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The Wolf Of All Streets
Bitcoin: Get Ready For More Pain Ahead | Macro Monday
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Bitcoin: Get Ready For More Pain Ahead | Macro Monday
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- [00:01]
Scott Melker
Bitcoin had a rough week, peaking around $108,000, going as low as 92,000, then closing near 95,000. A lot of this was a response to Jerome Powell and the Fed and all the things happening in the macro leading many to believe that there's more pain ahead for bitcoin, even though even the most bearish people on bitcoin tend to think there's more pain ahead before it skyrockets up to 125,000 or $150,000. We're going to break it all down as we wrap up the year here on Macro Monday. I'm going to be skiing next week, so this will be the last macro Monday of 2024. Can't wait to dig in with Mike, James and Dave, the All Star crew. Let's go.
- [00:43]
Dave Weisberger
Let's do, let's do.
- [00:58]
Scott Melker
What is up everybody? I'm Scott Melker, also known as the Wolf of Allstreets. Before we get started, please subscribe the channel. Hit that like button. But especially hit that like button. For these three gentlemen who show up even on holiday weeks, day in, day out, to provide you with the most amazing content. It's a good time to thank you guys for yet another great year on macro Monday. We've been at this for a while and I think Dave got the real Christmas present that came early or Hanukkah present or New Year's or Kwanzaa or whatever holiday we may be celebrating at the moment. You have officially announced your semi retirement from Coin Routes and have put in your application to work at the Department of Government Efficiency?
- [01:37]
Dave Weisberger
Yep. Well, no, it's. I'm more or less, yeah. I mean I'm basically, I'm out of Coin Routes except as a strategic advisor as and when and you know, it. Look, the company's doing great and I am still very much bullish on its prospects, especially in this environment. But you know, it's time to pass the torch. And you know, Ian is doing Ian Weisberger, my son, who was his idea and we ran it together. He has been running it and expanding it and building it and you know, God bless, Godspeed and let him do it and I will. You know, I'm taking some time off, chilling, trying to decide whether I want to, you know, what do I want to do. And I'm having some very preliminary conversations. But what I really want to do now that I have the time and financial flexibility is to help fix our completely effed up government regulatory framework, particularly for our industry and the financial industry writ large. And so the idea of helping and working with incoming chair Paul Atkins in particular and potentially with the CFTC is very appealing to me because these guys need to understand the understanding of how the digital markets have evolved, what that means for traditional markets and how convergence could be managed, all while getting rid of ridiculous amounts of inefficiency in those organizations because they do things the same way now than they did 50 years ago is incredibly appealing to me. And frankly, I think I would be able to add value. So this is my attempt, believe it or not, to give back in a way. I know people will be all sorts of, have all sorts of feelings about this, but my opinion is best to try to reform from the inside than to just dismiss and say, oh my God, they're a bunch of evil blobby blahs.
- [03:29]
Scott Melker
Would there be anything more epic than Dave Weisberger sitting in meetings with the Department of Government Efficiency and then reporting back on macromoney? Assuming that you wouldn't quit on us? Because I've seen David Sacks is now the crypto and AI czar and has been conspicuously missing apparently from the all in podcast for a month.
- [03:46]
Dave Weisberger
I suspect that the six month commitment in being in D.C. will be all consuming and you guys would have to miss me for six months and. But you know, we'll see. Certainly I would do it if I could. You know, it's a question of, of, of what it is. I mean, Elon is enough of a free speech maximalist. Maybe he'd think it's okay and that's fine. But you know the, the thing that's interesting, I want to point out one news story from last week which I think which has not really been major, has not gotten a lot of coverage, but that was the SEC finally doing a lawsuit that I think makes sense and that was against jump trading for manipulation in part of the loon. I don't know if you saw that, but of all the lawsuits the SEC has launched here, they end up with a settlement with jump trading for market manipulation, which we all know, I mean, whether they did it or not, I mean, I'm assuming that's between them and the sec. But the fact that somebody or firms can be part of a manipulation scheme which ultimately cost investors what the collapse of the Terra Luna ecosystem cost is very, very major. And it also tells you something that is really important. It tells you that Gensler, instead of going for jurisdiction and wasting 400 plus million dollars of companies defending what's a security, could have been prosecuting fraud with regard to the way that companies trade crypto. Just think about that for a second. It means that four years of time he could have been going after rug pulls and things that actually hurt investors, but instead he did not.
- [05:25]
Scott Melker
What's crazy about this story?
- [05:27]
Dave Weisberger
I find that just mind blowing just.
- [05:29]
Scott Melker
To point out what was crazy about this story. And I actually didn't intend to bring it up because it also passed in my mind. But I did read that Bloomberg article when it came out three days ago and the manipulation that they actually paid the fine for was for propping up the market. A lot of people thought that somebody would pay for crashing Luna intentionally, but what they actually did was mislead investors to believe that the algorithmic stablecoin was working by propping it up and buying to keep the peg. So it was a really, really interesting story because it was not the kind of manipulation I think that most people believed had happened. So pretty wild story there. So, Mike, I know you're traveling right now. We can tell. I like to say you're in Bill Barheit's living room because that's his favorite background. Dave working with his son. Like before we dive in, like you and I were just talking about how the greatest thing is being able to actually spend holiday with your families and take a little time off. Is there a greater legacy than leaving a company to your kid? I mean, come on.
- [06:27]
Mike
So that's what I want. I'm glad we started there. Hats off to Dave because there's. I think Teddy Roosevelt said it. When you point out problems without pointing out solutions, it's just complaining. And Dave's very good at pointing out problems and he's working on solutions. So Dave, to me, you're an example what makes America great. You do well in the private sector and then you try to help out, make it better. And that's what's happened now with this administration. You know, as much as us didn't like the morality of our new president, we have to go with the economics and go with it. And thank you, Dave. This is an awesome thing. I hope you find a lot of that grass.
- [07:02]
Dave Weisberger
I hope I get in. I mean, you know, who knows? I mean, it'd be nice to get, you know, more groundswell or ground roots support. But you know, a lot of the there, there's some I can't give up. I can't disclose some of the big names. There are a lot of people out there who have similar views to I and in support of the mission of this administration, particularly in terms of Elon and. And vivek I've never talked to Elon, so I don't know him at all. But I have talked with Rebecc and I have a pretty good idea of what he wants to try to accomplish and I'm very much in alignment. So look, I hope for the opportunity. If it happens, great. If not, so be it, and you know, we'll move on. But to me, the notion of smart people, and I mean like top smart, experienced people, blank sheet of paper, going into 600 federal agencies and trying to rework them, if done correctly, could be a force multiplier for the economy. It would make everybody bullish if you really understood what that meant. The only thing that it does mean, however, is that the use of regulations writ large across every industry as a barrier or competitive moat to exclude smaller companies and innovators is go would be coming to an end, which is not great necessarily for the largest companies, although some will do extremely well in that environment. But it is great for Americans and so we'll see how it goes. But you've all heard me talk about regulation and how important intelligent deregulation is and that's why I thought it was really important to start with the jump trading thing because I'm not picking on jump, but necessarily. But having a regulator that, that keeps the playing field level, that prosecutes fraud, that holds people to what they say they're supposed to do and do is extremely important. Having a regulator that goes off the rails, that causes every company to have to spend 20 to 30% more than their entire than their regular operating budget in order to, quote, do compliance, which is really a code word for keeping, you know, bullshit happy, is a very different thing. And it makes innovation very hard. It's a hidden tax and it's not even all that hidden. Anyone who's run a company can tell you the decisions you make are often, I mean, at coin routes, for example, we made all sorts of decisions to avoid businesses because we know that we would have had to raise an extra 20, 30 million dollars, which would have significantly more than we had raised just to deal with the sec. And that's just insane. So we never did those businesses. And that is a true statement throughout all of crypto. It's true in cannabis, in terms of even companies that are having nothing to do with getting people high but trying to use it for molecules, for therapeutics. It is true across so many industries, it's almost impossible to understand. So yes, I know, I'm off the tracks, I'm done, sorry.
- [10:05]
Mike
So I, I let's let's, let's, let's focus on, I'm gonna shift over to predictions for 2024. No risk in 2025, no risk in that. That's what we do. That's what strategists do. We throw it down in the line and get people tell us radios are being wrong. And I've been wrong a lot of places. So here's what I think is going to happen. We have this new administration coming in, markets way overpriced for the optimism of long term. It's going to deal with the realism of the short term. We're going to see pretty significant cuts right away. We're going to see pretty significant tariffs right away. These are all based on what we've seen happening, certainly from the book no Trade History by Robert Lighthizer. And if we all know what's happened, Trump know about the ministry, the mistakes of his last administration. He trusted the Chinese, they screwed him over with all those deals. Just throw off tariffs right away, say, sorry, guys, you got to deal with it. And the thing is, that really struck me about reading that book, the no Trade is Free. It brought back things I talked about with clients decades ago and when I was running some money at a hedge fund is everybody in the world wants free trade? As long as you can have a trade surplus with the U.S. that's over. Sorry. Everybody who sells anything to us has an inordinate privilege of selling to the world's deepest, strongest demand pull market on the planet, bar none. We don't have that. There's no place even close to our market. So to me, that's what's going to shift. That's what Trump's going to fix. That's what everything's. But it's going to be short term pain. So the key thing I have to point out is we haven't had a 10% correction, the S&P 500, since Q4, 2023. So we're going to get that first prediction. We are going to get a 10% correction S&P 500 this year. When it does, Bitcoin probably should drop 30%. Maybe it won't. That would be awesome. But the question is from what level? And at the same time you see bond yields ticking up, that's a big sign that we're getting that correction soon because that's a bad sign. So overall, I think we're going to see the band aid ripped off from this new government, get through it as soon as possible, get to the midterms and, and make it happen. So overall my key predictions are. The key thing I'm concerned about is this. I'll show that what's already pointing to that direction I'm pointing out is bitcoin to gold ratio. It popped up to 40, 40 gold ounces ago per week bitcoin. Now it's down at 36. It's right at that high from 2021. And I love when Dave and I have pushed back on that. It's perfect. We need to disagree. If we don't, we don't add value to our audience. To me that's already a sign of a big decent peak. I'm afraid it's going to just be a normal peak and get bounce to around 25 where it was right before the election. It's just things like that I'm concerned about. Another thing is a key fact I want to point out is I went back and read all my outlooks from the beginning of the end for 2024 and my focus was on the great Reset. Now I missed that in States, but it's happening in the rest of the world. So one key factor I want to point out was this morning 1.71. That's the yield on the 10 year note yield in China. China is in a severe deflationary recession and, and they're exporting that deflation to the rest of the world. So this is another area we've had pushback. I think that the setup right now is for severe deflation. You only get that on the back of massive inflation. So let's talk with some numbers. 1.71, that's a yield on the Chinese 10 year versus 450 or so in the US. Another key fact is I only go back about 10 years on this data. If you look at the average 10 year yields on the top five other countries in the world in terms of GDP, starting with China to India and then of course Japan, uk, Germany in between. Right now that spread, their yields are 127 basis points less than the US. That's the highest ever in 20 years. If you go back to right before 2008, it was the opposite. They were about 120 basis points above the US. So that's how high yields are in the US. That's how high assets risk assets are in the US and another thing I want to point is $13 trillion. That's the amount that we added to market capitalization, total stock market capitalization. This year it's almost 50% of GDP. So to get inflation to go down in an environment where you're massively boosting the stock market on the back of excessive debt to deficit spending which will tee off James and at the same time we have this big pump up in liquidity and assets values and cryptos is, you know inflation is not going to go down. That environment to me that's the thing I'm still thinking about for the deflation to kick in is when we get that 10% correction, that's $6 trillion, that's 20% of GDP. It's going to happen, it's not going to matter. But so then I'll tilt over a point out to cryptos, look at what's happening in theory. Ethereum has been giving us great technical indication pumped up to around 4,000. It's down almost what, 15%. It's nothing to stop to go to 2,000. So I'll end with this fact. I'm still big picture macro. I completely agree with the definable diminishing supply of bitcoin, increasing demand and adoption price must go up over time. But it's just got too expensive around 100,000. It's to me it's hard to get a better year than last year in terms of pumping up crypto assets. And now we have this problem I have with all cryptos. I've had it forever. There's an unlimited supply of cryptos. We have things we talked about Fart Coin and Dogecoin and Shibarino. They're just way too speculative expensive. They're starting to tickle down now. I think that's the whole space where the people are realizing that okay, we've priced nothing but complete optimism. We have the stock market at the 95th to 97th percentile of expensive in history according to all markets. This might be a bit of a problem for risk assets. And that's why I think we're going to get that correction next year and see how we come out of it. But it's gonna be a great trading environment. It'd be great environment probably to lay in some bitcoin at a discount versus right now pretty significant premium and risk assets. And that's where I think we're heading for next year is we're going to get that backup. We're going to get a great transfer traders a great chance for people to lay into risk assets at a bit of a discount rather than a premium. And the problem is right now markets are priced for perfection. And I think we're due for one of those issues. I'll end with where I started that bitcoin to gold ratio at 36 ounces of bitcoin to gold, it looks like it peaked around 40. It could easily go to 25.
- [15:57]
Scott Melker
Yeah, it actually has broken down below that all time high that it had temporary broken from 2021. As you can see in the chart. There's an interesting you kind of talked about there, Mike, that I've been thinking about. James, jump to you. Wouldn't it make a lot of sense with the Department of Government Efficiency, which we've talked about obviously is going to disrupt things, short term pain, long term gain, as you said. Wouldn't it make sense either for them to sort of cheer on a market correction now before the election so they're starting from a lower floor or to just get it over with at the beginning? Because by the time there's a midterm election in two years, they'll have had their correction, whether we call it a recession, a 10% drop, whatever it is, and then they can come out of it and people will have forgotten. Isn't now in the next six months the time if they were ever going to allow that floor to drop James.
- [16:43]
James
For that to happen, you would think so, you know, but remember, Trump's ego is wrapped around the stock market. He doesn't want it to go down at all. You know that. We know that. So you know, we're stepping into a situation where they're talking about the Department of Government Efficiency and they want to cut expenses. But I mean, let's just, I mean we've talked about it before. The reality is that there's $5 trillion of expenses that they can't cut unless they're going to cut massive number of workers and make somehow make Social Security, Medicare, Medicaid more efficient to cut to cut down the expenses from 4.1 trillion to what, 3.5. Like you gotta take out half a billion dollars of expenses there at least if you're going to get anything done. But I'm not sure how they would even do that. We do know there's a massive amount of waste in, in D.C. and the administration of all of those programs is probably way over, like far too expensive. But you know, you've got that, you've got a $900 billion of net interest expenses. Like where are they going to cut to get us into a, you know, to get us out of deficit and into surplus? The only way.
- [18:00]
Dave Weisberger
One way. There's only one way. And let's be clear about this, they're not hiding it. The Deck actually spoke last week or the week before and Mason we made this point, made a little bit more obliquely that I'm about to make it overtly, but the cutting expenses, yeah, that's a nice thing. So from a discretionary point of view, but you're right, without entitlement reform, it's literally what James is talking about, just for the viewers, is if you look at the, at the deficit, the biggest contributors, the biggest pieces are three things. Entitlements, interest rate, you know, interest on the existing debt, which is already there, and defense. Those are the three biggest things. And while maybe we can get some savings in the Defense Department, and I would like to think that that's possible, it's still not enough. What is enough? What is enough is if you get, you have to have hyper growth, you need 5 plus percent real GDP growth. And the point is get the government out of the way. People forget their dusty old economics textbooks, which used to teach. Because it's true that every dollar of government spent crowds out somewhere between more than $1 of private investment. I personally think we're at. Every dollar of government spent probably crowds out two or three dollars of government investment, which is a crazy multiplier. But if you understand just how bloated the bureaucracy is, you understand that's probably possible. So that is the point here. The point here isn't just to cut expense. The point is to free up private innovation, put money back into the private sector because there's tons of money out there to invest. The issue is in many cases it's just not economically viable to do so. And that's why you get during bubbles, Silicon Valley pushing valuations up to crazy levels and Wall street types scratching their head saying, how the hell do you come to that? I understand the difference. And you look at various crypto projects and other things, you see this. The issue is just freeing up the economy. But I want to go back to something Mike said because it's exceedingly important to understand that yes, the stock market is overvalued and yes, we have the highest wealth inequality ratio that we have ever had, and yes, the US rates are higher than the rest of the world, despite being a better credit risk. Arguably all of those things are true, but it could all be described under the umbrella of one word, which is not going to change in this administration or any administration until we end up with something far different, and that's financialization. We live in a world where the governments, both parties, all parties, and you more or less have to, I mean, I've talked about this before, want asset inflation and use that to prioritize capital over labor in order to suppress consumer inflation. The one interesting thing about this administration is JD Vance is well aware of what I just said to be true. Now, I haven't talked to him, so I don't know this, but his speeches indicate that he understands this. His book indicates that he understands this, which tells me that that is the one wild card when valuing assets. If you take to a logical conclusion, what he thinks is true to reverse the hollowing out of America, it means that many of the companies that have benefited from this policy are not going to have this policy Deb benefit from. So you have these two huge macro forces. One is deregulation, which is definitely better for smaller businesses and the economy writ large. And two, which is the financialization aspect, which is allowing big companies really cheap access to capitals to automate offshore and do a variety of things that make their profit margins better, which is definitely under threat from this administration because they understand this. I don't have any particular prediction about that. My predictions are because I think, James, you're going to have to do this too. Is 2025 will be a better year for Bitcoin than 2024. I know what that means. That means that because 2024 Bitcoin went from 42,000 to 95 or whatever, it's going to end the year at. So I think that Bitcoin will see a price over 250,000 during 2025. Yes, I believe that. Okay, so we'll see if I'm right or wrong. I could easily be wrong, but I think it's supply and demand.
- [22:37]
Scott Melker
Sounds like we got a third stake bet. But I want to go back to James before we make the stake bet, because I know Mike's going to definitely want to take the other one. But James. So obviously we're sort of talking about the Department of Government Efficiency and how much they can really do if we're actually in a debt spiral. I think that was what you were kind of leaning to.
- [22:54]
James
Yeah, and the point that I was going to make that. Dave, you know, emphasize that we have to. What, what I think this administration is going to do is they're going to focus on deregulation and especially in, you know, I mean, especially for small businesses. The, the owner, the, the, the red tape is owners for small businesses. And to, you know, remove a lot of that red tape will just make these businesses more profitable and that will add to gdp and, you know, you reduce government spending on administration of red tape, it'll increase private innovation and private you know, profits and so private profitability also in the energy sector. And the, the more you can deregulate and expand the energy sector, allow for refineries to be built, allow for pipelines to be built, allow for, you know, lower cost energy, that will bring down inflation and it will create more profitability for companies. I mean, the number one input for inflation is energy, the energy cost. And it's just, you know, the cost to run the machines, to run your manufacturing facilities, to transport the goods. You know, half the stuff we wear and use is made out of, is somehow made out of crude oil. You know, so it's important, and I think this administration is going to focus on that. They're going to focus on the top line. They talk, they keep talking about focusing on the bottom line and how, you know, they're going to bring down expenses, but there's only so much you can do in the structure of what we have in our deficits. And because we have such high, you know, mandatory expenses, it's going to be very difficult to cut a lot of that. And so that's, that's exactly what the focus, I think will be. Which means that I agree. I think that this market, I, you know, Mike's been saying this for a long time. You could see it. You just, you look at the charts. This is just seems insane that the markets just keep marching to higher and higher, higher highs. You know, it's just, when does it end? Well, you know, it should have a pullback. I agree. I'm not sure when or how, but it should have a pullback. And you know, but remember that this administration does not want to pull back. You know, the Trump administration wants to come in and have the markets off to the races, that doesn't mean they can't, they, that they can stop it.
- [25:26]
Scott Melker
I just wonder if they can do that for four more years. Right? I mean, as I keep saying, I've been impressed always with how many levers and tricks they have to pull and perform. But four years of pretending this isn't happening, that's only printing excessively.
- [25:41]
Dave Weisberger
That solves that. There's no other way.
- [25:44]
Mike
Here's the problem of.
- [25:45]
James
Yeah, go ahead. No, I'll tee you up here though, Mike, is that, you know, the, the markets, if you look at the expansion of the money supply and you look at liquidity, you know, the markets have gotten ahead of themselves. That's just reality, even. And bitcoin has, you know, it's gotten ahead of it, that, that, you know, the, the, if, if bitcoin really does hug that. The, the liquidity indicators and a three month lag. It looks like it's got a little sell off period here. Now that said, there's a lot, there's, there is massive amount of, of there. There are, there are some, there are some great developments in bitcoin that are fundamentally change Bitcoin. And those things have to do with the ETFs, the ETF options, the FASB ruling, you know, the, the possibility of this becoming a reserve asset for the United States. Like those are really big deals and those are fundamental changes. It's being priced in. I think that the market got ahead of itself. The bitcoin got ahead of itself charging up to 108,000. And then you know, in last week, just in, in a few words, Powell popped that bubble. I mean he literally just said nope, got ahead of itself. And you know, and with, and I can show you just a simple chart here. This is really easy to see. You can pull this up. This is what happened. Everybody's wondering what happened at bitcoin last week. It's simple. And you see this, Scott.
- [27:26]
Scott Melker
Yeah. Bringing it up right now.
- [27:28]
James
It's a, it's, it's pretty simple what happened, you know, so let me defer this out of there. So it's pretty simple. You can just see where the rates were in this light blue line. This is the Fed dot plot where, where the Fed officials put down where they expect rates to go. That's the light blue line. And then after the meeting, this is where it shifted up to. That's, that's it right there. That's what happened last week. And so all the rates pushed up the 10 years. Now the, the 10 year has moved up a full percent at the same time that the, that the Fed has lowered rates by a full percent in the last few months. That's what's happened. And so we have, you know, structurally bond investors are expecting more inflation. And so something that's really interesting that happened last week, that Powell has been pounding the table for, for years now that the Fed is data dependent. The Fed is data dependent. The Fed is data dependent. And that's why their big excuse is I know the data is lagging, but we're data dependent. So we've got to focus on the data. Even though it's lagging, we're going to focus on the data. And then all of a sudden last week they said, oh, we're going to focus on the expectation that there's going to be inflation from tariffs like out of the blue Just like now we're going to focus on, well, there's probably going to be tariffs from Trump's administration and that's inflationary. So that's what we're going to focus on now. It was kind of bizarre to me. It does make intellectual sense. However, we don't know what the tariffs are going to be and we don't know how much they're just going to be used as a threat. I've talked about this a number of times on the show before. Trump loves to wield a big sword and tariffs are a big sword. And how much he uses them is up for question. How much he uses them as a threat is not up for question. He's going to use them as a threat, there's no doubt about it. But how inflation they're gonna, how inflationary they're actually going to be. That, that's difficult to say. So I'm not sure. But now the markets has tilted toward that way and that kind of tees you up, Mike being the ex bond trader, that this is kind of where we're at. And I think that I, I think Powell's kind of lost the bond market, you know, especially on the long end.
- [29:45]
Dave Weisberger
I mean, I just have to interject one thing. I mean, yes, on a relative basis, what you say is true, but you know, I'm old enough and God knows Mike's old enough to remember that an uninverted normal yield curve has more than 20 basis points of upward tilt over from 2 to 10 or 1 month to 10. And that's what we got right now. Right now, the 10 years at four and a half, the two years at 4.3, one month is at 4.3. So you got 20 basis points of upward tilt. We saw it years, decades actually, with multiple percent of upward tilt between the shorter and.
- [30:22]
James
Right. But what, what the market is telling you is that the structurally rates are going to be higher structurally for that. That means we're zero interest rate. You know, policy is gone. That's what the rates are telling you right now.
- [30:35]
Dave Weisberger
Which rates are telling you that?
- [30:36]
James
The ten year.
- [30:38]
Dave Weisberger
Well, but we, we had year. I mean, just think about before we went into the idiocy of complete zero interest rates. What was the average? And we'll let Mike talk because he has all the data right in front of him on the terminal. What was the 10 year back in the 90s under the Clinton presidency? And what was, and what were short rates and how did it migrate? And I think when you look at that, it gives you some interesting Perspective.
- [31:06]
James
Let'S say you yeah it it yeah go ahead Mike, bring it up.
- [31:11]
Mike
Well let's start with I I as it's something I wanted to speak about was we've had some great indications what to expect this year for next year again I'm making my predictions next year and the number one market I've been wrong on is James and most of you been right on is that I still think the next big trade is U S Treasury long bonds. You know obviously I've traded them forever I used to have hair and the key thing I like to point out is we had a good test this year. We had TLT rose 15% from April to that August peak. Remember we were all in August when James was buying Bitcoin at 50 and you were all over it Scott and Dave but TLT rose 15% to me that's the next big trade when we get that normal reversion into US equities Now maybe it's a trade or maybe it's a long term position but these are we're just so undervalued now versus gold versus the world versus history even versus our debt to GDP. It's just the key things that I want to point out an article that recently came out in the Bloomberg was America needs to break its debt addiction by my colleagues Burgess and Crook and here's a key quote from that. The US collects 25.2% of GDP of of tax as tax revenue or 7.7 $7.4 trillion in 2003 the average of the among the OEC OECD countries is 33.9% so if the US matched that average it would result in 10 trillion of tax revenue if it were to do that it's not going to do that but that just shows how much we could cover our debt if we want to. It's not going to happen with how.
- [32:49]
James
Much would that impact the top line.
- [32:51]
Mike
So well that's the bottom line that's my point is we are on such we've elevated risk assets so much and this massive deficit spending and this I'm only question I look at when markets is it 19, 27, 28 and 29 and I refer back to Roger Babson who spoke about it completely I want to be people very completely wary of the the Irving Fishers out there looking for a permanently high plateau. This is what I'm looking for for next year and you see it in bitcoin is that bitcoin to gold ratio it's it's showing you there's issues. You see it in the rest of the world. But this is also epic historic what's happening. And I fully another prediction fully expect the lessons that Trump learned From Trump administration 1.0 is he did raise tariffs on China. A lot of them are still kept in there and they still are showing major pushback. They're showing a complete they're telling the world we are a bad trading partner because they know they're the best trading partner in the world is the US yet they're still pushing back on trying to limit rare earth metals. Like, okay, now we get exactly where your tilt is. You could at least pull back and say, yeah, we'll buy some of your stuff because you're the best place in the world. But they're not doing that. So there will be tariffs across the board. So here's the numbers on the tariff. First of all, we have a trade deficit around a trillion, around a little bit less. If you just have 20% across the board tariffs on that, that raises that's 22, that's $200 billion. It's a rounding error compared to the next 10% correct correction in the stock market, which will happen this year. McGlone's prediction, that's $6 trillion. That's deflation and that's what we're way overdue for. And I'll mention two books. One of the books we all appreciate is the Price of Tomorrow by Jeff Booth. Big bitcoiner pointed out how the benefits of bitcoin pointed out how China is collapsing. He did this years ago. He was spot on. Ray Dalia got it wrong. Ray Dalia flipped over. So I've been going with Jeff. Well, another one is the Price of Time by Edward Chancellor pointing out how the whole history of rapidly advancing economies and markets that move up unless of massive liquidity always go down. Now the rest of the world's doing that. Look what's happening in Germany, Canada, Brazil. Can we France, we can just keep mentioning them. Certainly China. The US Is the Lone Star. And that's what I think is going to tilt over next year. Partly because here's the human nature. We completely have price for the U.S. you know, it's the best country in the world, obviously, but it's so expensive. We've got this wonderful presence going to save anything. Completely priced it in. And now here's the next big trade. So this is where we're tilting now. And things like deficits won't matter when people are looking at the stock market. And for we all know this, we've been through these cycles. There's periods where people give up and we haven't had that in a long time where people say, okay, I'm in it for the long haul, but yeah, it's starting to hurt my portfolio and I can't spend anymore because my wife wants to buy this, this and that, and my 401k has dropped 10% or 20%. This is going to happen, it always does. And I think it's going to happen maybe in Q1, but it's going to happen next year. So what are the signals? Bitcoin.
- [35:45]
Dave Weisberger
So here's the question for you. Let me ask you a couple hypotheticals because I agree that the debt to GDP that the, well, that's a big deal, but that the stock market capitalization of GDP is at an absurd level in valuation. And yes, economists are predicting 14, 15% earnings growth next year, which sounds great, but then you look at that earnings growth and you look at what the PEs behind it are and effectively the stock market is priced for it to exceed on the upside on what is already a very, very rosy forecast. So I got that and I don't dispute that it's got gone to a level of absurdity that the market hasn't corrected at all and flushed any of the excesses out. That's all. I agree with that as well. But what happens if instead of a crash, you get a couple of months of grinding lower and 10% or even 15% spread out over a few months is not a crash. Correlations don't necessarily go anywhere. I mean, we saw, let's say you get in the S and P what we saw in bitcoin from its 70,000 where it literally dropped from 70,000 to below 50 and nobody called it a crash. It was a grinding and it was going up and down and up and down during that period of time. What if we get a period in time in the growth stocks in the stock market that look more like that? In that scenario, correlations don't go to one because the moves aren't big enough most of the time. Then what happens? Where does money flow and what do people do? Your bitcoin, your bet is it goes into into the long bond. T. That's your TLT trade, James and well, I don't know about James. I won't speak for you. My bet is the money goes into bitcoin, not speculative crypto, but bitcoin and or at least some of it does, and some of it into gold as well. I am bullish on gold also that's the funny part about our bet is I think that bitcoin will outperform. Sure. But I will be very surprised if we don't see $3,000 gold. 2025 very. And so you know to me that's. I just want to understand and frame the difference. That gets us a lot closer than people think we are.
- [38:06]
Mike
Okay. Well it's no fun to be close. Dave, we got to disagree. It's more fun for the audience and it's also provides value. So let's, let's make the risk of making predictions for 2025 gold. Yeah. 3000 matter time. McGlone's been early. Way wrong if you could say. But I've been calling for this for years. What gets to go the 4,000? I don't. We could talk about that. That's just a normal bear market in the stock. US stock market which goes down 20% stays on. That's a problem. I'm not predicting it. I hope it doesn't happen. But crude oil. James, you mentioned crude oil. It's going to 40. McGlone's been early. Some people can say wrong. But what's the number one thing people miss about crude oil? The elasticity of supply. It's. We're in this period now. We have so much rapidly advancing technology. I mean why can you and I trade bitcoin on our phones now? Because we couldn't do that in the past. Why is McGlone's EV 10 years old? People miss the fact about elasticity. The, the. The key thing you learn in commodities is markets don't go up because they go up. Like in equities they go down because they went up. So crude oil is going to 40. That means the average price of gasoline in this country which is around $3 a gallon is going to 2. That's not good for. It's usually it's a bad sign for economy. It's really good for deflation. But diesel in this country is running. Running around 350. It goes to 250. It helps the grease of the global economy. The problem is diesel demand on a global basis in the US in Canada, in Europe, in China, in India is all declining. That's the deflationary forces I'm worried about. It's the Greece of the global economy. Let's look at copper. Dr. Copper is the indicate. It's typically if you overlay copper right now it's like 4.1 with that US 10 year note yield. They've been 1 to 1 for like decades. Right now copper says the 10 year yield at 450 is very high. I think copper is going to 3. Number one, it's been doing that for like 12 years. It made a new high, around 550 this year and it's probably going to go back down. Yes, I could be wrong. What's the number one thing to make me wrong on that? China has to really come out of this massive stimulus and have some demand pull. But its customers are pushing back partly because it's supporting the war in its neighbor's best country. To me that's where we're going in terms of commodities. And I agree with you, Dave, that would be wonderful. It'd be a great chance, I think, for people to reassess. This is right now we're in one of those animal spirits bull market and everybody's making money. It's great. And everybody's wives can spend more money because all the assets are appreciating. Those of us who have wives who spend all of their money, we get that. But. And I knew I'd get a lot, but it's all the way. It is. It's like, yeah, I'm very parsimonious, but yeah, I'm married, I got a lot of dependence. We all get that. So to me that's what's going to happen. That would be ideal if we just get some normalization. Trump comes in, we all realize, okay, we're overpriced. We got this great future to look forward to. We consolidate for a year or maybe less. Bitcoin shows outperform. So here's what I'll end with. I've been saying for years I've been way wrong on the stock market, but I've been expecting bitcoin to outperform. So I've been saying for years it's been gold, bitcoin and long bonds. Definitely long on the long bonds. Bitcoin, I think it's way overdone, it should be lightened up and gold's still doing well. So to me, I think at some point next year bitcoin's going to give us a chance to get it a little cheaper, get in cheaper and it'll go back up. Not the rest of the cryptos. I mean ethereum and those 2.5 million cryptos versus unlimited supply. Just be careful there, trade them, sure. But to me that's where we're going for next year. Gold's still appreciating, but I'm really worried what gets gold to 4,000, that is just what Used to happen, a normal correction. Stock market at 2.2 to GDP, which is now actually 2.1 comes down to maybe 1.5. That gold takes off. I mean it's, and because that's deflationary, that's what I'm worried about the next big trade. But in terms of commodities, what's the main problem with commodities? I'll end with this is they went up a lot. They had a great incentive. They tweaked those lessons of Jeff Booth. They tweaked those lessons of rapidly advancing technology. And the lessons you learn in something that you can bring on supply, stick with the technology, obvious stocks, but not with that they're creating. We can create more petroleum and more food every day, particularly in this country, without, without too much regulation.
- [41:59]
James
I'm going to go to first principles, which is the stock market and all assets are, are absolutely tied to the money supply. And so that's where we are, where we were overcooked in the markets versus the money supply right now. So we have two choices. We could have just mean reversion of the, of the stock market back to money supply or we can start seeing expansion of the money supply globally again. And so one of the things that we're not talking about, that we should talk about is first of all, the, the US government's going to issue another $181 billion of, of debt in the next week or so right before year end. That's what they're slated for. That's number one. Number two, Janet Yellen has, has run the playbook of let's keep this thing going, let's keep this charade going. Let's just issue as many short term T bills as we can to get, keep this whole, you know, the, the, this charade and, and musical chairs going. Well, that's going to end. That's going to end because we have $98 billion left in the reverse repo. That's it. It's all the way down. It's down from the, you know, the high of somewhere around 2.5 trillion. And now it's $98 billion left. That's what's in the money markets. Okay. And we heard Powell talk about this back earlier in 2024. He was asked explicitly when do they, when do they stop QT and when do they start qe? And he said they don't start getting nervous until at some, and I can't remember if it was in one of the press conferences, but I recall them saying that they don't start getting nervous until that, the, the bank deposits are somewhere around 10% of, of GDP. So GDP is 2. 29 trillion. So bank deposits right now are about 3.2 trillion. And you've got nothing left in the reverse repo. So that's when they start getting nervous. And we all know what happens if the bond market locks up. We, we saw it happen in September 2019. And what did the Fed do? They rushed out and printed money. They started printing money before COVID This is what people forget. We were printing money before COVID before the lockdowns, the, the fall, before the lockdowns, we were printing money. So the question is how quickly do they stop qt? This is another part of the pivot. So we've had, now we're on pause, right? So you can either raise rates or lower rates at the Fed. You can either, you can either splash, you can either inject the markets with capital, which is, which is qe, or you can remove capital from the markets, which is Qt. Right now they're removing 25 trillion, $25 billion dollars a month. It's nothing. You know, when they, when they stop that, that's, that's another indicator that, that's then a full pause, right? So, and so right now we're still tightening a little bit, keep the rates where they are and you're, you're pulling $25 billion of capital out of the markets monthly. When you go to full pause or you reverse that, that's a huge indicator. So the question here, Mike, is, and here's my base case is we have, we either have some sort of credit lockup where the Fed rushes in and starts printing again and you have, you know, v drawdown and recovery, or they just avoid it all together and they just start printing money before it happens because of worrying about having another repo market lockup like they did back in 2019. Of course, the repo market is open all the time now. So they have, they, they have, structurally, they, they have in place some, some, you know, kind of guardrails to prevent that from happening. But that's, yeah, that's the U. S. Money supply. So that's kind of where we're at. What do we have the money supply globally start to expand. Where that mean reversion is, the money supply reverts upwards. Not this, not the markets reverting downwards. And that's the question. Well, you know, I would, I would think that with this administration, they're going to do everything they can to splash liquidity into markets to avoid a market drawdown. As, you know, as opposed to just naturally having market drawdown, which you look at the markets. I agree with you, Mike. They're overcooked, they're overdone. The question is, are we going to expand the money supply first or are we going to have a V drawdown or are we just going to grind lower like Dave is saying? And that's the big question for 2025.
- [46:48]
Dave Weisberger
I want to be clear what I, what my most bullish scenario is, is. And, and this, this is going to be kind of interesting for, for viewers. My most bullish scenario is from a bitcoin point of view is bitcoin kind of. And you see it today. The stock market is, is Mensa. Mensa, you know, kind of mixed, some down, some up, whatever. And bitcoin is, is lagging, you know, since we started this, it's down, you know, what, you know, 1500 bucks, something like that, you know, below 94. My most bullish scenario is bitcoin, where it's very clear that what's happening is there's speculation building on the short side, because you can see it in the funding rates. It's very, very clear. They're the lowest I've seen them for a while. And in fact, on the, on the usdt, the US Dollar denominated contracts, as opposed to the token, you know, the coin ones, you actually see negative rates all across the board. So it's interesting. My most bull scenario is through the end of the year for, you know, another two or three weeks of this and then some catalyst, and then now you have a coiled spring. And it wouldn't surprise me to see that because in particular, new entrants rarely deploy new capital right at the end of the year. So we're in a very tricky period where a lot of what's been holding up the bitcoin market have been new entrants from the institutional side. Now, I do think there are people who will make their allocations before year end for a variety of tax reasons. But still, you know, I think that January is, is generally, I, I am more bullish on a January rally than a Santa Claus rally. I, I would be kind of surprised to see anything major, barring a major announcement in the bitcoin market, you know, major catalyst upward. But who knows?
- [48:43]
Scott Melker
Like this guy.
- [48:44]
Dave Weisberger
Well, I mean, the problem is that guy is, if you look at his chart, he's not an idiot. He's put really smart people on his board of directors. Brian Brooks and his board of directors just got announced this weekend. You know, when you look at those, he has this great chart with the bubbles and when you see too much at tops, you know, I think he's gonna back off for a bit. I, I, I really do. I mean maybe not as, as it falls, but certainly if it rises, I think he backs off and lets it.
- [49:14]
James
Well, he said in an interview last week, he, you know, Michael said that the, he, he's going to start using debt more than the ATM coming into the next year.
- [49:23]
Dave Weisberger
So we know that, yeah, that'll help the ratio. But I mean look, the, the point is to the extent you believe what he believes and what I believe, then accumulating fairly passively and letting the market sell to him is a smart strategy. Chasing the next time that there's a major event up that's probably not going to happen. So I don't think MicroStrategy or any of the companies that we talked about are the catalysts for a move higher. The catalyst for a move higher are new people or new sovereigns and people allocating. And probably the most underestimated of which is the back half of 2025 is that the entire brokerage community, which today is not just can't offer bitcoin trading services to their clients. It has right now, today a strong counter incentive to actually push away from them. And that's going to change. You can take that one to the bank that one of the first things that's going to happen with a new SEC oversight is FINRA is going to stop denying broker dealers from their, their applications to offer these services. That would make the change complete. No longer is it, you know, are we looking at things like, oh, this is a big deal that Yahoo Finance added bitcoin to their banner on their app. I mean, although that has happened, I think that you, you will see the full integration of Bitcoin as being able to be offered by broker dealers. And that is something that people aren't talking about. But effectively that ends the restriction side. And yeah, you know, there are already interesting things going on there. I mean even in Charles Schwab which offers everything and it's very, you know, it's not a problem. You still have to click extra official, you know, things to say, okay, I recognize cryptocurrency is volatile, that's fine. Brokers have no problem with that. But I think that people need to understand from the supply demand dynamic there's a lot that's likely to change. And I'll continue to come back to the demonetization of gold. I don't believe it works. The same way gold did to silver. Although it's similar, gold definitely did demonetize silver. In a sense. Silver still does move with inflation, does move, and is used as a monetary metal by some, particularly Chinese. But the truth is it's just too hard. It's just too heavy. It weighs too much for per unit of actual value. So we'll see how all that works out. But I think that's a big thing. Now, the thing you said before, James, that's really important in terms of global liquidity is really what we should be talking about. Does the Fed do or is this, I think, going to be kind of forced to. And the real question that we're going to learn in the next year is how much political influence affects the Fed. And we're not talking about it, but we kind of know that. What do you think?
- [52:23]
James
I think it's, I think that Trump is, he, he's demonstrated before, he belittles people. He, you know, he berates them. And I don't know if, if Powell has said he's not going to quit, he's not going to resign. But, you know, if he doesn't do what, what Trump wants, he's going to make, Trump is going to make life difficult for him. That I would expect, you know, and I would expect Trump to be demanding rates lower and more liquidity because he wants the stock market up and he wants that top line up. He knows that, that our nation is completely financialized and expansion money supply makes it easier. That's my guess.
- [53:08]
Scott Melker
Mike, you're muted.
- [53:13]
Dave Weisberger
See if I can unmute it. Mike, you're unmute and then you get the last word. We're pretty close. We're close to it.
- [53:19]
Mike
I don't know if I'm worthy of that.
- [53:22]
James
You are.
- [53:22]
Mike
All right, you should be able to hear me now. Can I just show a few screens? You see the one that says Michael Saylor says Warren Buffett is destroying Berkshire capital. Can I see that screen? I got to show that. So that's one thing I love about what I do. I mean, I am an X trader, you guys. First of all, anybody in this podcast and video who listens and certainly you who do it, I completely respect you. I'm an ex doer. I say it better. I do it and. But this is one of the biggest double dog dares in history. I cannot wait. I hope I live enough, long enough to write about this. I just hope it doesn't mark a big peak. But you don't double dog dare markets. And this is the biggest one November 22nd. I mean seriously, this is just like you just double dog there much. It's a lesson I learned in trading. Pits have made the mistake myself. But this one thing I want to talk about debt. If you do okay, the total treasury debt divided by stock market cap it's like 60 completely heading lower. So it's all that matters is you gotta keep that stock market cap higher. It's the highest. It's 97th, 96 percentile expensive in history. Good luck. We all know that regardless who's coming in president. I just like there's a trade here. Maybe a good long term trade. Like like I said it's a 19, 27, 28 or 29. I just, I see it happen. Key thing also I see about it is this, this S gold, S P cross. It's just so buried. I mean it's one, it's a one market. You gotta have that go lower. I just need that to go lower yet. I'm afraid it's gonna go higher. And here's the chart that it looks like a peak that I'm so not happy with. But I'm worried that this is bitcoin divided by gold. That looks like a pretty good high. Looks like it easily dropped down to mean reverse. So to me I'm not worried the last word I'm just pointing out people it's looking at the beginning this year thing I got weight wrong. I didn't think we'd get a 30% increase in the S&P 500. We did get that massive move in bitcoin. And my thought is everything's so expensive. You can sometimes. It's a lesson I learned in the trading puts sometimes. And when you get a trade on getting 70% of that trade is wonderful. You know, getting the wings. The kurtosis of the normal distribution. As Dave and James are over, you got to be careful trying to pick peaks and pick bottoms. We got a massive good, rapidly bouncing risk asset trade for 2024. To me, 2025 is going to be about what this chart's already showing. Is.
- [55:40]
Dave Weisberger
That chart back up the gold one? Yeah, that one. No, no, no, the gold. The one you had.
- [55:47]
Scott Melker
Yeah.
- [55:51]
Dave Weisberger
The one you just had up a second ago.
- [55:53]
Scott Melker
Keep going. I got it here. Anyways. Yeah. Bitcoin to gold ratio, right?
- [55:58]
Dave Weisberger
Yeah. So if you look at that and you say what happens if we know that that double top in the middle of that screen was people? Was the market getting completely ahead of itself and then getting absolute bitch flapped by what happened with gbtc which Took down three arrows and Terra Luna which took down others. And then ftx. We all understand what happened now. Understand. Now ask yourself the question, what does that trend line look like if you take those peaks out and it looks like one of the most bullish charts you will ever see. And ask yourself the question, could history repeat? Could we get to the point where we say, you know what, Bitcoin should be gold? And then on a log.
- [56:42]
James
Yeah, because it's demonetizing gold. It is in real time. Maybe it's kind of ahead of itself in the short term, but it is demonetizing gold.
- [56:49]
Dave Weisberger
I look at this chart and having this is because it's like a Rorschach test, personality wise. I look at that chart and this makes me crazy Bullish, not the other way around. Bitcoin versus gold. It's literally funny. I mean when we did this, we had our bet toward the beginning of the year. We were sitting at like 22, 23 or whatever the hell it was. 26, I don't remember but it was somewhere in that, in that range. You know it looks like a very, very strong. And if you look at the s P circa 2013, 2014, it sort of looked 2015 after there was a little bit of a blow up sell. It looked the same or very similar. And we know what's happened in the last nine years. I think bitcoin think this stuff's going to happen quicker and I think that it's a little bit more cyclical and there's going to be more volatility. But it's interesting because I think that we're talking about an asset that's evolving as opposed to an asset. Whereas with oil I think you're right. Maybe in terms of inflation maybe it does go to 40, but 50, 60 to account for the more dollars and whatever. I mean. Yeah, that doesn't seem crazy at all because you're right, the electricity supply is huge and we keep our technology to extract oil has gotten so much better. So you're absolutely right about that. But bitcoin's not like that. And that's really kind of crystallizes the difference in you and I.
- [58:16]
Scott Melker
Well the best part is that we'll be here to find out.
- [58:19]
Dave Weisberger
Yeah, it'll be good. That's right.
- [58:20]
Scott Melker
Going into 20, 25. I hope that once Dave is running the country he's still popping every once in a while to yeah, say hi.
- [58:30]
Dave Weisberger
I don't have these delusions of grandeur.
- [58:33]
Scott Melker
You never know, anything could happen. I believe in you guys. That's all we got. Like I said, we will be off next week coming into the new year, so assuming we'll be back the first week of January. Thanks once again for amazing year of macro Monday. Always showing up, the incredible commentary. And I can't wait to see what kind of wild bets we come up with for steak in 2025.
- [58:52]
Dave Weisberger
That's all we got to get to Miami.
- [58:53]
Scott Melker
I still.
- [58:54]
Dave Weisberger
I'm still looking.
- [58:55]
Scott Melker
I'm trying to come down in January in general for a few. So we'll make it happen then.
- [58:59]
Dave Weisberger
Okay, cool.
- [59:00]
Mike
Good time to come to M, guys.
- [59:02]
Scott Melker
Thank you so much.
- [59:03]
James
All right, fellas.
- [59:04]
Mike
Deuce.
- [59:05]
Dave Weisberger
Let's do. Let's do.