moving. I mean, they are because they're getting used silver in particular, but it's really the dollar. It's really all the fiat currencies, the entire complex. And so that is what's going on. So you have to normalize it by the amount of dollars in creation, which is 8 to 10% a year. I think silver is essentially was a beach ball being held underwater from multiple times and they've just lost control of it. And so now the question is, is how far under the water was it? Was it a mile below the surface? Was it 10ft below the surface? Was it 5ft below the surface? So we're going to find out. And so supply, demand will win in the end. You know, all I can say is a couple of facts. So here's an interesting fact. Go on. Appmext.com largest dealer of precious metals in the United States. If Mike was right and this was the clearing price and everyone was pulling their silver out, they'd be screaming buy, buy, buy, etc. No, what they're saying, unprecedented demand and, you know, and, and, and they had to lengthen their schedule in terms of how long it takes to get to get it. But the truth is, is that there's a lot more people buying it than, than it, it's bring, it's bringing out the buyers, not, not necessarily the sellers. Now that will equalize at some point. We're going to get a correction. It has to happen. But understanding supply, demand matters. Now that's silver. Japan, people who talk about the carry trade, most of the carry trade people who talk about it in the crypto world are tourists and they don't understand that 95, probably 98, maybe 99 of the carry trade is, is yield. Are bond managers playing yield strategies? James is nodding because he knows what I'm talking about. So when you talk about the ATM to buy risk assets, that is a teensy little part of the carry trade. It really is. It's not what it's for, it's not what people do, because the same people who are speculating in different rate differentials between Japan and China, and by the way, I don't know historically, if we have any data, when Japanese rates were significantly higher than Chinese rates, which is where they are today on the 10 year, it's what, 60 basis points higher? It was 60 basis points lower, what, a year ago. That's a huge move because what these hedge funds do is they lever up a lot because yields are theoretically a more stable product and they trade that. That's what Long Term Capital was doing. So it's actually stupefying to me. I am stunned that we haven't heard of hedge funds blowing up because they got on the wrong side of that of that particular trade. But none of that has anything to do with Bitcoin, frankly. It doesn't have a lot to do with the stock market either. What it does have to do with is the plumbing. And some of those hedge funds are the ones who used it to buy U.S. treasuries. And that demand that comes out of the Cayman island, which is our largest buyer, has softened.
- [21:41]
B
Meanwhile, treasury, the reason that it's the largest buyer is because that's where most hedge funds are domiciled. Caymans.
- [21:47]
C
Right, exactly. So, but the point is that with that as a backdrop in the yen at this level, the fact that treasury yields have backed up what, 10 basis points? I mean, basically nothing through all of this mishigas is really fascinating. It tells me that there's some other stuff going on that I don't know if it's yield curve control, I don't know what it is, but there are people out there who are trying to do that. Now, Mike has been a bull on Treasuries, so maybe it's just that there are natural people who agree with Mike that the treasury is the best port in the storm. Right. And there's truth there because we keep asking the question, why should the US have to be higher, have much higher yield than the rest of the world, than all the euro region ones? And the answer is only because the dollar is a reserve currency. But what if what's happening is the dollar is being strategically weakened and more people are going into gold? And yeah, the dollar is a currency, but we're not holding it anymore. Well, then you would expect yields around to normalize based on debt to GDP or stuff like that. And that has not happened, wouldn't you.
- [22:54]
A
Expect bitcoin to be flying with the dollar dumping.
- [22:58]
C
I think that people. Markets, we always say markets are irrational longer than people can be solvent. What we really mean by that is human behavior follows predictable cycles. And we've had the same thing going on now for we're over six months or around eight months into it of rotation from people who made their money in bitcoin and are selling to new people in bitcoin has been happening. We have the entire crypto sphere. I mean crypto the greed and fear index being at 20 should tell you something. It is people are terrified. And the differential between stock greed and fear at 50 and crypto greed and fear at 20 is as large as we've ever seen it. Why? Because the people in the crypto verse are panicking, pulling their money out and it's getting bought. We're in a trading range. Right. You know, we've been saying it. I didn't want to get too excited when bitcoin got to 95. I'm not going to get too despondent when bitcoin gets to 85. But we've been in that range until it breaks that range with authority, we're where we are. And that has. And it's defying skeptics. I mean one of the things I thought was hysterical on bar chart.com, they have high volatility and low volatility indices. IBIT is considered a low volatility index because ibits volatility implied is and realize are both in the 30s. Just think about that from where we were. So you have a situation where people in the crypto world are beyond despondent and frankly some of it, as Mike and I agree is necessary. There's lots of people in the crypto world who value assets that have no value. I mean literally none. And then there are others where you could see some but it has multiples that make your head hurt. Right. And that's just true and that's always been the case. Bitcoin is a different beast. We don't know what and we do should talk about Ethereum. We don't know if what Larry Fink's comments over the weekend about one chain to rue them all. Now he didn't say one chain to rule them all but that's how the cryptoverse talked about it. But if they're talking about Ethereum in that guard there's a lot that's happening under the surface. But understand when half the country or half the world even says oh associates Bitcoin with Trump and we have this kind of political division you don't expect. I mean, no one associates gold with any political leader. If Trump was considered King Midas, gold would be at 4,000, not at 5,000. That it might even nodding a lot. What I mean, there's a lot of stuff going on. But last thought on Japan, when hedge funds get hurt, when you get a move. I mean, we saw it last week. So Friday, for those who weren't watching it, we're just about to touch 160. I forgot one of the.
- [26:00]
B
Who is it?
- [26:00]
C
The governors. Someone from the BOJ basically came out and talked about it and whammo, it dropped to 157. Then over the weekend it dropped to 154. Now that's a big move for a currency. You know, we tend to think, I'll go, oh, 6% or 5%.
- [26:16]
B
That's not that big currency. You got to think about currencies. Like currencies are ocean liners, man. It is very difficult to get them to change direction.
- [26:25]
A
That's why you get 100x leverage on forex pairs.
- [26:27]
C
Correct.
- [26:28]
A
Have a big enough move to care.
- [26:33]
B
For people to understand. For you to trade a billion dollars of, of a currency is usually just, it's not that much. It's like, okay, we could call up a desk, you know, and you just trade $100 million of a currency. Like it's, you're done. It's. It's not even like, okay, almost a choice price. Yeah. It's like these things are massive liquidity. Massive.
- [26:59]
C
People don't understand that a 5% move in a currency when the Japanese yen is more volatile over a weekend than Bitcoin is, that is saying something when it's more volatile than not than silver, because silver actually outperformed it. But you get the idea. It is a massive move. And so that is showing you something about this market. And Mike is always fond of talking about risk managers. Risk managers will care about.
- [27:29]
B
So.
- [27:29]
C
And we've seen this before. You know, I made the comment literally last week. I'm pretty sure I said, well, look, if it gets close to 160, people are going to be afraid. More afraid of the Japanese yen strengthening because that's what, what hurts the head. Well, that's what happened. So we don't know what the results of that are. That's not necessarily bad for risk assets, but it is certainly interesting.
- [27:48]
A
Yeah.
- [27:49]
C
And I, I think that you have to look at it that way. Okay, Mike, I've teed you up so Many different ways.
- [27:55]
D
You did in a good way. So let's, let's just. Dave, show that stack of those silver eagles. You have that can that again.
- [28:04]
C
This was just silver. Let's see what. Let's open one of them. Have one of these that are open. Yeah, these are all sealed ones. These are just the half dollars. Okay, four half dollars.
- [28:18]
D
I, I just, I love that because from my wife and I are both some big family. So I always had stacks of those. And there's always events I'd always give out one of those silver eagles. You know, they're average price is 20 bucks the last 15 years. And at the end of last year I thought to myself, what an idiot, Mike. You should have given him a token for some kind of bitcoin or something because it was just stuck maybe went up 2x. I thought some of these young kids when they turn adults, when they would find that silver in there on the wardrobe and say it went up 15, 20x or something, but that's a problem. They've already gone up a lot. That's the key thing. The point is you have to have the pain. The pain was forever. I had calls last week with people I haven't spoke to about metals in two decades. All they can talk about was what to sell and where because they've been on that trade forever and finally, finally got some money back. So the key thing I want to point about silver, you point out there, there's a couple, couple ounces of silver right now in ETFs. There's 844 million of ounces sitting in silver ETFs. That's dropped 2% this year. People are selling. That's what's different from 1979 when we had a similar high velocity rally in silver. You did not have that massive overhanger supply. And I challenge anybody to take a supply in the mount model from any point in time and not shift shifted completely the other way. Where supply kicks in, demand declines because prices went up parabolically. That's what people miss sometimes. The answers have just changed. So the key thing I want to point about silver's right now at 3.8 times its 60 month moving average is only 3 months in history. Okay, I'm going to go back to 1954. That's 855 months that it closed at a stronger rally than this. And that was the average price of $132. And the 79 up to February 80, it got to 50 and it dropped down to four bucks in 1993. And it was $28 last year. That's what's going to happen in silver. I don't know what from level but we're probably going to be putting a peak this year that'll last for maybe decades. Just what happened in natural gas, it just peaked around 6. That's probably going to last for maybe a year or two because the next price it's going to buy Friday, you're going to see the price is $3. It got to 6. The switch in contracts. The key thing I'm pointing out is don't underestimate the elasticity in commodities when prices go up. Now gold's the least elastic and that's why I just look, I look at gold. It's just purely frightening. It has never rallied at this velocity with stock market volatility, inflation and crude oil staying this low. Never. I look at that like thank you, that's been a great trade. You're probably not supposed to overweight that now. Your risks are great. And the key thing to me that really happened last week was I'll end with what I think is happening because I'm seeing potential peaks in copper. It's getting a little bit stretched. And the key thing also I'll remember I might remind you Dave, is if you're long silver versus gold, that gold silver rat. So you're buying silver at the most expensive ever versus crude oil at the most expensive versus gold in 15 years. And there's one key thing that needs for you, for you need to happen for you to succeed is a stock market relatively has to stay low. The stock market has to stay up. Almost always when the stock market goes down, silver way underperforms gold. We know the obvious reasons why. But the key thing I want to roll over and then with this is my base case this year is we're going to have a pickup in stock market volatility because it's too low. Stock market at some point is going to go down. It's just going to follow the lead of what the cryptos have been telling us for almost a year now. And the bottom line is Treasuries might be the next big trade. So to me the key thing I fixated last week is can that 30 year get above 5%? It can't do it. Every time it does, I hear about more of the duration, people finding ways, excuses to buy that 30 year and selling other things to do it. So now I see it 480 to me that's the next big trade. By this time next year I think it's more likely to be a 380 than 580. To me that's a huge trade and that's what I'm looking at for this year. And I want to say signs I'm wrong, first sign I'd be wrong is, let's see, bitcoin stays above 100,000. Okay, that's a bit of reflation. Let's say copper can stay above 6. Yeah, okay, that would be great. Volatility in stock market has to stay 180 days is 11.7%. The average annual 10 years is 17%. It always goes there. So to me this is still a great trading environment. Bitcoins probably peaked. But prove it wrong. I have to see markets prove me wrong. Keep that 10, that 30 year above 5%, keep that stock market volatility very low and it's staying there and still resilient. But how long is that going to last? Gold to me is just purely frightening.
- [32:33]
A
I've got some very clear evidence that you might be wrong about silver. Jim Cramer says he's a huge gold bug, but he's not a silver bug. All right, what he's really saying is over to 300 and then we can talk.
- [32:49]
C
I do need to point out a couple of things in here. I mean I do want to ask you about natural gas. We're going to come back to that because that's the most interesting move. I mean that's a 50% move in a week, 5% in a week. Commodity. Clearly there's some short term pain because of the cold snap that came in and they just, they're just trying to flush out where the supply was. And, and I, I think that that's a. Well, to me it feels like a pretty obvious trade selling it at 6, but you know, that's a different thing. Natural gas has blown up more than one hedge fund in my, in my life time. So yeah, oh, I'm not, I don't know very much about.
- [33:24]
B
Oh yeah.
- [33:25]
C
But there is a huge, huge difference between oil and silver and that is that oil is incredibly elastic to supply in the earth. Silver is almost totally inelastic to supply in the earth. They can still produce it for. The average cost of production for silver is still in the 30s. Oil product cost of production is very close to the price that it's at right now. And there are tons of mines, tons of mines, tons of rigs and fracking setups that become profitable as you go. 60, 70, you know, so there is a lot of supply there where the marginal cost of Production is what drives it. They can turn it on. Silver. It takes a decade to get a new silver, a silver mine on a decade, literally 10 years in terms of permitting and getting it started. So it is very different in terms of the elasticity of below ground supply. Meanwhile, oil has almost no elasticity to above ground supply except for maybe the Strategic Petroleum Reserve or whatever. And silver, as we've talked about, you got people who have silver that they bought when it was at $4 saying, Is this a time to sell it or not? I mean, I find it. I keep this on my desk for a reason. It's a tiny amount, but I keep it there to remind me that my cost basis for silver is cheaper. Relative my appreciation, my total return in silver is higher at this point than it is than my bitcoin that I bought around the same or not around the same time period a little bit later because I got to bitcoin later. Curiously, when I sold gold for bitcoin, that trade is still okay, that's done fine. Had I sold silver for bitcoin, it probably wouldn't have been, but I didn't because I thought silver would outperform. Lastly, you keep talking about 15 years in silver. Remember these. The structural demand for silver has shifted over that period of time. When you look back at the 80s, that, that rally from whatever it was to 50, at least 80% of that was the Hunt brothers trying to corner it. It had nothing to do with NASA.
- [35:35]
D
I just got to warn you, the things you're saying in silver stuff that metals people like me said 10 years ago, finally we. That's so just. Thank you. It's just 10 years ago it was 10% was demand was solar. Way to go to 20. Now it's 20.
- [35:48]
C
I want to make it clear that when you look at the charts, you need to understand a few things. The Hunt Brothers bit for, for years, and I mean years, silver was produced as a byproduct of copper mining. And so there was no point in even opening a silver mine. I mean, I've owned Pan American silver in one of my accounts for, I mean, 30 years. I don't know, a long time, you know, whatever. I mean that's still a small position still in one of my IRAs, whatever. And so I used to read all the silver and gold newsletters and I understand this stuff. Silver was not even mined. And so yeah, it would rally. But the reality was there was a lot of capacity to bring online. We've blown through that. The demands drivers for silver are things that didn't exist 20 years.
- [36:29]
D
You keep missing the point. That's changed because we've blown through the price. The price will shift that supply demand curve.
- [36:34]
C
Oh, there's no doubt. There's no doubt that if you could produce silver at 30 that in 10 years as new mines, I am sure there's got to be a lot of venture capital money flowing in to find new silver reserves and we'll figure out where equilibrium is. All I'm trying to tell you is the one major thing to keep in mind is gold surged above silver because of its demonetized silver. It did. And we can't ignore that that demonetization matters. And so when I'm calling for gold silver to get back to 30 does isn't. Doesn't mean that I think gold loses its monetary value. Just I think its monetary value is an overstated part of it. That's all right because 30 is still 50% higher than its ratio in the earth's crust.
- [37:19]
D
I think we got to move on.
- [37:21]
C
Yeah yeah.
- [37:22]
B
James, we have not talked about at all is. Is oil. And so I wanted to get your thoughts on that Mike, because you know, with, with geopolitical tensions kind of everywhere. You know the, it's surprising where oil is right now, where crude is. However, you know the, you're. You're looking across the world at demand and, and economies. And so it's, it's a, it's far more complicated than just a geopolitical play.
- [37:57]
D
It's a meh bear market. I think the key thing to remember is the key thing I pointed out when I was dead wrong on oil for a few years in 22 calling it for to go to 40 when it went above 100 is the elasticity is kicking in. Dave nails that the last case is kicking in. And now what's also happened is the paradigm shift with now the western world led by the U.S. canada and now we go all the way down to Venezuela and Argentina is now the price maker used to be the price taker. And the leader of the rest of the world wants lower prices. And the bottom line it's holding up all these industrial number one crude oil is the number one industrial commodity on the plan being replaced partly because Russians invasion of Ukraine that shift the incentive to replacement with technology and the bottom line is it always bottoms around 40 anyhow. So I think it's re entered that range before COVID it was 42 to 40 to 65 in WTI maybe get to 65. But if that happens, producers are just waiting to sell Keep their curve in backwardation, saying, bring in more supply. It's a bear market. And when we do get the little pickup in stock market volatility, it'll probably be the final catalyst for crude oil to get to 40, for copper to. And that's my point is we're so dependent on the stock market staying resilient now. And crude oil's already flunked that test, it's heading lower. Bitcoin's already flunked that test. It's heading lower. Copper is doing okay. But you see the dependency, it's the most in history. That's why maybe we live in interesting times. And the metals, the precious metals, most notably gold, are telling you to be careful and watch. But the key thing about crude oils, get a rally to 65, you sell it, you get a dip to nil 42, and you buy, it's stuck in a range. It's a bear market market.
- [39:26]
A
I want to talk about two things. There's two topics I want to make sure we get to a. I want to talk about the government shutdown, because we're seeing it now at a 75% chance. We just did this dance a few months ago. They obviously did not come up with a permanent solution. And many would argue that actually the bitcoin bull market was stifled by the government shutdown because obviously that puts a pause on liquidity and data and effectively everything else. And the second one is I actually want to have a conversation about if gold and silver top regardless of when, where that rotation goes into. But let's talk government shutdown first and, and what that means. James, I don't know if you have thoughts on that. You've been quiet.
- [40:05]
B
Well, I mean, the government shut down. Surprise, surprise. I mean, like, if anybody's surprised that we're talking about this, you just haven't looked at the, the government calendar. You know, I mean, this is. Yet it's just more posturing. And, and you know, obviously the situation in Minnesota has been an absolute powder keg and it's just getting worse. And so, and you know, it's become fully 100 political now. And whether that is because they want to dial up the temperature to, to deflect that, meaning the, the leaders in Minnesota want to dial up the temperature to, to deflect all the attention away from the fraud that has been going on in that state, who knows, but. Or whether or not they just hate Trump so much and they just cannot stand the ice being in there and, and, and taking away their voters. Who knows? I don't know but they're going to use it as a political hot button and they're going to say we're doing, we're gonna, we're not going to fund the government if D8, you know, if Homeland security is going to be funded in there, if, if ICE is going to be funded in there. And so it's going to be a showdown. And you know, but that's, I'm not, there's in no way shape or form my belittling the, the fact that two people were killed out there over this, this, you know, surge in, in the, the hatred between the, the two camps. Like I'm, there's no belittling that but this is just yet another reason for them to fight about the budget. And you know the, we've talked about this ad nauseam for years and the one thing that doesn't happen is they don't stop spending. So where that money goes and how it moves around is, is going to be a political fight. But the, the Democrats are going to try to get the, the Republicans to agree to spend less on, on things that they, their constituents want and vice versa. And that's where we are. It's no surprise. How does that affect us? Well, you know, I mean it's just yet another just, it's just it, it, it's just yet another reason that all of these ratings agencies have downgraded U S debt. It's not because they think we're going to hard default on our bonds. It's because of this nonsense, you know, and that you could have a, a technical default on, on bonds if, if, if we can't get spending measures in place and so who knows what, what happens in, in four days. But here we are again. Surprise, surprise. It's like the same movie that's been on the same channel since you were a child and you just can't change the channel. And here it is.
- [43:15]
A
Micro Dave. I mean quick takes on the shutdown.
- [43:18]
C
I think the weekend was fascinating. It went from on PA on poly market. It, the odds of the government shutdown went from let's get it right here, 9% on the 24th at 7:00am to 80% at 7:00pm 9% to 80% because, because the only asset open it was the only way you could play it other than just betting on the outcome one way or another which is prediction market. So that definitely has taken some of it. And bitcoin dropped more or less 2% peak to trough and nothing else was open. Markets opened and bitcoin stayed it Recovered about half of that. So it wasn't in the 86. Now we're at 88, whatever, but you know, recovered about half of, of where it was, give or take. Polymarket hasn't budged. It's still at 81 of a chance of government shutdown. So what do I make of this? What I make of this is I think people in, in the, the broader markets are like, oh these guys, boys will be boys are just gonna fight. We don't give a markets. I've said this before, the stock market likes gridlock. They like nothing happening because the bids dominated by the large companies. The large companies more or less have the regulations. They want to block smaller companies and so they like that. What's the most obvious problem with the government shutdown for is crypto. Because you're not going to get a clarity act. It's not going to happen. It means that even the SEC and FTC and CFTC getting together and talking about coordinating rules won't actually be able to do anything. It means that we're stuck in the situation we are today. So if you're an industry that needs the government to either do something or get the hell out of the way, it's not that they're out of the way with the shutdown. You literally are stuck with uncertainty or if you're in every other industry, you don't really care and so you're seeing it. So it's not crazy that bitcoin and crypto dropped more because they're more sensitive to it. I think that that's true. The liquidity side is fascinating. The other thing people forget is that before, before we got to the political theater that's going on over ice. And by the way, the data comparing the number of people, the error rates between Obama and Trump and all the other stuff, I mean there's just no there there. James is right. This is theater and this is stupid theater. All the leaders that are crowing about this and one side or other are all morons. And I'm talking about both sides. I mean it is a tragedy. So the, the people on the, on the administration saying, oh this, no, it's a tragedy, let's understand what it is. And the people are saying, oh well, this is because they're doing more and more. It's like, no, Obama actually had almost exactly the same statistics and arguably a higher error rate. And it was in Politico, I think, I can't remember, but it was a left leaning source that basically talked about all that stuff. But we're seeing massive amounts of histrionics and that's covering up for something that happened that no one's talked about, which is earmarks. We saw five plus billion dollars in earmarks in the budget deal that they, that the House actually passed. And what are those earmarks? They are everything. They are think all the shit that no, no national political audience would vote for, but each congressman would get their own pet project, a library here, you know, paying for something I want to.
- [46:53]
A
Steer from the politics of it. And I'm just pointing the government mean.
- [46:58]
C
For market markets the reason I quoted that and I don't have it up. But Lyn Alden made a really good post about this, about the earmark stuff and saying this is why nothing stops this train. And it was very, very concise. And she had a whole, there was a whole list of them in the thing that she quote, tweeted. That's the point, Scott. There is nothing that's going to change spending. It's a uni party out there. And so everyone who thinks that we're going to get all this fraud, we're going to get 500 billion fraud out of the budget and we're going to live within our means, that will only happen if they're forced. And that's really the point. And so that's why markets are reacting. That's why gold and silver aren't looking at this fraud story saying, oh well, you know, look, the fraud's going away and so we're going to spend less. That's not happening. And a shutdown just delay is just a beach ball under the water. It doesn't change anything. It just delays it. Right. So that's what's going on. But that's why Bitcoin reacted more to the shutdown than anything else.
- [47:48]
B
And honestly, when you're looking at all the numbers, you're talking about moving around a chair deck, chairs on, you know, chairs on the deck of the Titanic. Like it's just, you're not, you're not talking about the big numbers which are Social Security, Medicare, Medicaid and you know, the interest on the debt and then defense spending, which is a trillion dollars. Like it, like you're, they're not talking about the biggest pieces that would actually make a dent and nobody's going to cut Social Security. We're just going to keep, you know, piling on debt to take care of it as long as we can. So it's that, that's the point, right, Scott? Like, it's just it, it is Lynn Alden's meme that she now owns. Nothing stops this train. It's. Nothing's going to stop this. You know, we. There's not, there's not enough. There's not enough. There aren't enough chairs to move around to make a dentist in the weight of the Titanic, it's just not going to happen.
- [48:48]
D
So let's talk about what you do about it. I mean we can all make statements. As we point out, it'd be awesome to be right about things politically and everything, but being right about markets is a lot harder. So the bias last year. Exactly. I still stuck with last year was obviously gold. Now you look at what's happened, obviously gold and Treasuries, now all they have left is Treasuries. I look at that ratio of total holding of Treasuries in price divided by gold and you can. Gold is the most expensive since 1982 versus a basket of Treasury. So to me that's all priced in as of this time next year. When we say President Trump, we're going to use the word lame duck in the same sentence, probably. Particularly if inflation stays hot and the way things are tilting towards the midterms, you can see it's a normal shift and people are just getting tired of him as most people are and just tired of the can't we just sleep without his name in the headline all the time? So that's the key thing we're thinking about. And I think the bottom line here is the only thing that matters is when you hear and see that ye the government deficit spending is pumping up things. We've seen the failure in bitcoin, we've learned that lesson. That's not the right trade for running it hot. Let that market cycle its way through. I think it's far from the low. Just get some of the purge out probably 2/3 of the way in. Things like Dogecoin just drop another 20 billion, we'll be done. Go in the pot of that trades mostly done. That's why I said sometimes it just stand back and say sit in Treasuries and maybe even look at that long bond. If it can't stay above five, it's going to four or three money. To me, that's the trade. I want to see signs of being wrong. And that's the bottom line is just all this nuances from Mr. Trump. Yeah. Gold loves him and maybe it's, it's love has gone a little bit too much now.
- [50:23]
A
Okay, so let's with a few minutes left, talk about where the Money rotates if any of these all time high assets.
- [50:30]
B
Yeah, Let me, let me share this and, and you'll, you'll appreciate this, I think. Mike, let me see if I can share this window. Is this working?
- [50:40]
A
Yeah, coming.
- [50:41]
B
Which window do you see? You see that? Okay, great. So this is tlt. This is the long, this is the, for those people who don't know, this is the, it's basically the long bond. This is 20 year treasuries, you know, 20 to 30 year treasuries. And when it goes higher, that means that rates are, are going down. Okay. So when, you know, when, when we entered 2019, 2020, this was a phenomenal trade.
- [51:11]
D
Right.
- [51:12]
B
So rates went to zero because we had, we had Covid. Like, like everything went straight to zero because you had, you basically this was the risk off move right here. This is what Mike is talking about that if we have some sort of geopolitical event, we have a, a global meltdown. We have an economic meltdown.
- [51:31]
D
Yes.
- [51:32]
B
People will be diving into the U. S. Treasury as, as safety. They're not going to be diving like gold may or may not benefit from that. On the, and in the front end, it's already benefited I think is that this is the, this is the issue. So people will go into this. But then look what happened when we started raising rates and this is the back end of it when we started printing money. And so, so this is the reversal of that trade, which is what we're talking about in the long term, that nothing stops the train, it reverses out because people are like, oh my God, here comes inflation. And when you're staring down 9% inflation, you do not want to be holding 10 year to 20 year to 30 year treasuries. That's just not where you want to have your money because you have basis risk. And we saw the largest reversal that, that, you know, the, the 6040 portfolio got absolutely demolished in this period because of that. So for, for what Scott is asking is there that we're talking about two different things. You're talking about a trade where you have a meltdown of the economy. This happens.
- [52:40]
D
I'm talking about long, long, long term of a position of a lifetime. That chart looks like platinum did a year ago, Coco did two years before. Stuck in a narrow range, very room place to go. It's. But the key thing to report about that chart is for that to stay like that. Remember that's TLT made 7% last year, almost 7% despite the fact the stock market went up 17. I look at TLT as a put that's appreciating with zero time decay. And the minute the stock market corrects TLT is going to drop right up to that 120 level in a heartbeat. Level.
- [53:15]
B
Yeah, this is, that's my point. You're gonna go right back to this level on a shock. Now what is that? What happens long, long term though, Mike, what happens 10 years from now?
- [53:24]
D
Well, it's one bridge at a time. That's a good problem to worry about, right?
- [53:28]
B
It's like so the point is that you're. The point is that it's not, it's not free. You are being debased, you know, and that's the point. So it's a trade. It's not, you know, it's not like I would not say go buy 30 year treasuries and stick them in your retirement account and go to sleep on it. Like that's not, to me, that is not, that's not okay.
- [53:50]
D
So that's what I want to point out is I really point enjoyed at the economic club meeting, I think it was in December with Michael Saylor. He says his quote was we put money we can afford to lose into bitcoin. That's going to go down in history as the biggest taunt of the market gods ever. You're supposed to put that in bonds and yields. I'm just saying that's the way it used to work. And when I see a stock market most expensive 100 years and bonds the cheapest versus gold in almost 50 years, that's not a trade, it's when it gets started. It's my point is we're looking at starts, trades that might be getting started. Maybe Bitcoin peaked around 100 grand just a couple weeks ago. That potentially if it continues down, that's getting started. My point is if you just drop 10% in the stock market and stay down, that's severe deflation we haven't seen in 100 years. My point is the market's already looking ahead of that. Bitcoin's already rolled over. MicroStrategy rolled over micro. NASDAQ peaked in December. I mean the stuff, it can keep going, but the other markets are telling you like gold that that's not going to be a trade. It's going to start as a trade and then it's contention. But right now I don't care about that. It's one trade at a time, just, it's just one year. Absolutely.
- [54:54]
B
If you're, you're looking for signal it's it's one trade at a time. Absolutely.
- [55:00]
A
Where does the money rotate, Dave?
- [55:02]
C
We got three minutes left over Bitcoin corrected. And I think that you have to look at the magnitude a 30% correction when you had the smaller rally relative to its previous rallies is more or less end. So we are now in what I call time based capitulation. I do not expect anything to happen anytime soon. But when it happens, it will happen. And that is, and that matters. The sentiment matters, New money matters, all the stuff matters. When you talk about as happening when they've already happened and we've been in a range and we stay in a range, you don't, you get there. So if Silver stops today, I have no idea where it goes because I don't think it stops today. I think that this market's going to be volatile and it's going to capture people's attention and I think we have months left. But when it rolls over or when people are looking for it, the people who are buying Silver aren't jumping into tlt. I think that you will see a rotation and it will depend on what.
- [56:01]
A
The macro jump into Bitcoin. That's the question I was really trying to ask.
- [56:05]
C
Well, I believe it will. I think that Silver is foreshadowing bitcoin, but I think it people are so impatient in this world that until you get, until the leverage money is made and people get actually hurt and actually liquidated not once, not twice, but multiple times. Think of how many times people have played bitcoin breakouts and gotten their noses smacked by the newspaper since, you know, since just even since October.
- [56:32]
D
Right.
- [56:33]
C
It's a lot. We had a massive shock on October 10th. It was very much the same size as Luna and that took over six months to clear. We're not at six months yet. I've been saying it and someone reminded me over the weekend that on macro Monday, right after the October 10, I said that expect to see a similar time. I haven't changed that. So I'm not going to sit here for the next eight weeks and say anything different than I've been saying for the last four months, which is I don't think bitcoin is going to recover until the that shock has cleared and we have a new narrative and we may very well have a new narrative, but that is what it is. I also don't think that silver trade is going to change anytime soon over the next, you know, couple of months because I do think that you're going to see volatility. The One place. Mike and I agree and I loved your comment on your, your post this this weekend which you wanted to say people who go long get killed but you knew enough to say are gonna get, are gonna get hurt.
- [57:28]
D
It's the devil's metal. It's gonna be some fun trading. But devil's medals.
- [57:33]
B
Guys, if you can bring up this, I shared a screen it like this. This is a 10 year chart on silver. So that's not normal. It's a weekly, just not normal. So be careful out there. That's it.
- [57:51]
D
Yep.
- [57:52]
A
Yeah.
- [57:52]
C
I mean that, that is a beach. And, and the question is, is it above the water now and about to start falling back to the water?
- [58:01]
B
I mean it's, I mean that's not even a banana that's going to turn into, you know, a boomerang.
- [58:05]
C
So yeah, it, there's no way that moves like that.
- [58:09]
B
I don't mean, I don't mean, I want to be clear. I don't mean that's going to go back to $20. I mean it's going backwards.
- [58:17]
C
It can't keep doing it. Trees don't grow to the sky. We all say the same thing, we all know it. I mean traders can do whatever the hell they want to do and you can make money in these things. But you know, understanding is it a fundamental reset or not? Are we unwinding about since when, when was William Jennings Bryant, 1870. Are we unwinding 150 years of monetary history? Yeah, I actually think we are. So there's a reset going on but it's still that kind of a chart. It doesn't end there, it doesn't go like that. And then here's one for you, Dave.
- [58:50]
D
You probably, you might be right and I still think you might get a chance to buy silver on 50 if history's a guy that's just, it's the devil's metaphor.
- [58:58]
C
I'm not arguing with you. I'm telling you. I think we are seeing a reset. But I also think that you have to understand that the, and the amount of margin people forget we, I, I'm gonna, I said something a few weeks ago ago, remember when the CME raised margin requirements and it went from 80 down to 70 and I said I don't think it's going to do what they think it's going to do because. And I said it at the time and I'll repeat it. The size of the contract for differences market which trades on as much as 100x leverage is larger than the CME futures and Therefore the CME futures are being used quite often by the market makers that are making markets in that CFD market. And so.
- [59:38]
B
You need you. The CFDs trade by the 100 million. They don't trade by a million dollars. There's a lot.
- [59:44]
C
But there's also a retail component.
- [59:46]
B
You can't make a CFD trade for less than like 100 million.
- [59:48]
C
Well, yes you can. Yes you can in, in. Not in the United States and. But you can in, in, in. In various places all around Asia, the Middle east and Europe. Yeah. And so that market is huge. The market makers had their liquidity constraints, meaning moves get magnified, which is exactly what I said would happen. So we now. So the CME effectively made. Because they thought there was. Obviously they did it for whatever their reasons were. They, you know, they don't, they, they could see how much margin the market makers have and they want to do it. They actually made the market less liquid. Less liquid markets don't. Doesn't mean go down, doesn't mean go up. It means magnified volatility and that's exactly what happened.
- [60:27]
A
And you agree with Mike that silver bulls and bears are going to get their faces ripped off.
- [60:32]
C
That's right. If you're playing on leverage, you are. If, boy, it's like how many times have we seen it? Bitcoin bulls. It's the same thing. It's the same freaking thing. You know, we're in a range. Breakouts or breakdowns generally get their noses smack with it with a rolled up newspaper. And unfortunately it's, it's just, it's just you need to understand when we get to the point where there is a, a directional market it in bitcoin or in fact in crypto, it will look very different than it does today. Right now the sentiment is crypto winter. I will, I will continue to say it. Crypto market is like your background on your screen even though you're actually sitting in Florida.
- [61:12]
A
No, it's snow here.
- [61:14]
D
What?
- [61:15]
A
That's real snow. We don't know what you're talking about. Yeah, I mean bitcoin may only be down 30% but if you look at the rest of the market, it, it's hard to argue that it's anything but this weather or worse for the crypto market right now. Great conversation, guys. Next week we will be celebrating an existing government shutdown instead of just pontificating about one that will likely come. We may be on who knows what'll be happening in Minnesota and we'll have 7,000 tariffs on Canada which may or may not be by that.
- [61:50]
C
So don't forget aircraft carriers going to the. Going to. To the Middle east, and yada, yada, yada, yada, yada.
- [61:56]
A
And silver at silver. 300 bucks. You heard it here first, folks.
- [62:02]
C
Yeah.
- [62:05]
D
Okay.
- [62:08]
A
We do, unfortunately, have to leave. Another great macro Monday. Thank you, Mike. James and Dave did. Dave and I can continue the conversation on what we've dubbed smelting town hall. Town hall you can't even talk about. There's just nothing to stop it. Yay, Clarity Act. I mean, that's basically the substance of.
- [62:25]
C
Any crypto, of course, will drag to a halt if the government shuts down, which.
- [62:28]
A
Mike, the Clarity act today was on my DI List. I had the story pulled up. I'm gonna deliberately ignore this one right now. All right, gentlemen, that's all we got. We will see you, of course, next Monday. Thank you, everyone.
- [62:41]
D
Bye.
- [62:43]
C
That's DOP.