A (4:49)

Yeah I mean before I, before I say anything because we'll, we'll, we'll let as moderator as I promised last week I, I tend to want to talk a little bit less the I will say one thing I, I still think that gold is going to run to 5,000. I've said that on this show multiple times. I think that the liquidity gold is unhindered by some of the idiosyncratic things we're seeing in bitcoin. And that's what's going on. It is interesting that I think gold is going to lead this, the hard asset rally higher. But, and I think the hot money is there first and we'll see it pause once we get to that level. Of course there'll be a tunnel of euphoria. I mean just the fact that it, you know, what it did over the last week is, is I think pretty interesting. I mean, I assume you agree with that, James. I mean, yeah, everyone in the world on the trading side thought Once it lost 4,000 a couple weeks ago it was going to stay there. And here we are back pushing towards the all time high again.

C (5:49)

Well, let's talk about this overall macro, the macro picture. And, and Mike, thank you for your nod to my, to the interview I had with Scott. We talked a lot about leverage and.

C (6:01)

About liquidity. And so one of the things that you said is dollar strength. I mean if you look overnight, you look at the overnight markets, we can't really talk today about macro without bringing up Japan. Right. So one of the key structural changes that we're seeing in Japan is that they're allowing the 10 year to the, the Japanese tenure is now trading at 1.87% yield.

C (6:30)

It's a remarkable move for Japan. If you look over the course of the last decade, you know, Japan's 10 year has gone from about 30 basis points down to basically negative 30 basis points and now it's up to 1.87. What does that mean? What does that mean for the macro world? It means that the structural availability of free capital in the world is gone. It's over. So, and this is what we talked about either last week or a couple weeks ago I think Mike, is that the era of, of borrowing from Japan for nothing is over. And so part of what you said today is, and what, what came out in the meeting is, is the expectation of a stronger dollar. Well, I'm sorry, of a weaker dollar. And part of that is that you're seeing today that the Japanese 10 year yield up means that the, the yen is stronger, meaning that the dollar is weaker because one of the key components of, of measuring the DXY is, is the yen. And so that is happening right now. So now we kind of roll into what you're talking About, Dave, is, you know, gold and bitcoin and all the indicators of what's going on in the macro world. Well, I agree with you. I think that that gold structurally is going to go higher from here. I think that because I believe that we're going to see, we're going to continue to see liquidity. It's just not going to come out of Japan. And so it's going to be coming out of central banks. Primarily the big central bank that we're going to see come out of is the US Central bank. And it has to because it has to support the Treasury. And when that happens, how that happens, I think that, you know, some of the faster money got ahead of itself and, and you're seeing that in overnight prices of bitcoin. This is nothing new. We have an end of the month here. It's you know, now December 1st, so the last day of the month was yesterday. And I think that we had some algorithms that were triggered both month end and just price wise and risk off sentiment because of what's going on in Japan. And I want to make it clear, I don't think that carry trade is blowing up. I don't think that we have, we have, you know, an implosion somewhere. That's not what I'm seeing. But you're, you are seeing a structural move toward or away from free money. And that means that you've got to reprice risk. And when risk is repriced over the weekend, what gets repriced first? Of course. Of course Bitcoin does. It trades 24, seven, it's going to get repriced. Now here's where it gets interesting and here's what, I'll bring up a chart here and we can, we can look at this, Dave, if you know how to do this.

A (9:27)

Well, I, I just tried to. Yeah. Okay. So hold on. So if you, can I see it.

A (9:34)

You see my, I saw your chart.

A (9:38)

That was a different one.

C (9:41)

There, There it is. Okay, well this is, this is the, this is the 10 year, the Japanese 10 year. And so you could see it's just structurally moving, moving higher. And this is from 2020, you know, when they were keeping it at basically zero ZIRP, zero interest rate, you know, policy that this all kind of came undone. We all talked about this and you, we, we've seen this movie here in the end. But this is, this is a long term move. This is not, this is not like a violent move upwards.

C (10:15)

This feels violent. But you can see the policy changed. Okay, that's the 10 year the policy has changed. So that's one thing. And then if we go to bitcoin and we look at the liquidations for the last 48 hours, you can see that the liquidations came and let me make this bigger for everybody. You can see the liquidations came here when we were, we were in the 90s. It, you started seeing shorts being liquidated and then this, this risk off sentiment occurred and boom, we just hit this we it cascade of liquidity, you know, and this is the cascade of leverage unwinds. And it just continued and continued and then it kind of held its value right into early into this morning and then it hit it again for another washout here. And these bars are leverage. That's all this is it. Was it a massive amount of leverage? No, I think it was about $700 million. From what I've, what I've read. Dave, you, you probably have a better handle.

A (11:23)

Very thin. I mean, I mean it almost because of October 10th. He doesn't even show on the liquidation chart. The fascinating part about this is one would think that the amount of bitcoin that is bought by yen carry trade is tiny. One, one would think that the end carry trade unwinding off of BoJ news that Bitcoin reacts to. We would come in and we would see very different markets.

C (11:53)

Let's, let's talk about that. So really what I think is happening here in bitcoin is that you've got leverage longs expect expecting movement from the Fed a little bit too soon. Okay, so what's remark, what is, what is significant about today? Today QT is ending in, in for the Fed, right? In December. I don't know if it's December 1st, December 5th, whatever they said December. So if QT is ending today, okay, that's significant enough. It's $25 billion of liquidity. It's not going to be drawn out of the markets, but it's not liquidity coming in yet. Now we did hear Powell say, and he's reiterated and, and other officials from the Fed have reiterated that, that we are going to see liquidity come in from the Fed for bank reserves. But that does not mean QE in the traditional sense. It could just mean that we're seeing a steady flow, a steady stream of liquidity in the short end of the of the curve to just shore up bank balances. And that means Treasury's buying T bills with the expectation that they'll roll off pretty quickly. Now we've seen this movie before Also back in 2019 we, we saw the repo crisis where the Fed came in and said, this is, this is not qe, it's not qe. So it became the term of qe. Not qe, right or not qe, qe. And so that, and because it never rolled off. And so if essentially it is liquidity, but it's not the fire hose that we saw back in 2008 or 2010 and again in, in 2021, 2022, it's not the same fire hose. But the significance of it is the era of tightening is over at the Fed. We're not tightening anymore. That's it. Now the question is how much liquidity is going to come and when. And I think that the markets got ahead of themselves again. Once again in crypto and bitcoin, they got ahead of themselves thinking, okay, well QT is over, here come the fire hoses. No, it's not quite that simple. And so we really need to zoom out. When you're investing in.

C (14:02)

Assets that are being adopted like this, you have to zoom out. So to your point about gold, Dave, I think you're right. I think that gold is going to structurally move higher, but it's going to move higher along with liquidity. And that liquidity is not going to come in a burst or a cannon or a bazooka today. If it does, it means we have some sort of black swan event. We're gonna see a lot lower values in all these markets a LA Mike, Mike McGlone's point of a steep drawdown. Yeah, we would see that and everything will correlate to one and then you'd have the fire hose. But what we saw last night is the realization and the algorithmic trades and, and, and response to the reality that Japan is letting this go a little bit and they're doing it again. It doesn't look like it's, it doesn't look like there's chaos in the markets.

A (14:58)

Okay, no, that was actually going to be my point.

C (15:01)

It's just, it looks like it's a structural move and they're trying to do this without having a drop from, you know, a 10 floor, 10 10th story floor to the ground. They're trying to take an elevator down and kind of stop into, in between floors a little bit rather than just drop it off a cliff. And so that's what I think we're seeing. And I, I have not heard of any desks being blown up from this gen, this, this yen carry trade yet. But I, I, I do see a risk off sentiment. And again, this is a mathematical end of month, end of year end the of risk off sentiment that, that you're seeing. And it, and that's kind of what from my perspective. I would love to hear Mike's views on this, but that's kind of what I'm seeing from, from where I'm sitting. And Dave, anything you're seeing and just the sheer amount of leverage that came out.

A (15:55)

Well, it wasn't that much leverage. That's, that's the strange thing. There's less than a billion. I mean, you know, as I said, I think, you know, Mike, you and I all agree, we don't all agree on a lot of things, but one thing we do agree on is, is bitcoin does tend because especially on the weekend, tend to be a leading edge of the spear. Unless of course it was complete nonsense and some one it doesn't take that much to move the bitcoin market. Right? I mean we saw less than a billion dollars in liquidation.

C (16:22)

Well, when you have leverage like that, it doesn't. It's just sitting there just sitting ducks, just ready to be picked off.

A (16:27)

Right. And so, you know, over the weekend, right before that happened, you know, whatever, James Wynn famously said, okay, I'm not short anymore, you know, you know, whatever. And stay tuned. And you know, you have all these people who are like, oh, okay, that's probably. And who knows, I mean, maybe many of his followers just went and said, oh, if he's not short, let's go leverage long and, and see, see this thing go crazy in December. And then of course they're easy sitting ducks to get picked off. The thing that's interesting is, is if you look, I mean, Mike, I, I'm sure your bond strategist has said this. You just look at the 10 years they pretty much all moved in lockstep Germany. I mean, everything is 5, 6, 7 basis points among all of them. And that's not, you know, that doesn't look like, you know, the headline saying bitcoin dropped because of the boj. Well then why would bond yields of all kind of moved, you know, fairly muted, pretty much in, in tandem. I mean everywhere else other than bitcoin, there's no sense that there's an issue in the end carry trademark because the end carry trade is a very big deal in the bond market. Right?

C (17:32)

Look, we had the yen carry trade blow up in August of 2024.

A (17:37)

Right.

C (17:37)

We experienced it. It was a lot of fun. And but that, that, that put everybody on alert and that was kind of it. And so I don't, I just don't see these desks being way over their ski tips on this anymore. It just doesn't, it just makes no sense to me.

A (17:55)

And there might be some hedge funds, but there won't be any. We're not talking about any professional dealer desks. The ones that are the systemic.

C (18:02)

Exactly so. Exactly right.

A (18:06)

Anything on that, Mike, what are you thinking?

B (18:09)

Yeah, I'm glad you went there. I agree with it. And then if I can just run through some screens and kind of mimic on it, obviously my biases is the big one. This is way overdue. And yes, I've been wrong in that one for a while. But here's just you pointed out global world bond yields are all up about 6, 7 basis points with the exception of China, which is not really a live market anymore. It's very close, but yeah, they're all up. Europe, Japan's up 6 basis points, US up about 7. But I want to tilt over to, I think what's really going to be mattering and why I'm sticking with this bearish view is first of all, this is just, you take bitcoin divided by its 50 month, 50 week moving average. It's, you know, it's set right now at a 15% discount. It's never ever gone down below its 50 week moving average this time of year. Certainly Without S&P 500 following this is since 2017, to me, 2017 was a milestone because that's when futures started trading. And then the next milestone is when we had ET widely disseminated ETFs, which was really 2024. So the key questions for the end of the year is will bitcoin be the Grinch? And then I like to point out, yeah, I think so. And one of the key things that really tilted me, I just want to show you real quick, tilted me lower to get to give up on a little bit bitcoin too much last year was, if you look at it versus 50 week moving average, it's made the same lows and lower highs. It's, it's a maturing bull market that's becoming normalized. But the lows have been the same around a 50% discount. I expect that. But you overlay that with what's happening with gold. Gold is rising versus this 50 month moving average, Bitcoin declining. So from a leverage standpoint, which is my background, everything's leveraged. You want to belong the one that's, that's increasing relative, relatively. And so that's a big difference. But also I want to out to me my favorite leading indicators. Bitcoin to gold has broken down. 25 was the key support we looked at earlier. Now it's at 20. Our model says it should be closer to 13. And the bottom line for everything what you talk about is why there's not a lot going on and a lot of you know, it's just kind of a complacent market is volatility. S&P 500 is buried. It's kind of potentially recovering. This is 120 day volatility potentially recovering from the lowest level since 2021, 2020 and we end the year here. It's the lowest since 2017. So I'll just end with one thing that I stick I'm still worried about. Here's volatility very buried. Last five years Bitcoin's inflection point has been around 50,000. When people say look at the chart, it's bullish. I say okay well that's normal. And that's why I'm worried for going into the end of the year the Grinch might be coming in here and if we just get a little more trickle down especially with bond yield spiking here, this is not good for any risk assets.

C (20:48)

Yeah and I look and we talked a lot about this with, with, with Scott and I talked a lot about this which is you know, Bitcoin liquidity cycles, Bitcoin four year cycle, its historical performance and, and looking at it there's only a few data points and to me as a long term investor that just means that you're, you're, you're looking at something that just does not have enough historical data to, to really.

C (21:16)

Give you comfort and, and confidence in, in trading it. You know the. Now that said because of these cycles there is some self fulfilling prophecy, there's no doubt about it. But the reality is that we, I just think that the four year cycle for Bitcoin is over and we are in now a we. This, this is, is showing you especially in a day like today, it's showing you that it is the, the tip of the liquidity spear. And so it is showing you what markets expect from liquidity and are reacting to on liquidity in, in kind of a, a hyper reactive mode. And so it unfortunately you have to zoom way out to, to really.

C (22:07)

Understand how this is working with Bitcoin because it does have short term volatility. But that means that something like gold is you know that's, that's also reacting to liquidity and that's why I don't think that that gold is, is finished and it, I think that gold is going to structurally move higher. So, and I believe that Mike, because just like you, we, you know, the market on all metrics, forget about bitcoin, just look at all the market metrics. It looks overdone unless of course you change the denominator.

C (22:44)

It doesn't look quite as overdone as it is, but it still is overdone. It's super concentrated. You have a tremendous amount of risk and just a handful of names that are hinging on this AI new structural change to not just the market, the economy. And so when is that, like, is that, is that going to have, is it going to take a breather? And how much of a breather is it going to take? And does that cause a cascade of selling where the Fed has to rush in and dump liquidity into markets rapidly? That's really the big question. It's not the question about whether or not we, we can have a breather. We'll, of course we can. And we all agree that this, you know, the, the, the danger is that it's, it's extremely concentrated and, and it has gotten ahead of itself. So. But to look at bitcoin, I think that you really do have to, I mean, I know bitcoins love saying the zoom out, zoom out, zoom out, but you really do have to just pull back. You do have to zoom out and you have to revisit what your, what your, what your thesis is. If your thesis is that Bitcoin is the hardest money in the world, that it cannot be corrupted by central banks, it cannot be corrupted by the dollar or the yen or the euro systems, that it will swallow them because of exactly what we're talking about and that it can't be just expanded on and devalued and debased like the other, like the other currencies, then that's your thesis and you, you have to zoom out and really understand that hey look, this is a volatile asset that's going to continue to be volatile along its long term, long term adoption, you know, kind of, of personality, but as, as something you look in, in the markets. But to just trade it around on four year cycles, I think at this point is probably a mistake. We have to see how the liquidity cycle is playing out. Are we finished? I don't think we're finished yet. I think that we're entering a period where the treasury is going to do whatever it can with a government and an administration that is likely leaning heavily toward liquidity rather than pulling liquidity, especially as we go into midterms. So this does turn political. And now you've got a fed that we're going to see a regime change in that is going to change to a regime that is probably highly favorable for the current administration. And when you have that with an administration that is hammering for lower rates, hammering for liquidity, well, you're going to see, you're probably going to see that next year. But again, we're still in December here. Midterms aren't until almost a year from now. And so there, there's time for all of this to, to still oscillate around and play with. And so just, I do reiterate, if you, if you have that, if you do have a long term view on Bitcoin, don't forget it. Like step back, take a breath, take a moment. It doesn't mean that you shouldn't have liquidity sitting there waiting opportunistically for a trade that Mike is pointing out that you could have a drawdown. That doesn't mean that you should be 120 in on it. You know, I think that Mike would, would tell you take chips off the table and step back and, and be ready for liquidity. Now in my hedge fund, we're ready for liquidity because we have different levers we can pull than an individual can. That's a completely different thing. But you know, it really is. It's determined by your own balance sheet and how you're approaching this. And so I do, I, I cannot reiterate this again enough. I reiterate the caution around having leverage on something like Bitcoin. It is still violently volatile and you've got to be aware of that. So, you know, last night, again, another warning, really important.

A (27:03)

Look.

A (27:06)

I personally think that this was idiosyncratic, that people, there's, there's a tweet that I did last week or a post that I made last week where I, I lamented how in the long run the narrative does tend to fit price right. Price and narratives do work right. So the long run narrative, why is gold up? Gold's up because we print more dollars. The denominator changes. Gold price goes up, full stop, end of story. It works. First principles just that doesn't mean anything different in the short run. When there are short term price moves, people always desperately. It's sort of like the search for religion, search for a reason. What happened over the weekend? Well, the answer over the weekend is somebody. And it could very well have Been orchestrated, looked at what was going on and you, you made the point, you said words that were important words that I want to delve into. You said picked off. And what, what happens is, is traders like to make money and big traders have big bats and can do things. So if, for example, you have a position where you are long spot Bitcoin on exchanges, you are short perpetual swaps and by the way, in the funding rates, you can see that that position, that trade is not nearly as expensive as it would, that trade is, is not nearly as, as good from a funding perspective as normal. Right? But it has oscillated. We went from negative funding rates to now slightly positive, slightly pot, but still below normal. So that trade costs.

C (28:48)

But walk through what that means for people who don't understand that because.

A (28:51)

Right, so when the funding rate for people, right, so when the funding rate is normal, effectively what that means is you're, you're being paid to be, you know, you're being paid to be long. You're being paid to be short on the futures or on the perpetual swaps politely enough to offset the cost of the money you borrow to do that. And so, and when it's, when it's, when the funding rate is negative, you're actually being paid, you know, to be long and so are paid to be short. And so when it oscillates back and forth, trading desks and there are trading desks that do this all day long, they use it, they go, they either have long or short spot positions that they've borrowed vis a vis per positions where they can make money. Now it obviously costs to borrow spot, not nearly as much as it used to, but it still costs. So what happens is traders look at this and their opportunity cost is what they care about. Because if you have a big position that's hedged, the only reason you would have that big position is, well, to be, quite frankly, it's, you're moving in and out of it if you're going to hold that position, unless you're being paid to hold it, I. E. Funding rates are high, you wouldn't hold it, but you could build it up and then dump spot an opportune time. What is the most opportune time to dump spot on the weekend when on the weekend is the most opportune time to put dumb spot. Generally it's Saturday night. Well, what happened? So you know, if you're asking me probabilities, the probability is a trading firm or firms doesn't, wouldn't have taken more than one because it wasn't that big of a move, saw an opportunity to have a large spot position and dump it at the same time that they were hedged in the perk markets and they take their profits at the bottom of the dump. Because the spot, what you do is, and this is true about every electronic book, but really true in bitcoin and really true in crypto and particularly on the weekend, is liquidity is concentrated right at the bid offer. And if you look liquidity down $5,000 on Bitcoin, it gets less and less. The first thousand dollar move in bitcoin may cost 300, 400 million. The next might be a hundred million, the next might be 50 million, the next might be 20 million. Right? Until people start reacting and putting bids back in the system. And so it always tends to be sized as a move in sizes that make sense to people. And so you look at it and this looks like, I hate to say the word, you know, they would call this in if it were in a regulated market that was us only. It would be called manipulation and someone would be getting investigated for it. Now, in the crypto world, there are no regulations in terms of market manipulation, except the CFTC literally does have authority. And whether they'll ever do this, I don't know. But this is the sort of thing that is manipulative. You look at it and you see it and it to me looks like that again. And we've seen this many times. I've commented, I'll Never forget the 29,000 to 26,000 drop, which was $3,000. It's half the size of this, but it was from a significantly lower level, so in percentage terms was even bigger. We've seen these many, many times. And so we all rush to come up with narratives. Why did it drop? Tip of the spear, liquidity. All this stuff, great, except for nothing else moved, which tells me this was manipulation. Yes. Someone may have looked at a news story that panicked a couple of people. Boom, down it goes. Now they look and, and you know, here we are again. And that's why I made the, the observation that we're literally trading where we were trading a week ago on this show, having recovered a little bit. Then there was a rally a few days later. I, I don't think that I'm just not reading a whole lot into this move. I don't think that it really means a whole lot. You know, it's just that simple. I, I don't think it matters. I hate to say it, but, you know, it matters to traders. But I don't think it, it matters within the scope. I think that if we came in and the S P and the NASDAQ were crashing down this morning, as Mike said, the Grinch started on December 1st. If that happened, okay, that'd be different. Right? But, but, but that's not what's happening. And so that's why I think sometimes people overreact. I think there are a couple of other stories that we should talk about though. You know, on the macro side, one, one that I really would love to get your opinion on. Mike likes to talk about microstrategy as being the tip of the spear, but I think it is worth noting something. And James, you're in the bitcoin community so you know, I'd like to get your comment on this four year cycle. I personally think we're going to play out very much like the four year cycle and it is exceedingly bullish. And I'll expand on this narrative later. And the reason is because the main driver of the four year cycle used to be fear when the halving happened that mining would fall off a cliff and the network would have a problem. And then within six months or so of the network being stable, then it rallied to catch up. I think that we are now in a period we are the most stretched where mining is still doing extremely well. The network is still. Is it? The price of bitcoin is at an all time low discount to the total overall hash rate. And I think that there's geopolitical reasons for that. There's lots of reasons for that. But to me that's a buying opportunity. I've been saying that for a while doesn't mean it can't stay bad for a while. Three, four more weeks it could easily months even. But the truth is, is selling at these levels relative to the, to the fundamentals of what's going on in the network is just not a really smart move when you zoom out. But there's a lot of infighting. I don't think we've ever seen more bitcoin OG people yelling oh man, you know, Blackrock this and. And fidelity that and vanguard this and you know, talking about all the institutions and how it's corrupting the meaning, etc. Etc. And so you're seeing all this stuff play out that's idiosyncratic to bitcoin. But it is worth noting this weekend and the other reason for my, my thesis is on October 10, Bitcoin was one third of the liquidation and it was not the biggest this weekend Bitcoin led the liquidations significantly. It was a bitcoin led and in fact, you know, that mattered. So inside this is, there's a bitcoin story going on here. And barring, you know, major dumping from people who are, you know, who made who, who would be cutting, literally hurting themselves to do it, I just don't see this price action being all that, that destructive. I think it's actually somewhat constructive if you understand and you, and you look back on it. But we could be in a bad macro cycle, but we're not seeing it anywhere else.

A (36:00)

Right.

B (36:01)

Can I follow up on the bad macro cycle?

A (36:05)

I was, I was trying to trigger.

B (36:06)

You, Mike, so I know you would and, and you know, and I know our audience wants us to describe, but I mostly agree. The thing is, I want to point out as a year over year, bitcoin is down 10%. That wasn't supposed to happen. It's just a one year basis to now, you know, after Trump was elected, before he was obviously elected, it's definitely higher. But the key thing I want to point out is what's changed. Number one is what you said, James, is what the Trump administration wants by stacking the Fed. That endgame is over. First of all, we've solidified the fact that I want to show you, quote from here, that inflation is the number one issue in elections. And if you're the one behind the government creating in somewhat inflation, which is the Republicans right now, you're definitely in elections going to help if you keep inflation up, help the Democrats win. That's what shifted. If you want to stack the Fed and keep the stock market strong, great, you're creating that inflation. But for the 60% in this country, they're not so much involved in that. You're getting hurt. And one key thing that's changed I want to show you. This is my colleague Andrew Silverman, just published on Friday the headline. It's not so much the first line of this story, something I would have never dreamed of a year ago under the nation's first crypto billionaire in the Oval Office. Then he explains what's going to change. That's what shifted the whole world. I remember loving this space when he hated it, partly because he didn't get the fact that crypto dollars are investing in Treasuries and didn't get that. And now he's not getting the fact that, by the way, inflation is the number one reason to lose in the elections and he's trying to create more inflation. Good luck with that. It's how the things shift. And that's why I want to show you what's changed in markets is the end game. Now again I show you the same chart. Bitcoin below its 50 week moving average. It almost always bottoms at a 50% discount. It's nowhere near there. But what's changed is we have fed funds in one year. They've been hovering at 3% for a few years now, just bouncing at 3%. A year from now it's going to be 3% and we're still not there. We're still running around 4%. But my point is this is going to be below 3% a year from now. This is Fed fund futures in one year. And partly because bitcoin is going to lead the way to I think at least a 50 drawdown versus its 50 week movement evidence. What is always done. Maybe it's different this time. Yeah, that's what I pointed out is it's not working. I just want to fill it with one key thing that's shifted this year is I'm predicting and the market's telling me we're overdue for the third negative year for the S P500 since 2008. Hopefully it's not gonna be this year. That would be a crash. And that's what I just showed you. This is bitcoin gold. And you see the rate this massive green candle this year by then the year I've been thinking, yeah, it could come back a little bit, but it's very green now. But this candle I think is going to be red next year. So that's my point is we have to put up with and probably deal with. We're at the potential end game where we're overdue for what used to happen. A down year in the stock market. Bitcoin's front running it. Microstrategy is ahead of the game. All the crypto alts are leading that and now getting towards the end of the year. So my point is we can just have a little bit of pickup and volatility. It's all pointing that way into year end. It might just be a week that it takes to switch the, to flip the switch. Like it took one day in cryptos October 10th to flip the switch.

C (39:01)

Yeah. So part of that is it. I think part of your thesis is it's priced in part of it is that it? You know, we've already seen the liquidity.

A (39:11)

I don't.

C (39:11)

Look, I agree with you and I wrote all about this on my newsletter this weekend. The, the game is rigged against the little guy. And that's just reality. You know, if you do not own assets in this country, you're going to be left behind. And it's not about whether or not the Fed and the central banks have learned their lesson. They are mathematically trapped. They must add liquidity or we don't have money to buy the bonds that we're issuing to pay the debt that we're creating from the deficits that we refuse to give up. That's the issue. And there's no way to give up the deficits without structurally changing the benefit the beneficiaries. And so are you going to tell all of the, the Gen X and boomers that have already paid into Social, Social Security that they're going to get a fraction of what they, they're already getting a fraction of what they paid in for? All right now you're going to tell them that they're not even going to get that. That, that would be pretty, that would probably be worse than allowing extra inflation on a voting perspective. You know, you, that would be turning your back on, on what you, you have promised the, the pay ins for all these years. You're going to turn your back on them and say well, sorry, you're just not going to get Social Security. No, they're going to print money and make sure you get Social Security and your Medicare and your Medicaid. So the question is how does it happen and how quickly does it happen? Not whether or not it does happen. We, they are mathematically trapped. They can't get out of this. We are in a debt spiral. It is, it is, is clear as day to everybody who, who studies debt. And Mike, you studied debt for a long time. You see how it is. The, the. I just don't think that there's any way. And that's not that I don't think you're looking at the numbers. If you have a way that you think that we could actually balance the budget without destroying the economy without, without causing a, a worsening effect on the deficits that we have, then I think that you should probably, you know, be nominated for part of this cabinet to help them figure it out or the next cabinet. The, the voters. If you, if you lower rates now and remember, remember the politicians are on four year cycles. They don't care about, they don't care about anything but being re elected. We have, we have that has been made a abundantly clear in the last three or four administrations. They do not care about anything but being re elected. They will talk out of one side of their mouth and deal with the other side all day long. And it doesn't matter which side you're on, Republican, Democrat, I don't care if you're in, if you're in D.C. you're likely in this game and it's just overwhelming.

C (42:08)

Well, and that's, and that's the question is who's going to be, who's going to be favorable for the Fed? He wants zero interest rate policy. He wants liquidity. He wants somebody in that chair that's going to help facilitate that. We're going to see it. The question is when and how much Powell's done in May. Right. So that it may take some more time to see that if you see liquidity, you know, front running the, the elections that are in November, you're not going to see the inflation off of that until months or years ahead.

A (42:44)

Yep.

C (42:44)

It takes a long time for that to get through the boa. It's not immediate. So, and that, that, because you're talking about infl, you're talking about printing money, adding liquidity to the markets, adding liquidity that rises, that makes asset prices rise. And then the derivative of that is eventually consumer inflation. But that's a different thing than asset inflation. Dave talks about this a lot and it takes a while for that to get through that, that goat to get through the BOA and be digested. And, and once it's in the boa, man, it is hard to stop, as we have seen, we saw when inflation sort of raged to 7, 8, 9% that they admitted to that it's very difficult to stop that. And you've got to draw a lot of liquidity out, trillions of dollars out of the markets to stop that. It's not just, it's not just raising rates. It's also that QT where you're literally drawing trillions of dollars out of the market to slow it down. So, but again, and that takes time to work its way through. So all of this stuff is on a timeline that, that markets understand generally. And if you want to see what's going on, please watch the debt markets. They haven't, they have a finger on this pulse. It's not the equity markets. They don't, they, they are trading around it in real time and, and they, they react to things very rapidly that often are, are emotional and they're not what the long, long term structural reality is.

A (44:25)

Well, I mean, yes, that's absolutely true. Although if the equity markets, you think react quickly, then the, the crypto markets react like you Know, they're hyper like Ricochet Rabbit. If for those old enough to remember that cartoon, which probably most of our audience has no idea what that is, but you know, you can look it up on TV land or whatever, but you know, it is really, really vexing to listen to. You know, this just the assumption that pulling it, hurting, curbing aggregate demand is what causes, is, is about consumer inflation. There are monetary inflation is very clear. I mean you, you want to pull, you, you want assets to go down, you suck liquidity out, boom, you get 20, 22 assets go down. I mean, you know, pretty straightforward, that's pretty easy. But if you want assets to go up and you want consumer inflation to be muted, then what you need to do, well, then you need to get rid of all the choke points. So what are the two biggest choke points on consumer inflation and the two biggest levers they have one, energy by far the biggest. Not even close. What's the other? Well, the other is supply chains of the stuff that people actually buy. Competition and supply chains not, not, not collapsing. What were the things that we were doing earlier this year on tariffs? You're not hearing a lot about it anymore, right? You know, the whole trade war with China. Why is that a big deal? Well, because most of the stuff we buy comes from there. You know, it, you know, you want to drive the price of, of people's stuff up. Well, you, you, you tax it specifically via tariffs on what they're actually buying. So instead you want to encourage domestic production. Well, you need to do two things. First, you have to make the regulations be, make it such that American companies aren't disadvantaged. That's really hard to do. A lot of it is state and local and on the federal side they're trying, but it's hard. What's the other thing you do? Well, you cut interest rates. Why? Because you want people to be able to invest in new factories and new things. But as you pointed out every time I mentioned this, James, months, years, you know, for that, for that to actually impact supply chains.

B (46:39)

Right.

A (46:39)

And so you know what you're trying to do, you understand that. And you know, I just think the Black Friday data is, is fascinating. Right? You know, you, you started this with this, with this. Mike, you said real growth of, of 2 something percent, which you know, when you saw that it was an all time high, the nominal increase was significant. So effectively what your analysts are doing, if I'm not missing you, if I'm not misquoting you, is saying there was real growth. So the consumers are still Buying stuff. And that is different than we were hearing a few weeks ago. We were hearing a few weeks ago that that wasn't going to be the case. It was all going to be inflation, but a significant amount of inflation in what people are buying. Did I catch that right? Is that what you were saying this morning? In the morning meeting, Mike?

B (47:25)

Yeah. So Anna, it was her, Anna Wong pointed out, yes, the nominal numbers are good, but the real numbers actually chalked down from last year from above 3% to a little bit less than 2%. The issue, Black Friday sales.

A (47:38)

Well, right, so, but, but let's get that right. It's not lower than last year in real terms. It's, no, it's still less growth.

B (47:44)

Oh, yeah. So it's just less. Yeah, yeah. Diminishing returns still up. Oh yeah. Growth is positive. Yeah. Right.

A (47:50)

So there is, there is growth and on a nominal basis there's a lot of growth.

B (47:54)

Growth.

A (47:55)

And obviously the administration would strongly prefer it to be, you know, not to be inflated because when people have to pay more for stuff, I mean, effectively, I saw some analysts over the weekend talking about it, saying that, well, you know, Americans are trained to hold off on their purchases until Black Friday. So they don't pay too much because people, and, and so a lot of what's happening is people effectively pulling backwards or forwards, depending on whether, you know, however you're looking at it. But they're trained to buy on Black Friday because that's going to save them money because people don't have as much overall money. So that's why looking at Black Friday in, in a, in a vacuum is kind of difficult. It's also important to understand whether it's necessities or, you know, or presence or, you know, whatever people are buying. And I guess we'll get, we'll get a lot more on that after Cyber Monday, which is, I guess today, yada, yada, yada. Right. You know, but it feels like, you know, James is getting away.

B (48:55)

Right.

A (48:55)

When I was going to queue you up, I mean, you wrote about, you wrote about this weekend, something, the game being rigged. And you know, I do a lot of spaces with, you know, with people who talk about the K shape economy. That's become a very popular term. It's stuff we've been talking about forever. By the way.

A (49:14)

That is a large reason why people are in Bitcoin. And, and before, you know, you go through this. Is that this one?

C (49:20)

No, it's, It's a monopoly one.

A (49:22)

Yeah, it's a monopoly one. Yeah. But yeah, I do I do want to do my weekly comparison. I'm presenting something so. Or save our background guy can see it just it what, what I was talking about before. Every time, Mike, when you go through your charts, if you look at the far right of this, and this is getting worse by the week, the blue line is the bitcoin hash rate is. That is the power of the network. And the black line is price. It continues to get the most extended ever unless if you believe that the, that price is going to lead the hash rate down, which by the way is the narrative that happens at points in the having cycle right before rallies and you can see it at every other time. I mean they're smaller moves, but you can see it around there. If you believe that you should value Bitcoin completely in a vacuum from the network itself, then fine, you know, and basically you're saying, okay, it's an, it's an asset. I, I still think Bitcoin's an option and we've talked about that many times. I don't want to go down that diatribe. But effectively when you're looking at this, this is telling you the reason I don't agree with your 50000 call a reason I don't think we see these big drawdowns are because this blue line, the blue line breaks down. That's a totally different situation.

A (50:40)

To be clear.

B (50:41)

Let me follow up on that because I love that chart. I used it for five years at least every year. And I stopped using it last year when I flipped over to gold and risk off assets and because I thought sometimes we have to try to determine when the answers have changed. And to me, the answers have changed. Now we have a president who's a crypto billionaire. And while the people got involved in the first place don't want to get involved, don't want to be exposed to that human being. They want to be away from the system. Gold allows that cryptos don't. Now, now you're dependent on cryptos and we have a president who wants to run it hot. Despite the fact that inflation is the number one issue and wants to get the Fed to ease. Despite the fact that inflation is the number one issue in elections, it's going to get unelected. I mean, sorry, this is the way things are working right now, but that's what shifted. And I fully expect now the signals I'm seeing from commodities are historic. We've never had gold rally at this velocity with the stock market volatility this low, with crude oil going down. This low never, it's never happened. So maybe it's just a faint, but I look at it as okay. It's just predicting now we're going to have a down here in the stock market next year. Big deal. Not a big deal. If we drop 10%, everything changes. Bitcoin will probably go down at least at 50,000, maybe 10,000. I have that outlook. But here's a question I want to ask you. Last year at this time I was way early. I flipped over to completely golden Treasuries. Now I think gold so expensive, I should only be in Treasuries fully expecting that next year you have to be willing to fall behind when risk assets are taking off. But I see risk assets rolling over and so critique that view because last year critiqued hard and overweight gold and that seemed to work out. How about now?

A (52:13)

Well, I think first of all, risk assets is a really interesting definition. Arguably everything other than Treasuries a risk asset because you're looking to outperform it. Because Treasuries don't get you, you basically lose to inflation. Treasuries are a melting ice cube to use Michael Saylor's debt. So by that definition, if you're talking about just search for yield or search for return, everything is a risk asset, including gold. Two things have changed with gold. Gold. First of all, gold and Bitcoin share one really important thing that people don't talk about. Yes, they're both provably scarce assets. Although gold scarcity kind of changes. There are some, some new gold discoveries over the, over the weekend again. But whatever, I mean, it is what it is. They're both global assets. Whereas US Treasuries, yes, they are globally used and less and less so over time because people are sick of it. Right? And you've seen that in terms of central bank holdings of gold versus Treasuries. But they're global assets. So it's not only what's happening in the US and outside of the US Gold has found a product market fit as momentum hot money trading. And that is new. And that does matter because I know we've talked about the contract for differences market, but gold and silver, I mean silver, you know, whoops, let me undo this. Let's kill that. Let's do this, let's do this. Let's see if we can get it right. I mean, I mean.

A (53:45)

Silver, you know, is going crazy and you know, silver is a risk asset in the, in the precious metals world, but it's going, it's at a It's now at, you know, record highs. And why is it being driven to record highs? Well, I can tell you that it's not physical silver demand in terms of coins in the United States. Dealers are, if you want to sell, you're selling below spot. There would have been many times in the silver market when you want to sell, you're selling above spot. And when you want to buy, you, you would be paying a big premium. That is not the case now. The silver market is running because the hot ball of money that chases stuff is chasing it. And there are a lot of people who see silver as undervalued versus gold and etc but it really is, it does react with more volatility. And the volatility of silver is what is it? 40% more than gold, Mike? Double. You know, somewhere between 40. Yeah, you're muted.

A (54:47)

Yeah, you're still muted. You have your mute button on.

B (54:49)

Yeah, sorry. It's two times. It's the nicknames. Leverage gold.

A (54:52)

Right, exactly. So what you're seeing is, is there's a lot of, of moment. There's just a lot of leverage in the system and a lot of people willing to employ it. And with contracts for differences, the gold and silver markets are no longer the stately market where you look at and you buy it. You know, right before Diwali when the Indians buy gold and, and use basically as presents for their, their investments and then, then you're done for the year. You know, it's a. That market doesn't exist anymore. You know, we've had central banks buying it, we know that. But we also have had this hot ball of money buying it. And that's my thesis of why I think gold will continue to move higher. Because frankly, where else are you going to put it? The entire world is printing. Literally every single country now in the G7 is printing money. They're all running massive fiscal deficits. So if you're, if you do it in constant fiat, gold or silver probably will continue to go higher. Bitcoin has that narrative. But in the crypto community, who are the people who believe that most. There's been a lot of four year cycles talk dumping, blah blah, blah. And so that momentum isn't there, that momentum can switch on a dime. And all the people who keep making these leverage bets like this weekend, basically pushing it up to 92 from 86 last week and now back down, round trip back to 86 are just trying to get ahead of itself and front run the next quote big move. Understand Bitcoin volatility Despite it being up, is still. This is the other chart. That's what worth looking at. Hold on. Stop screen. Let me present this. Share screen. Bitcoin volatility index. Right.

A (56:41)

So if you look. Can, can. Is this up here? Yeah, you can see it if you look, you could see it at 1.93. Is where, where it's at right down there. I don't know if you can see that. But this has been, this is where bitcoin used to be in terms of volatility. So and where it was. And you see where we are now, we are now in the middle, almost in the middle of the range. Still not toward the high end by any means. Middle to low end of the, of the recent range and still low by historical standards. And so what are you seeing with this? Well, you're seeing that, that it's, you would say it's a maturing asset. It's, it's not a terminal velocity though. I mean, so. But it is still there. When bitcoin moves, you'll see a spike and it could be in either direction. The difference in bitcoin and the S P, I'll point out, is some of the biggest moves in the volatility have been on rallies. Whereas in the S P when the vault, when the VIX goes up, you, if, if you told me the Vix was at 50 and where are we at now? 18 19, Mike. 18, 18, you know, Vix goes to 25, you're assuming probably a 3 or 4%, 5% correction. Vix goes to 30, you're going to assume a 10%. Vix goes to 40 or 50, you're assuming a 20 correction. Bitcoin. There is no such correlation like that. It's both. It's bi directional. And so it's important to understand that we're still in a compressed volatility environment. What does that mean? That means that rallies get sold and, and crashes get bought. And it's generally in that. And there's reasons for it there. You know, in terms of who's buying it. Most of the people buying bitcoin are buying it for the same reason that people buy gold. The difference is there's no momentum in bitcoin right now. Zero. You said it. It's down 10 over the year. You mentioned, you mentioned Trump. Let's, let's be specific. You know, if in the US half the, half the population says, well, I can't buy bitcoin because that's going to enrich the Trump family, that's a very real thing. Now Investment managers don't work that way. But that is a real thing and it does dampen, it does dampen things.

C (58:46)

Is Dave, you can show this screen that I, that I just shared.

A (58:50)

I don't know how, but I'll stop. There you go.

B (58:53)

There we go.

C (58:54)

So this is the 10 year, this is the 10 year yield, okay. This is a u. S. 10 year treasury yield. You can see what has happened here and here's what, where we differ Mike, is that this, this. How is it different this time? Well, it's different this time. It's not because it's different this time. What is structurally changed is the market, the world. The, the, the, the investors around the world are waking up to the fact that zero interest rate, probably zero interest rate policy has, has put us in a spot where we absolutely must have, we must continue and we must continue to run deficits and print money to keep this whole charade going. So what Dave just said is gold is, has sniffed this out. Central banks around the world are buying gold. They're not buying u. S. Treasuries like they were before. The, the, the demand for them is, is structurally down. Okay. One of the largest buyers in the world is tether, okay, that, that there's a reason for that. They're looking for pockets for, of liquidity with this thing. And so you've got pockets of liquidity for people who are on exchanges who can't just sit in dollars or can't just sit in, in a money market. That's the new money market. Okay. So that's, that's what's happening there. But this red line shows that how we have broken. This is the, this is the, the structural descent of the yield on, on the U. S ten year that ended in Covid that, that, that descent ended in coven and it broke through and it broke this long down downward trend. And now the 10 year is at 4 4%. So when we say that we expect lower rates, we expect the Fed to lower rates on the short end. The Fed does not control this. We know that they don't control it because.

C (61:03)

What's that?

B (61:04)

I used to say the same thing, but now, now I've learned that when they want the yield bond yields to go down, they buy them.

A (61:10)

Well, they can.

C (61:11)

The only way that they can fix. They can all. The only way they can control this is through yield curve control. And the only way you can do yield curve control is by printing money. And the only way that you can print money is by. And the only way you can do that is by dumping, that means QE dumping money into the markets, okay. Which is inflationary. So this is not controlled by the Fed unless they print money. It's not by just lowering rates. If they lower rates like they did right before the election last year, okay, then they, they lowered rates by 50 basis points and the 10 year went up 50 basis points. That's a, that's the reason for that is that that investors realize, oh my God, they are going to just continue with this and they're going to allow inflation to run hot and even though it's Nowhere near their 2% so called target, they're going to allow some sort of range that they can stomach, whether that's 3 to 5% which I believe that's what it is and, or they can just somehow manipulate it to look like it's not as bad as it really is. But you said it yourself Mike, this is hurting individual investor. Individuals, not investors. It's hurting the everyday consumer. And they feel it whether or not the BLS will admit to it, whether or not the government will admit to it, the cpi, the ppi, whatever it is it it in, in the consumer feels it in their home and insurance and health insurance costs. They're feeling it everywhere.

B (62:46)

Right. So one simple way, one simple way that chart's going to go from 4 to 3 to 3% next year, which is my view is the stock market going down 10 and staying. A very simple fact. And you have to remember the key fact is the Trump administration is losing. Now inflation means they're not going to get reelected, which means we're going to get Democrats. It's just, it's the elections less than your way. Inflation's the number one issue and right now if the elections now they would get hammered. And then there's the Trump and that's what's changed. I'm just pointing out that chart there. I look at China, look at Japan, it's going to 2% heading towards 2% in my view. And next year at this time if we're heading higher. Yeah, Mike McGlone, you're wrong. But, and we're going to make, and.

C (63:23)

My bet is that the, that the, is that the U S Fed makes up the difference by adding liquidity from this side.

B (63:32)

Just like in China.

C (63:34)

Just like China, yeah. So.

B (63:36)

And their rates are 1.8% and, and.

C (63:39)

That is what you're hearing from the gold market too.

B (63:41)

Yeah, I don't disagree with that but it's just so stretched.

C (63:44)

I mean you're hearing it from the bond market and the gold market, the bond market, that the chart I just showed tells you that the bond investors are saying inflation is going to rage and they're going to let it rage and it's, they're going to do whatever they can to allow it. And that's what you're seeing, guaranteed not.

B (64:01)

Going to get elected. You just said the number one purpose as a politician, having said on Republican town committees for 20 years, is to get reelected if inflation runs hot. They're not going to be elected.

C (64:09)

They wouldn't, I didn't say they wouldn't step in it. They have short term views. That's it.

B (64:14)

We have an election coming up and.

A (64:16)

This administration believes that if they can get the kind of liquidity in the market and they can spur investment, that they can run it hot and they can get it to the point where it's not hitting consumer inflation, that's what they want. I have no idea.

C (64:29)

I mean, do you think, Wait, just pause on that, Dave. Do you think, Mike, that handing out $2,000 tariff dividends would be inflationary or deflationary?

B (64:39)

Well, we know the answer to that. Most all the Republicans push back on the stupidity.

C (64:44)

We're literally talking about buying votes.

C (64:47)

That's that, you know, like that's, that's what we're talking about high monitor. Whether you do it through, whether you do it through illegal immigration, handing out Social Security and benefits, or you do it by handing out checks to everybody.

A (64:58)

I think we should, we should delve into this in a few weeks. You know, we, when we get to the end, our New Year's predictions, but I think it's a little bit early to worrying about elections. The only thing we do know is that the administration is going to do what they can to run the economy and improve the job situation and make people feeling better. That's what they're going to try to do. And there's a bunch of levers that they can plot, they can do, but they can't get anything done. If Congress is totally dysfunctional because basically, and by the way, in, if, if in fact the midterms go the way Mike says, and I think that there's every reason to believe that it could, then for two years you're going to have nothing but impeachment at a Congress and nothing's going to happen. Right. So which means we'll have total gridlock in Washington. By the way, markets great for risk assets. Yeah. Market love gridlock.

C (65:43)

Yeah, markets love gridlock.

A (65:45)

So, you know, I'm not saying that's going to happen. I hope it doesn't as a citizen, but markets love it. But anyway, we are way over time again. It's been fun. I mean I miss Scott. Hopefully everything will go well with him this week and we'll see.

C (65:57)

We didn't even talk about micro strategy floating more stock to, to shore up.

B (66:02)

Their dividends down 6% today.

A (66:05)

You know, MicroStrategy is, is what it is. I mean they have enough cash to pay their dividends now for quite some time and that's that.

C (66:13)

Well, they, they listen like they listen to Wall street and they said you okay, you want us to have some cash, we'll have some cash. And now they do. They're going to have two years of dividends sitting there waiting to be paid.

A (66:24)

Right. And so once you, you have that then you ask yourself the question, when is the time? I don't know what the bottom of MicroStrategy versus Bitcoin is, but it's a hell of a lot closer to the bottom now. This might even be the pico bottom now versus Bitcoin. If Bitcoin drops to 50 as Mike says, MicroStrategy is going to get cut in half again or more. If Bitcoin goes back to, you know, all time highs, MicroStrategy is going to perform better than Bitcoin from here to there. It's just, that's the math. And you can buy it or not.

C (66:54)

If you believe, if you believe Bitcoin is almost bottomed out and you want a little bit of extra juice, then MicroStrategy would likely be the one of the names to hold. But right again that's again, you got to do your own research and understand these things.

A (67:06)

That's right.

C (67:07)

See how they work.

A (67:08)

As I said, Bitcoin dropping 25, 30 from here, MicroStrategy gets cut in half. I will say those words again so that we don't, we understand. While I think it's quote a buy, I think it is a buy relative to Bitcoin because it's trading at very, very low. But to me that there's, there's juice in the model.

C (67:26)

That's a better trade, that's a better trade than a leveraged per.

A (67:31)

So well, it's certainly you're not getting liquidated but you're, you're, you, you, you can afford to have a long term view. Just like, like Michael Sailor, have a long term view.

C (67:40)

That's the point.

A (67:40)

But understand what you're doing. Because Mike Mlone is correct that if Bitcoin drops, micro strategy is going to get is going to drop more.

C (67:49)

Absolutely. But if you're buying. If you're buying a levered bitcoin etf, you. You could get. You could get liquidated on a. On a steep drop down in. In bitcoin too. It's just the way those things work.

A (67:59)

That's right. Well, we're. We're at it at 10:10, so we'll. We will sign off and we will. We'll talk again. You guys both here next week?

B (68:09)

Yep. Thanks, J. Y. Thanks.

A (68:11)

Me too. Okay. All right.

C (68:13)

See you guys.

B (68:14)

Cheers.

A (68:16)

That's dope.