A (5:15)

Yeah I guess for you since you have to hop off or Anybody else mentioned 2022 in Ukraine, Dave or James, you can take this one. I've heard a lot of people making that comparison to the price of oil. But at that time it was this existential threat of what might happen to oil. And it feels like this time with the Straits of Hormuz actually closed and the biggest producers of oil in the world actually shutting down, that this is a very different situation.

B (5:41)

Mike, you want to handle that or do you have to hop?

C (5:46)

It's a short term shutdown. Now for an event that is unprecedented and that makes sense. Now this is one thing I completely got wrong. I fully expect when US military went in they would say the first focus, okay, let's make sure the straits not closed. Well, it's closed. How long that lasts I don't know. But the bottom line in the macro is we've seen these things before. The pump with Ukraine included grains and everything. But remember that high got to 130 and then what happened? It shifted the world order. Now that's fully what I had expected. It shifted world order towards EVs and less demand for crude oil and more supply from the places that were already creating excess supply. Here we are now when that happened, U.S. and Canada were exporting maybe 3 million barrels a day. Now it's 8 million barrels a day. So this is a rest of the world problem right now. If the strait stays closed, that's a problem. But right now you have to admit this is an oversupplied market that just got a great incentive to bring out more supply from the part of the world where the bulk of that oversupply is coming from the western hemisphere led by the us. It's just how its cycle works. It's the auto correlation factor. So be careful about the short term shutdowns. And I'll give you one example. 2019 in Iran Proxy hit. Saudi oil supplies really hit them hard. Crude oil pumped up for a week and then went back to that downward Trend.

A (7:01)

All right Mike, I know you got to jump so we can go and you'll be back in a few minutes. Guys. Mike, we'll be back. Just what I. Maybe as he leaves we can put in context of just how crazy this oil market is right now in the energy crisis. Crude oil up 30. Brent up 26. Heating oil 22. You can read through those at your leisure. World's largest oil company, Saudi Aramco cuts production at two oil fields. We obviously know that Qatar had done the same last week. We talked about it. You're wondering about that price action. We literally have had US oil futures on track to rise 60% this month. G7 if you're wondering why we saw up to 120 and down because the G7 said that they're basically going to go deep into the reserves and release as much as 400 million barrels of their 1.2 billion total. I mean it's just insane. The most severe energy Crisis since the 1970s According to the Wall Street Journal. I mean guys, what's going on?

D (8:01)

And it's, and, and oil's round tripped it too. If, if you haven't that get back to 100 now.

B (8:07)

Right, right. We see it every time there's a, and it's, and it's funny. So when there's a hurricane in the Gulf, you see these spikes, you know, because there's worries that refining capacity is going to get destroyed. You see, you know, you're seeing it here. The math is, is ludicrously different than what people think. So if you're in the United States, understand that, that we import somewhere in the neighborhood of 400 and like less than half a million barrels a day from the Middle East. We're self, basically could be self sufficient. We aren't for a variety of reasons. The Saudi crude is lighter etc, there's,

D (8:50)

we don't have the, we don't have the refiners refiners to, to, to refine our own oil. That's the, that's the craziest part of all of it. We could be independent but you know there's a lot of factors around that and a lot of it has to do with, you know, environmental stuff. And it's just, it's insane that we

B (9:07)

don't call, call it what it is. It's the, it's the green new scam. So one of the only things that I agree with Trump completely on but that one, it's just, it's insane. And you know, I'm sorry, I don't want to hear. I, I would love the global warming Nazis to try to argue with me but you know, I'm sorry guys, the US could literally go to zero and it wouldn't make a damn bit of difference given what's going on out of India and China. And it's been, it's been and, and look, Germany committed effectively national suicide for, and you've seen it in terms of their electricity prices etc, that's the reason. But it doesn't matter. Let's, let's get off of that as much as I like, you know, but

D (9:44)

what's important is for people to understand that. But it's just important for people understand because you always hear that we've, you know, we're one of the largest oil producer in the world and we are still importing oil. They don't understand why, that's why, because we, we can't find oil.

B (10:01)

I wanted to get to James. Yeah, we, even with the Strategic Petroleum Reserve having been drained by Biden to try to help out with the election, even with that, and even with Trump having failed and kind of been asleep of the switch and not refilling it when it got into the 50s, know when it was below 55, we have two years, years of being able to replace 100% of all our imported oil sitting in the Strategic Petroleum Reserve. Two years. And so, you know, that is, that tells you from the US perspective what's going on. So why did West Texas jump above Brent? Brent usually trades at a significant premium to West Texas. Why? Because people need to be able to get at oil. And even if you have to go the long way, you can't get the oil out of the Persian Gulf because the Hormuz Straits are closed. So you get it from wherever direction you're going to get it. And that's why. And so when you see these sorts of things, unless you think that somehow, unless you think that Iran is going to mine the straits and cut it off for a year or two, which would be incredibly devastating to their benefactors in China. You have to believe that it's short term, which is why by the way, the markets in December are very different than the markets now. In fact, the markets I think read this morning are effectively pricing the conflict to be over one way or another in May. That's what the oil markets are pricing. So now ask yourself the question, if you're valuing the long term cash flows of any asset or the long term value of any asset, something that is expected to be over with in May, what does that mean. And the answer is not a whole lot, which is probably why Bitcoin, for example is at 68,500 or damn close to it right now, which is by the, for people who are keeping score at home, the exact same price it was at three weeks ago, two weeks ago, one week ago and now today.

A (11:57)

And we're getting this trend, by the way, that we get a quote unquote dump on the weekend as some sort of news happens and nothing else is trading and by Monday morning it's a non event.

B (12:05)

That's right. So you know, when we start going into. Because our audience wants to care about how macro impacts Bitcoin, the answer is not a whole lot. Bitcoin is going to eventually delink and trade on its own things and we can talk about why and how it's trading. When you look at stocks, we're still way closer to all time highs than anything else. Yes, there have been a few sectors. The software sector that's been pummeled for a variety of reasons. Most notably it's been rotation. Yeah, yeah. Most notably AI, which is a macro factor on its own and definitely deserves some conversation. But we can table that for now. But the real question that people have is what's going to happen with global liquidity? And this is why. This is where I absolutely am dumbfounded at the stupidity of so many analysts. So oil prices spike, it will hit cpi. Unless you think that the people running our, our, our government are stupid and self and want to self immolate. Ask yourself what else is happening. Well, we're spending boatloads of money building bombs, building missiles, building munitions. We are going to spend boatloads of money to reconstruct both Lebanon and Iran when this is done.

D (13:19)

I mean I, I read, I read somewhere that, and I don't have this verified, so maybe one of you guys can verify. It was something I saw over the weekend that Trump wants to spend as much as $1.5 trillion on milit and on defense this year or the Department of War. So that's, that's a 50%, that's a 50%, you know, raise from the 900 billion that we're currently spending. Is that, has that been confirmed? I, I don't, I have seen the

B (13:50)

exact same figure, but I don't. He can't do that unilaterally, James.

A (13:53)

I mean, you know, also isn't this effective? I mean the amount of spending that's happening, won't that naturally happen if the war continues to go on? A million dollars a day at war. And war continues on for 365 more days around the divided by.

B (14:09)

And so where, where's the money going to come from?

D (14:12)

Right.

B (14:13)

You know, we all seen the memes. We know what's going to happen. And you know it. You can look at it and say, well, okay, but then, you know, that'll be inflationary. They're going to print more money? Well, no. I mean, yes and no. They're going to push it into assets. That's what they always do. They're going to, they're going to enact policies so as to divert it, you know, take advantage of. You know, I saw Jeff Booth did a tweet storm over the weekend, and the, the most important tldr, I have no idea. I, I didn't have a chance to read it in depth, but the headline was that natural deflation would be down 5%. And the target of 2% inflation means that you're going to have monetary inflation of at least 7%. And of course, they'll overcorrect. Now, monetary inflation of 7%, basically in my, my little pea brain thinks, okay, well, that means they want assets to be up across the board by 7% just to stay even. And because they want, you know, obviously it's, it's, it policies to channel into assets. And so within that backdrop, you're selling assets because we have these words. The word that I think has become, you know, I think the meme from the Princess Bride, the word risk asset now is, you know, that famous meme. I do not think that word means what you think it means. I mean, risk asset used to mean. Used to mean that you didn't know whether the company was going to be successful, whether their competitors were going to be able to win, whether the product would have market fit, you know, whether their business plan or infrastructure turnaround. Now, a risk asset is anything that moves with volatility in a world which is basically the markets have turned into a giant casino flooded with excess fiat cash, which means, drum roll, please. Everything is a risk asset by that definition. And when you do that, what does that mean? Well, it means that you've lost the meaning of the word risk asset. And that's the world that we live in. So when gold is a risk asset, as Mike said, and by the way, I don't argue with him.

A (16:18)

Yeah.

D (16:18)

The way the markets, it is absolutely traded like a risk asset. It's what it's.

B (16:23)

I'm not. This is not me taking a pot shot. I will only do that to his face. I'M not gonna do that behind his back. As much as people in the audience might want me to. Screw that. Mike's a good man and he's not wrong. But when the markets are treating non risk as risk, what you're really seeing is it's the prediction market, you know, phenomena bet on everything, right, Scott? Yeah. On the weather. Why not bet on where oil is gonna go? Last night I'm sitting at the World Baseball Classic watching Israel win a game against Nicaragua. Which was, which was.

A (16:56)

They played baseball.

B (16:57)

It is. Well, I mean, it's like all these countries, it's all, it's, you know, they all have people with some, you know, some whatever to it. Most of them don't live like the. The Netherlands is a good team because they have a lot of people from Curacao, you know, and, and you know, Dutch Virgin Islands or Dutch Islands or whatever. But anyway, it doesn't matter. It was a lot of fun, you know, great atmosphere, et cetera. But I'm sitting here on my phone and weirdly the WI fi worked, which is because people were watching baseball and I'm watching oil and I'm thinking, man, there's a short, there are people, there's going to be some bodies floating in the top of the pool tomorrow. I mean, and it looks exactly oil traded like, not even bitcoin, more like Solana, Dogecoin.

A (17:37)

Yeah. James, you actually kind of wrote, not specifically about the risk side, that everything's a risk asset, but you wrote this amazing newsletter yesterday and this is the tweet that was the inspiration for it, but that a record 95% of asset classes are trading above their long term trend. And you said when there's no safe haven. Kind of the flip side of the same idea.

D (17:59)

Exactly. Well, yeah. And you know, people think gold, gold's a safe haven.

C (18:04)

And.

D (18:05)

Well, okay, so getting to what, you know, what Dave is saying here is that, look, gold trading like that, like a risk asset. Everything's a risk asset. Stocks are risk asset, real estate, you know, credit, private credit. Anything that's not just a T bill is trading like a risk asset right now. And you know, even the, the long bonds are all over the map. Everything is trading wildly with volatility. So where do you hide? You know, and the typical answer is it would be gold. That's the typical safe haven asset. That's the long standing safe haven asset. The interesting part about it though is that, you know, we've seen the last number of corrections and that's what I wrote about in here is that the last number of corrections gold is it, you know, either held in there or recovered the fastest of everything. But then on the other side of that when bitcoin what became part of the picture and that was after the 2008 crisis. So once we hit 2020, 2022, then you know, the bitcoin, it took a little bit longer, but it way outpaced gold after the recovery. And why is that? It's because of the money printer. It's just exactly what we did, what Dave just said, you know, that they're going to print money and it, it, it's going to be on the backside of inflation and the deflationary effects of AI. We're getting into a period here which is extremely, it is unsettling to say the least. And why is it unsettling? Because we're seeing people being laid off all over the nation in typical white collar jobs. You're talking about middle class people that are being laid off with decades of experience because they're just being replaced with AI. You know, you're going to see all these industries have a, there's going to be a massive consolidation. We saw, we talked about it I think a week ago about Block and, and Jack Dorsey just laying off like 4, 000 employees in one fell swoop. You're seeing it at Microsoft. You're seeing it Amazon, you're seeing it.

A (20:22)

Amazon did.

D (20:23)

What's their latest.

A (20:25)

This was the story yesterday. It's absolutely pretty insane when you dig into it just really quickly because it's worth mentioning.

D (20:30)

Yes.

A (20:30)

Yeah, they made their engineers basically spent eight months documenting exactly what they were doing, 2,847 of them. And then they programmed the AI based on what those agents, what those people did to do those jobs and fired the people. So those people basically programmed the AI to replace themselves. I don't remember what the number is, but I think I read that they're down to like 12 guys in Bangalore that are doing this job. I don't even think that's an exaggeration.

D (20:55)

That, that would, it wouldn't surprise me in the least. And here's the crazy part about it. So well, oil going up is going to hit, it's going to hit prices just like Dave, you're delusional if you don't think that it's going, it's, is the, is the largest by far factor in price of everything. You know, you get, you get, you know, the whatever we're not going to get into activism stuff. But so that's, that's that is, you know, so, and the other side of it you've got this deflationary effect of things that, you know that that would norm, that that would be going up in price because of the AI inputs. Okay, so what is that going to cause? It's going to cause stagflation, right? I mean you've got people being laid off, you've got the economy getting arguably worse in large swaths of large sectors of the economy. At the same time the prices are going up. But then on the flip side, you're going to have this really hard downturn in everything, in pricing of everything because of deflation, of the deflationary effects of AI. But it's not going to hit everything, right? It's gonna, the, it's not going to hit everything. And so that's, it is an extraordinarily difficult market to make sense of right now. And that's part of the reason you're seeing, you're seeing rotation out of MAG 7 stocks into, you know, defensive sectors. You're seeing gold has, has kind of topped out and has come down here. Same thing with silver. You know, you're watching the long bond. The 10 year treasury now is back over 4% on, on yield. It's 4.16 now. I mean just a week and a half ago is under 4%. So and then you've got the dollar movement and you, and, and then, then you look at Bitcoin and Bitcoin seems to be just doing what it wants to do without any relation to anything. So Bitcoin's up 4% today. This is not against Friday. So all the other prices you're seeing are against Friday's close. But gold, but bitcoin is against yesterday's close, but it's up 4%. So you know, it, what is it going to do?

B (23:14)

Who

D (23:16)

it's going to do what it wants to do like it always does. And so there is, but going back to your point, Scott, and, and what I wrote about is that there's, there just is no place safe to hide right now. There, there's no place to go except cash. And you know, and cash is going to melt if you sit in it for a long period of time. But this is a short period of time and it's okay to have cash short period in short periods of time while you're trying to make sense of things and make sure that you're being careful. Because if you need capital, and this is the whole point of what a risk asset is, if you need access to capital for short term needs, then you can't be 100, 100 exposed to risk assets. And those are assets that will be volatile because you're going to have to liquidate them at a point that they, you may not want to. And that's where, that's where the whole point of the correlation of one trade comes into play is when some sort of event occurs that pushes people and investors to the point where they have no choice but to liquidate assets that they don't want to. And that's why everything correlates to one and everything sells off. But the, the, you know, the, the interesting part about it that we have seen a lot, many, many times over is that gold recovers first. And then we would expect that if and when the money printer comes out, because there is no choice but to keep this engine going. And by engine I mean this inflationary run it hot economy engine because you need high GDP in order to keep taxing, in order to keep running these deficits that we're running. And if you're going to spend another $500 billion on defense, where is it going to come from? It's going to come from deficits. And those deficits are going to be funded by what? Money printing? That's right. And so that is what that, that, that is what you need to understand. And that, that's why gold will recover first, in my opinion. And bitcoin will slingshot past it and slingshot hard, especially if they, if they print the amount of money that we expect them to. It's just a question of what happens when, if you do have a black swan or not, or if we kind of just tiptoe through this, on, on this razor wire between, you know, the, the Twin Towers. If you've ever saw that documentary, that guy walking across that razor wire, you know, that's what we're doing right now. Is it possible that we thread that needle? Sure, of course it is. But you know, it's just we're in a period that has been extremely difficult to, you know, to navigate. And, and I'm sure that, that Mike, you guys are hearing it on the desk when you're talking about this and you're talking through the Economist. This is a really difficult situation to, to handicap. And it, you know, it's not like you saw this train come in and finally Lehman and, and Bear Stearns went bankrupt. He finally happened. So many of us were talking about on the street for weeks and months, but this one is just like, I don't know which way this turns it's so political. You've got war involved, you've got, you know, oil involved, you've got AI involved, which is a new factor that we've never seen before. This is a difficult one. And so, you know, to, to, to. To err on the side of caution is, is probably not a bad thing. Can you miss out another huge run in all the stocks? Of course you could, but could you miss out on a. Could you protect yourself from a sharp downturn because of some event that we're not seeing that has nothing to do with this, the, The Middle east, but something else entirely?

B (27:04)

Yeah.

D (27:05)

That's out there.

A (27:05)

That's no safe haven.

D (27:08)

And I want to make it clear I'm not, I'm not doomsdaying. I'm just saying that everything seems to be priced to perfection, and that's the problem. Except for bitcoin.

A (27:15)

I ask guests all the time. I'm like, you know, someone gives you 5 million bucks right now, what do you buy? You know, and everybody kind of scratches their head. Mike, I know you say tlt. Well, and I want to go because there's this interesting. This is extremely hyperbolic, but Japan's about to blow up the US Financial system and nobody's paying. Okay, there's a lot of.

B (27:34)

A little bit hyperbolic.

A (27:35)

I just want to talk about the idea because Japan is the largest foreign holder of US Government debt on earth and are apparently about to sell a lot of that. Right. They hold a third of it. So, you know, how's tlc?

D (27:49)

This is why we have wrong. This is why we have swap lines. That's, that's a, that's why Besant has a swap line with, with Japan. It's to avoid a cascading effect that would, you know, that would take down financial markets. But look, we had the Japanese carry trade unwind in a violent well swoop that August of 24. Look, I don't expect that to happen again. It's not like you're going to have all these hedge funds caught offside because they weren't expecting, you know, the yen to go to 160. And I think that that's the, the, the price that the Japanese finance minister had quoted as kind of the, the stopping point. You know, that's, that's their, their stop loss point. But, you know, there's still that. It has been the, the access to cheap capital for the world for a long time. And so that's, that's kind of over. And that's the, that's the, the death Knell there. Where is it going to come from next? It's not going to. It's. This is the point that people I think are missing is that it's not that the liquidity is going to stop. It's just a question of where it's going to come from next if they can't stop. The whole world is so indebted it can't stop. It's. It would, it would be, it would be financially, you know, catastrophic to stop liquidity.

A (29:15)

And so that's why you go to war.

D (29:17)

That's why you go to war.

B (29:21)

Mike, if you were here, we teed you up when you were gone I made a point that the word risk asset no longer means risk in terms of business implementation risk in terms of whether what the future would hold for its idiosyncratic stuff. Risk now basically means if it's been volatile and that volatility is being driven by macro which basically means everything is a risk asset except for. That's why we got except for it which is. I knew you would agree. I wasn't taking a shot at you. But it is amazing how that changes people's way of trading. You point out all the time how risk models govern a lot of asset allocation and now they're all fubar.

C (30:05)

Right?

B (30:06)

I mean exactly the music because doesn't mean what it used to mean.

C (30:11)

Well, we need to teach other off partly because I enjoy when big brother Dave teaches me stuff and once in a while I learn little lessons once while we learn each other lessons. The key thing is I was get back to the macro and James I caught enough of it to point out my main rack thesis for this year remains the same that stock market volatility still 180 day volatility near a 10 year low will go up. Okay, simple fact. What's it going to take to do that? Now this war has started also with stock market cap to GDP near 100 year high. Yes we can push back on that but we also seen what's been the precursor for this. Bitcoin grabbed beta in 23 and 24. We loved it. It was great. That's when we had the biggest money pump in history starting in 21. Gold grabbed beta last year 64% and this year I fully expect P bonds to grab beta. Now we're getting a good reason for that. But it's one key thing to make this happen. It's just stock market volatility do what it always does mean revert. And I'm using 180 day because I started using 60 day back I think in August and now we're out to 180 day but I put kil levels on then I'll stick with it. So initially, you know, it looked like we're sell the opening in bitcoin on the year that was 94,000, I've moved that level down to 74,000. If it can stay above that, prove me wrong. This is the kind of environment I look at this. This is the beginning of a severe normal deflationary trajectory which is not going to be short term. It might last for a long time. Yeah, there'll be pumping, there's pumping of liquidity in China and they're 10 year old yields 1.8% which is why I expect to go. So I'll put a lid on that. So key levels to prove me wrong. Bitcoin stay above 70,000, silver stay above $100 an ounce, copper stay above $6 a pound. They're all ticking lower. Yet this s and P500 still down. What are we on the year? 2.3%. That's nothing. Give us 10%. No, there's a trade and I think that's what's going to happen. It's going to kick in. But also you look forward this decision that Mr. Trump made for this invasion, I got to think he's going to make it happen the way he wants, which means more and more lethal offensive weapons until he gets what he wants, which is very scary, I'm afraid. But one time we get to those midterms, he's going to have a decent story to tell, I think which is part of what I see in the forward curve in crude oil. I even see it in grains. So like I say, for me to be wrong, prove me wrong. Stable. These key resistance levels in these, what are now risk assets.

B (32:27)

So the interesting question here is, and I pointed out the Jeff Booth point which is that natural deflation versus monetary inflation. But whatever you want to look at it, I think that one of the, and I, I tweeted it out this weekend. One of the things that I find disturbing is how people continually to use charts in a world where there is significant monetary inflation going on. So like, and, and the reason made me think about this is I was thinking about some of these countries back in the old days where you know, they would price stuff, you know, like the Turkish stock market when Turkey was going through, you know, very low, you know, basically 10% inflation per month to, you know, 100% plus annualized over years. And of course the stock market Kept going up. Right. You know, so if you used a nominal chart, you'd be wrong. You literally couldn't. You had to, you know, you have to do that. Now, are we at that point where the amount of monetary printing throughout the entirety of the west is significant enough? Well, depends on how long of a chart you're using. I mean, if using daily charts, probably not. But if you're going back years, probably so. And so you know it very much. It is very interesting. So when we talk about, like when you talk about oil, the most important point about oil is what's the cost of production and where we are. And the cost of production because of technology in oil has not. In fact, it's gone down relative. So it's not like there's any inflation. So using a nominal chart in oil makes. It works perfectly well.

A (33:59)

Right.

B (33:59)

I mean, oil companies are like licking their chops. You're going to hear if, in fact it goes the way that prognosticators in the betting market say, and we have the midterms go that way. You're going to hear from all the Democratic Congress about windfall profits from the oil companies. You could take that to the bank. We saw it in the seventies. It's absolutely certain. You think, oh my God, look at these oil companies. Look how much money they made. Well, you know why they're making money? They produce between 40 and 50 and they're getting to sell at, you know, depending on where they are, probably average price of selling now is somewhere between 70 and 80. Well, guess what? If you have 100% profit margin, the politicians are going to scream about it. But the reason I make the point is if you're valuing the oil companies, if you're not taking into. You have to take that risk into account. But if not, then if you think that they're going to be able to keep these profit margins for a long time, then you should be investing and they should be exploding. I mean, they're doing well, but they're not exploding because people realize that these things are going to come back down to normal. Now, the flip side of that are all the companies that are going to use AI to keep pushing their corporate profit margins up. I mean, horrible for the humans, really good for the companies.

A (35:10)

I mean, these days, the biggest days for a tech stock is when they announce layoffs, not when they build something new. Remember when Meta did that and it

B (35:18)

was like one in the Meta department

A (35:20)

because we don't believe in the Metaverse anymore and they're starting massively well.

B (35:24)

So Here, here's, here's one fact that I find incredibly interesting. Should be a difference maker. And they have to figure out how to make it investing. So Tesla has literally shut down. They are no longer going to produce the Roadster, the S Roadster, Their, their top, you know, top end sports car and their X, they're, they're, they've come up with new Y versions. But why? They're literally devoting a huge percentage of manufacturing to producing Optimus robots. Ask me how long the jobs in Amazon distribution centers are going to be safe against Optimus robots. I mean I took a friend back, we went to the World Baseball Classic and I dropped him off at his hotel last night and I let my car, my Tesla Y which is one of the most popular cars in the world now do full self driving and he couldn't believe how good it was. And I'm telling you it's better than humans.

A (36:21)

So the only time I've ever self driven in a Y was with James in Vegas. And the thing literally like got us to a restaurant around an obstacle at a blockade. It's insane.

B (36:30)

It's, it's, it's. And, and the thing is the reason I, I use it, I'll be blunt, is because you're driving on many streets where the biggest fear is that some idiot will open a car door, jump out in between two cars and the car will see it faster than me. And I know that's true. So I use it a lot now why am I mentioning I mentioned it? Because what happens when Optimus robots can do all the factory jobs?

D (36:53)

All right, so just stop there for a second. So some people don't know how Amazon, how Amazon distribution facilities work. I was in. If you've never been in one, it's insane. First of all, they already have robots everywhere. But they're not, they don't look like humanoids. They just move boxes from on a massive grid footprint that moves goods from one side of the, the warehouse to another side. And then they, they, it ends up, it ends up putting them in these buckets that then humans who are in a cage. So humans are in a cage to protect themselves. Now this is years ago. So they, they, they're probably even way more developed than, than when I saw this pre2020. But then the, then humans will take them out of these, out of these bins and then put them on a conveyor belt to go off somewhere to be to the next production line where they're, they're wrapped or put in boxes or whatever they Are, So those are the jobs that are, are in danger of the, of the humanoid robots. Now that's, that's the point is that they, the. There are already robots everywhere in manufacturing and distribution facilities. Just a question of can you eliminate all the jobs? And the answer with Optimus is yeah, you'll be able to. That is a scary part.

A (38:19)

I want to pivot slightly because it's worth talking about since we're actually here as the market opens and it's live and I know it's just one data point, but just to take a quick look, I mean Bitcoin is up, right? Once again. It dipped on the weekend, but it's almost trading at 69,000. You take a look though at the news here and the Dow pretty much got smashed at the Open, tumbled 400 last night. Japanese stocks obliterated South Korea. Share market fall by 8%. Trading halted again. You take a look at the bitcoin chart. This is a rounding error. It's sideways, but still

D (38:53)

I've been up a percent which is fair for the Friday to Friday or Friday to Monday. That's the comparison.

A (39:00)

I'm just saying. Listen, I know it's not going mad or anything, but it continues to look like, like it's not that correlated. You know, you would used to, if you used to have the stock market open on Monday morning at 9:30 and everything dumped pretty significantly, you would think that bitcoin would be dumping with it. It's going up.

B (39:19)

Yeah, well, I mean there's reasons here. I mean first of all it's, it's more the expectation there at a point. Last night the NASDAQ futures were down 8 or 900. Right. You know, what are we down now? Now it's now down 285. So it's, it's, it's literally regained overnight two thirds of its loss. So you could make an argument that regaining two thirds of that loss is Bitcoin's higher beta. Now personally do I think that that's true? I mean it, mathematically what I just said is true for a day. But that's such a crappy data point. But it always goes on trend. I mean look, the selling in bitcoin, the sellers are, are freaking exhausted. Scott. All the crypto players who look at this and sell, they don't have anything left to sell. And shorts get, get, you know, are not as stupid as Longs. Let's just, let's just be blunt here. I mean there is someone, I can't remember who it was. It might have Been Luke Roman. It was someone smart, kind of made a much nicer way of expressing it. But understand that highly leveraged short sellers are smarter than highly levered long buyers. Full stop. They do what Mike says. And Mike's violating because he knows, he says they set a stop loss and they don't get themselves carried out and they don't over lever and they, they size their positions. Right. But on the long side, people are like, let's just yolo and go for it. I'm going to make myself rich. Oh well, I lost. I guess I'll try again. You know, when I, when I earn the money to try again. You know, it's, it's, it's crazy and, but it's, we've seen this forever. So this is, this is, what's, what's happening is there isn't a lot of people to sell and there's still buyers. The people who have been buying are people who believe. And, and I pointed out I, I used. You could yell at them and talk about, you know, you can look at power law charts until you're blue in the face. But when you look at power law charts, what you end up with is you look at the power law of bitcoin and it says you get into what's the purple band is the high band. And you know, every other cycle it got there, it hasn't gotten there. They po right? Now if it gets in the purple band and does what a normal rally would be in bitcoin, you would be somewhere between five and six hundred thousand dollars, right? It's happened every other time. And so you get a lot of long term investors who are saying, you know what, this is a reasonable bet. The market is literally pricing its probability of that happening at just 90% against. So it's like I saw this other thing on prediction markets where someone asked Claude what's the best way to make money. And the answer is you find a lot of these prediction markets that are just underpricing the risk of it actually happening and bet on a lot of them. And there's definitely that money going into bitcoin, there's no doubt about it. And so yeah, I mean you can look at all of this stuff, but you have to take into account the dynamics of supply and demand. Unless some new OGs say yeah, this is the time to sell and that will be self destructive. This, you know, the bottom that happened at 60 seems pretty damn strong. Unless there's a massive black swan that, you know, whatever, a nuclear bomb goes

D (42:26)

off cascades everything it takes everything down with it. Yeah.

B (42:28)

And, and that's the thing you saw last night when bitcoin fell, I think did. What was the candle last night? What was the, the lar.

A (42:36)

We were down to about 66, 65. 5. So yeah, drop below 66.

B (42:41)

So you see that because what James and I and Mike tell everybody here and you got always have to remember this when markets, when people are panicking, they sell what they can, not what they want to. And it doesn't matter. This is true. This is true with everything. It doesn't matter whether we're talking gold, silver, oil, tech, stocks, this, that, whatever. You know my, your mom's silver set. You sell what you have to, you sell what you can sell and you see it all the time. And if you don't understand that those are the market dynamics, then I don't know, I don't know how to help you. Okay, Mike, certainly you've been teed up enough.

C (43:19)

Oh Dave, we teach each other. I would love to get bullish bitcoin. And one thing, it's wonderful to see some of these signs of divergent strength. But bitcoin led the way. And this is my macro theme is if you're buying any risk assets, number one, you have to hope NASDAQ 180 day volatility stays near a 10 year low. So you're shorting volatility that level. Yeah. You're going to get bounces. You have to hope that stock market captain GDP stays near 100 year high. This is the shorter term stuff and I just pointed out levels are trickling away. So I'd love to see signs of strength. But then I like to bring out the macro for me for bitcoin was we've had the biggest pump in history that happened. And the bitcoin stock market ratio right now is around 10. If you take Bitcoin divided by the S&P 500, it's about 10. That's the same for five years now. So this asset that has two to three times the volatility of bay the S&P 500 and still trading flatline is now that doesn't include total return. So total return means does it actually

A (44:15)

still have is that I'm actually asking genuinely does it still have two to three times the volatility?

B (44:22)

Here's the bitcoin data, I just ran it. So the 30 day realized volatility of Bitcoin is running at 40%. The 60 day is running at 43%. Right. Whereas the implied options volatility of Bitcoin 30 day is 60% and 60 day is actually. They're both around 60%. So, you know, that's what, that's what's actually happening in bitcoin right now, which is a little bit, you know, realized is always underneath. And that's why people who sell options generally make money. People who buy options generally lose money, except for the outliers. And that is true. What's the S P running at? You know, probably running it at 15 to 20, right, Mike?

C (45:03)

180 days, 11. It's been stuck there forever.

B (45:07)

The 30 and the 60 day is. Is what I was.

C (45:09)

Yeah, they're picking up. They're picking up.

D (45:10)

Right.

C (45:11)

I'm looking at right now. I'm just.

B (45:12)

It's about half. But a lot of that has to do with daily volatility. But here's the thing, and I could ask it, and we can do this if you take weekends out of it. I suspect that it's. That the difference is, is really becoming close to negligible because most of the

A (45:27)

volatility is on volatility on weekends. We see it every week.

B (45:30)

That's right.

C (45:31)

So. Well, here's my key point. I just updated. If 180 day volatility on Bitcoin is right now 3.9 times greater than the S&P 500. Why? Okay, so bitcoin volatility is high at the moment. S and P 500 is very low. That's my point. That's going to narrow. S&P 500 stock market volatile has to pick up the volatile in every single little market around then. And then let's rinse and repeat and look at buying risk assets at discounts. I just. That's why I love bitcoin in the beginning because it led the way up and now it's leading way down. And I think you should be very careful with false hope in bear markets. And that's what we are. And again, prove me wrong. Show me at least one sign of staying above 74. Now that's much lower than 94, which we looked at, you know, three months ago. But you see the trend there. It's just. This is a bounce, I think. And Dave, you nailed it was a little bit of de risking. People been way short bitcoin. And I think this is a holistic picture. I get here more. That is, I hear from a lot of people, Bloomberg and people I speak to is, yes, we love this. We loved it before, but we look at it risk adjust basis, we can get much better return in stocks. And I Just point that out. The volatility is high, the performance is poor for five years now how long is that going to last and keep. People tell me, people keep telling me it's going to get better. I said it will. Once we purge the excesses of supply and cryptos, not bitcoin, we still all agree on. There's just give me, let's, let's get Dogecoin and Shibu, you know, flush those things out and then we might have a great chance to buy bitcoin.

D (46:51)

Yeah. Here's a couple of data points. First of all, bitcoin is already down, it's already touched down 50% so it led the way how much more it can go. It really depends on how big a, an event we have. And I'm not calling for an event, I'm saying that there's always one out there. I mean I've been, I've been in Wall street for 30 years. I've had about 10100 year events in my career. So everybody knows, I mean everybody's like oh my God, it's 100 year event, it's 100 event. What it was, whether it was 1998, it was 1999, 2000, it was 2001, it was 2008, it was you know, 2020. I'm like we've had so many hundred year events, it just, they happen. And those are the black swans. So you just have to be aware of that. We so Bitcoin down 50 already, you know, I, it, it has been wiped out and so the question is, does it get dragged down with the rest of the market on something else? It's not going to lead the way down from here and that's my opinion. So that's number one. Number two, the Vix is at 30, that's not nothing. It had been sitting around 10 for years here and now it's at 30 and the market is still hanging around around its all time highs. And so that's a very interesting data point right there. Is the Vix 30 out of control? No, you don't see the VIX out of control until it's too late. When the Vix is at 60 or 70 or 80, that's it. There's no way you can buy insurance at that point. It's over, you know. So that's another interesting data point. And then the last data point that we should talk about here Scott, is that as I understand it, 20 millionth bitcoin is being minted here. So you have 5% of the bitcoin Supply left to be mined over the, over the next hundred years. 5%. So this is a seriously anti inflationary asset. It is a, it, this asset is not it, it does not get devalued like other assets do. I mean it is a fraction of what gold gets devalued by the expansion of, of the gold supply every year. And so that, that is a very interesting data point that I think a lot of people are missing because of just nonsense and, and, and just you know, disinformation, misinformation and purposeful misinformation from you know, certain networks that, that just refuse to recognize that Bitcoin has a fixed supply. So there's just an important data point out there as well. Those are all things that are happening while this market is uncertain. It's a, and so if you're a bitcoin holder, long time holder and you haven't sold, then it should give you some comfort that long term that this is, this is an asset that's going to benefit from that, that very strong, a very strong probability that the government's going to continue printing money to fight this deflationary effects of AI and any sort of downturn in the economy.

A (49:57)

And by the way, just worth noting James, that at the same time a lesser landmark event, but Michael Saylor just bought Bitcoin for the 101st time and over a billion dollars again this week. So we saw huge numbers on STRC last week. So I'm assuming that's where that's coming from.

D (50:12)

But yeah, and that's an important, that's an important part. I was on stage with him. Was it last week or the week? Yeah, I mean God. And so we talked a lot about Stretch and this STRC product and, and for the people who don't know it very well, a very simple explanation is that this is, this is a, it's, it's an, it's a preferred, it's a perpetual preferred that pays you eleven and a half percent yield at, when you buy it at par at a hundred dollars and so in. And that is, it's, this is an alternative to something like private credit. Is it, do they, do they expect it to be volatile in periods of downturn? They're not delusional. They, and you know, sitting on stage with Fongly and Michael, they understand that this is not something you can keep as a checking account, but this is something that, that gives you a better yield long term than something like private credit where you don't know what is what you actually own and you don't. And you don't have access to that capital. And so it's, but it's a different. What, what they're doing though is that they're, they're literally just borrowing fiat to buy bitcoin, add infinitum, you know, and so that's, and that's the, that's the, in this, this is just, it's a, it's a mind blowing shift in, in how to arbitrage capital markets. And that's the, and long term though, it's, you know, this, this is where they're going to be able to just continue buying bitcoin.

A (51:59)

Yeah. I can't believe I didn't have this story pulled up. And I don't even know if we have time to unpack it. But you mentioned private credit. Five clock fund limits, withdrawals is redemption. They're the third one, right? In like in two weeks or something. I don't know what the timeline is, but in a few weeks or the third one, I mean this is, yeah, I'd be interested.

D (52:16)

Did they say anything about this in the, in the morning meeting, Mike, because this is a, this is a big deal.

C (52:22)

It was, it wasn't mentioned. I had a hop off part of it. So they might have when I was right. So I want to hear your views on them.

B (52:28)

I think it's very important for people to understand what this means because a lot of people think private credit go, oh, this is going to be this. I've heard people make the asinine comment, well, this is the same thing as 2008. It's just a different cause. It's, it's not, it is an overarching thing. Mortgages and building subprime is basically saying real estate has major pockets that were overvalued and those major pockets that were overvalued under. People understand it, it got, it got to every level of society. You had strippers flipping, you know, condos, yada, yada, yada. What's happening in private credit is something very different. There are. Private credit is a much broader thing. It is companies borrowing money to build out businesses, some of which have done very well and are doing okay, some of which are absolutely royally effed because they built out businesses not knowing what was going on with AI and they no longer have a business model. And in a private.

D (53:30)

And here's the worst part about it is that they're not marked appropriately.

B (53:33)

Correct. And so unlike real estate, where at least there's some form of mark, I mean if something sells, it's like, okay, it's there, you have to do something with it. In this case, you have sectors. And so you. It's just, it's not that private credit is bad. It's that there are a lot of individual companies who have borrowed on the private market that cannot pay their bills back and may in fact be going bankrupt. And so if you're a private credit portfolio manager, then if you were focused on companies on SaaS, you are, you are out of luck. Right? If you're a private, you know, credit manager and you're focusing on building restaurants, you're probably fine. I mean, you know, the restaurant business is up, down, whatever, but I mean, you get my drift. And so the notion that all of private credit is bad is just, that's just not true. What's happening here is we have a massive disruptive change going on in the economy that's going to help companies and hurt companies. And private credit happens to be one of those cases where the company, some of the companies that are being hurt are going to go boom. And when you go boom, that leaves holes in your balance sheet. And the problem with a lot of this stuff is what James just said, when he said not marked. What is he saying? This is a, this is a famous debate. Cliff Asness is probably the, the most, most articulate on the subject. He runs, you know, aqr, people don't know who Cliff is, you know, and he said, yeah, that people like to believe that their, their private credit or their private investments don't have volatility compared to public markets. Well, the reason is because public markets, every single day you get a price, you know, on the screen every minute. Right. You know, while the markets are open. If it's crypto, it's 24, seven, whatever. It's, you know, you know, six hours, some odd a day, you know, five days a week.

D (55:28)

A good example would be you, you when you were holding private, the private equity fund that's in, invested in biotech and then the entire biotech sector in the market is down 25%. But you're getting a statement from your private equity fund that says that it's marked at cost. That's, it's not marked properly or appropriately, you know, and that's the problem.

B (55:51)

That's it. It's exactly right. And so what this means to people, because we always talk about uncertainty is there's a lot of investors, it's a non, not a small, it's not a small number, right. That are totally uncertain about what their, what their investments are. Actually worth. That's the issue. And you know, and they don't have,

D (56:12)

they don't have access to the liquidity of it either. And so that, you know, and so you're, and you're watching, you're watching endowments try to unload this stuff. You know, they're trying to unload it and they're unloading it at, you know, they're at a discount because they want liquidity out of it and they want to be moving into other stuff.

C (56:30)

Stuff.

D (56:30)

And so it's gonna, it, Is it gonna be like a 2008 style implosion? I don't think so. It's just gonna, but it's very, it's, it is an important, you know, piece of the market that, that we're not really talking about enough probably.

B (56:46)

Right. That answer your question, Scott?

A (56:49)

It does. Yeah, it does. Because it seemed, this seems like one of those hidden in plain sight potential black swan situations.

B (56:58)

The one thing I, I do want to clarify because there's a lot of these, especially in the crypto world, people who have no understanding how these companies work. There's all these conspiracy theories, black rods, gating people. It's like, guys, this is what you signed up for. If you bought into a a. There are many, many private funds, not just credit, but otherwise in hedge funds that literally have, when you, when you sign the papers, they tell you we are going to limit withdrawals to be this amount per quarter. Or others say we reserve the right to limit. Why? Because the investments that the fund is invested in doesn't, don't have liquidity. So if in fact they didn't, what does don't have liquidity mean? Let's just make this simple. If you're in a private credit fund and they had to liquidate say 10% of the fund in a day, then they'd have to go source bids. Those bids could be double digit percentage below what they believe they're worth worth. And so what they're trying to do, what they're doing is when you take, take your money, they're telling you, protecting

D (57:56)

you from forcing a fire sale.

B (57:58)

Right, exactly. So it's sort of like saying you put your money in here, you are not, you can't get liquidated. We are not going to create, we're not going to sell at the bottom of a down wick. So this is not nefarious, people. It is not nefarious at all. It is the reason you structure these funds this way.

D (58:15)

It's a necessary function. Yeah.

B (58:17)

And that is important because so Many people on crypto Twitter are like, or crypto X, whatever the hell you want to call it, you know, are saying, oh, look what BlackRock said. Maybe they're going to do this to Ibit. And it's like, oh, God, Ibit. I literally have seen at least three different posts that said that. And, and with all due respect to the people who wrote them, they're not doing that with I go to school, don't invest. Get it. Because you literally don't have any idea how markets work. It is. There is a huge difference between a. Between liquid assets and non liquid assets and the way that funds operate. And just because it's the same company that runs both, Please, dear God, don't make that, that, that, that, that, that comment, because it's just so stupid. Okay, now I've insulted enough people in the audience. I think I've done okay for the day.

A (59:05)

It's the perfect time to wrap 1001. Everybody hates us and we can go on. Actually, I think I would like to give our audience credit for being wildly intelligent human beings that understand the deep functions of all markets.

B (59:19)

No, no, I think that actually this audience probably does, but when you look out and you see people with these conspiracy theories, and I spend time on other spaces, not like the ones that we do, but like on Bitcoin today. And while I love Lauren and Terrence, the co hosts, they get some people up there who are just absolutely tinfoil hat kind of crazy. And. And these are. This is exactly the sort of thing that will come up in one of those spaces. And I'll be the one person saying that it's not crazy. And I'll get yelled at saying, oh, you just. You're just a shill for tradfi.

A (59:53)

It's like, okay, yeah, I saw your Blackjack Blackrock check was sent in the mail, so.

B (59:59)

Yeah, exactly. It's with all the other checks that I don't have. But that's okay.

A (60:07)

If you say anything positive about anything, you're obviously getting paid. All right, guys, we gotta run. Thank you, Dave, Mike, James, yet another amazing macro Monday. See you next week. Thanks, everybody.

C (60:18)

Let's do.