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- [00:01]
A
Is bitcoin headed to $70,000 this month?
- [00:04]
B
History and seasonality in July say that we might have another 10% upside. Of course we're seeing an uptick in the war in Iran. Trump potentially selling his truth social messages for $100,000 to high frequency traders and a lot more. Today we've got Dave, Peter Cheer and David Young joining in just a bit.
- [00:23]
C
Let's go, let's, Let's do.
- [00:40]
A
Good morning everybody.
- [00:41]
B
Happy Monday. Gonna go ahead and bring on Peter and Dave right now. Good morning gentlemen. How are you? Hopefully you can hear me.
- [00:49]
C
Yep, we could hear you. Amazing.
- [00:53]
B
Yeah. So here, maybe we should, we don't have a morning meeting, Mike, next week, but of course we can sort of start here. Bitcoin flat near 64. It was 64, 65, 63. It's all the same as oil hits a one month high and Kimmy AI sell off lingers. Peter, I know you were just on TV twice already today talking about China, AI models, compute. So maybe, you know, we can start there with that Kimmy story and beyond.
- [01:21]
D
Yeah, it's, you know, we were starting to talk about this even a week before the Kimmy story came out. And you're starting to see, to me a little bit worrying that China is just starting to flood the US and the world with cheap compute. Right. I think they're building out their data centers and AI slightly cheaper. They have an immense amount of energy and electricity. They have no concept of not in my backyard. So they won't get any sort of political pushback like we're seeing here. And they are what I think they call distilling their models. So they run their models effectively on our models to kind of train themselves much faster, much cheaper. And, and I'm getting a little bit concerned that we're going to lose this race and that it's going to be a big impact for the US Stock market, not just on the hyperscalers but also on the picks and shovels. So I'm not quite sure I'm there yet, but this is a bigger concern. It reminds me just how China has flooded markets time and time again, drive prices down to a point that they are the most competitive. And this is really the first time I've had this fear and it's bubbling up a little bit.
- [02:20]
B
I mean, Dave, what do you think?
- [02:22]
C
I mean, look, there's obviously a concern from certain perspectives. From another perspective, if you, if, if in fact Chinese models can be used on hard, on the hardware of companies, the productivity benefit to companies is going to Be massive. I. I'll give an example. Coin routes. You know, ian built a HelpBot using a open source AI model using the $4,000 Nvidia self contained unit. And it is amazingly helpful. It can do it in multiple languages and provide help and support in a way that Zendesk or other earlier versions of help systems couldn't do. Now it's one application, but you start thinking about all the things that can be done. For example, law firms. You know, law firms will never use LLMs. They can't, they absolutely can't. The data has to be proprietary, has to stay inside the firm all of a sudden. If law firms, however, can use AI based on their own case logic, their own training, what can they do with it? The productivity of every paralegal and first year associate is going to go through the roof. Same thing is going to be true in medical care, in education. There are so many applications. The changes that are going to be wrought in society and in corporations will be massive. And this is one trend that will absolutely help that. So yes, there will be losers, but the truth is when you talk about hyperscalers, the amount of compute, I mean, we are so far away from being able to satisfy the demand for training and inference that yes, there will be winners and there will be losers out of this for sure, but this is not the same thing as is flooding the market and putting steel companies out of business because they couldn't build it. Yeah, I mean, we have New York saying you can't build data centers here, which of course is asinine because, you know, look, when morons, I mean social, I mean Democrat, whatever, when people are running the economy or running the government that have no idea of what makes sense other than what plays well in focus groups with voters, you're going to have a real problem. But I think that cheaper, better, faster AI, open source systems is a trend and it's going to be a trend and it speaks a lot to the valuation of companies that thought they could build themselves a moat. I mean, one of the other things that's interesting about this, and this is an aside, but it's the summer, so I'm going to go off, I'm going to riff anyway, is that the models that are coming out of China aren't woke. They don't argue with you. Someone made the comment that, well, Claude is great, but this new one at least doesn't lecture me while it's doing what it's doing. Now I am not going to speak to that at length, but it is interesting because one of the things that people are most afraid about with AI is a few big companies controlling the training of these models could literally be the most Orwellian thing imaginable. Right. Even Orwell didn't assume that the truth could be manipulated. I mean he said, well, the truth would become, you know, whatever the party said will become the truth. But he didn't know that they could convince people in such a, in such an incredible way. And AI has that trend. The more open source AI comes out of, you know, the rest of the world, the harder that becomes to happen. And so that competition is potentially useful. But we shall see. You're right though. There are certain major assumptions built into the various technology markets. Last week it was semis getting destroyed. This week who knows what will get destroyed. I mean the hyperscalers are all down huge, even the ones that have locked in revenues and serious competitive moats. So markets tend to overreact to these things. But there's, there's smoke here. It's not like there's no fire.
- [06:36]
D
Yeah, a good point too on which AI to use. I find if I'm going to say something critical of the administration that I think is critical, I, if I have to use any AI, I'll go to grok. I feel GROK is probably the only one trained or the best trained not to be critical of the administration. So if GROK agrees with me on something critical of the administration, I have a degree of confidence. But yeah, you've got to be really careful what you pick and choose because they do seem to have biases.
- [06:59]
C
Oh, by the way, they know that you've asked the question.
- [07:01]
D
Oh yeah, right.
- [07:04]
C
So that, that's, that's the, that's the other thing. And you know, as far as crypto is concerned, I mean it has to be stated how incredibly bullish. The, for probably bitcoin, but some crypto value certainly for stablecoins that the, the. I don't want to use the. I don't know what the right word to use this, this acceleration in availability of cheaper, better, faster models is going to accelerate the agentic economy and people do not understand that that is not priced in to anything yet. The fact that instead of going on a website, I mean it used to be you wanted to go travel and I, and my wife and I did this trip to Italy and I made this joke about how my mother's neighbor, Rhoda Green booked our honeymoon and so she was a travel agent and she did all of that and she together this year. I put it Together, going on a variety of websites and cobbling stuff together in five years or 10 years, or, hell, maybe next year, you'll be able to ask an AI agent, hey, can you book me a trip with these parameters and just go find me the best price anywhere and get it all done? And within two or three sentences, instead of, you know, two or three nights of, like, pouring through all the various things and going, you know, whatever, it'll get done. Now, why does that matter? Yes, people will use it because it'll be way, way easier. But it also means that the models themselves will need be able to trade among themselves. And this is going to happen. And when that happens, then crypto rails become not just something that senators can argue about because they think there's an ethics clause with clarity and we should talk about that. But it becomes necessary and it becomes literal plumbing. That has to happen because it's the only way that you can do it without intermediaries. And so that agentic economy is going to go grow much faster than people think. And this is a trend that will help that.
- [08:59]
B
Maybe we should dive deeper into Iran, Peter, because obviously you're tracking that. That was one of the other reasons you were on television this morning. Interestingly, it doesn't really seem to affect markets at this point. I think everybody has headline fatigue and has just kind of put it on their, as McGlone would say, their deliberately ignore list. But, you know, oil, up, down, all around.
- [09:22]
D
Yeah, no, it's, you know, again, I think one of these weirdest things. So, again, I work with, like, 40 retired generals, admirals, CIA people. So, you know, from my standpoint, it seems like the ceasefire is broken. And they all explain, no, ceasefire is kind of whatever someone wants to say it is. And so neither side has actually technically said, we're out of a ceasefire, really. So we're kind of still within that framework, as weird as that seems to me. And you could tell the second it came out that the mediator was kind of, you know, interested in, you know, setting up negotiations, the markets calm down. But I think this is a little bit precarious right now. It's, you know, one. It's a little bit unclear why Iran would choose to escalate. Like, this was really Iran coming and attacking its neighbors, our US bases, neighbors that killed American soldiers, which, you know, that is going to force a response from this administration, and they had to know that. So, you know, what do they have up their sleeve? Do they have more weapons that we have than we think? So a little bit nervous of why they would think about escalating this. And the one thing that comes up a lot of our conversations is, you know, is there a degree of overconfidence in the US or maybe Iran understands this, but globally, we kind of have drained our strategic petroleum reserves. China drained a lot of their reserve. Europe drained most of their reserve. The US has almost gone to the reserve. It's lower than it was during the Biden administration. And structurally, to keep the caverns kind of intact, we're probably at that point. So if we do see another escalation, we see a disruption and a continued maintenance rate. I think it's going to be harder to control oil prices because the biggest lever that we had globally was releasing reserves. If that lever is taken away, I'm a little bit nervous, which kind of sucks, because I really thought we were kind of on a path towards rate cuts, that we're going to see inflation come down. We had CPI last week, which was kind of with that. So this has been the wild card. Does this escalate? Hopefully this calms down. Hopefully the President's being advised that unless he really thinks he can cause a regime change, which seems highly unlikely. Let's just get back to the negotiating table.
- [11:15]
C
Hey, Peter, can I ask a couple questions? You made the tie between oil prices and rate cuts, and frankly, that's been incredibly tenuous, in my opinion, like, forever. I mean, there's like virtually no, no reason why a rate hike could help bring oil prices down. Right. And that oil price is going down.
- [11:37]
E
Philly.
- [11:37]
C
The economy is there. I just said that matter of factly. Do you think that there's. I'm sure there are some morons at the Federal reserve out of 20,000 PhDs who can't, who are no more accurate than, you know, than. Than blind monkeys throwing darts over the last 30 years. There it is. Sure, there are probably some dumb people who do think that they have a magic wand, but I know Kevin Warsh doesn't think that. Considering that, and considering that he's already told you that he's going to use a new inflation metric which someone basically calculated was at 2.5% when we were at 3.4 last as of the last reading. You really think they're not going to come up with a reason to be able to cut rates and, or push more liquidity into the market, particularly if the semis and the stock market on the NASDAQ side starts to slide, like, seriously slide.
- [12:30]
D
So let's go. Two weeks ago, before this escalation, my view was that we were going to have a rate cut by September. I did raise my hand. No one's picked me. I want to be on the data source committee task force that war is putting together. I think there is just so many flaws. And you talk to economists who try and build out models of cpi, they all build it, including these flaws. The one right now in core CPI came in a little bit hotter. So I had some push back. Oh, core CPI is hotter. It's hotter because it uses this onerous equivalent rent measure for shelter. And two, it's just crazy. And again, I think we've spoken about it before, but it's. You're supposed to estimate what you could rent your single family home for. And back in the 50s, supposedly people rented single family homes. No one rent single family home. It's a tiny fraction of the market. The other thing, it's purposely, it only pulls 110 of the market at a time. So it takes a full 10 months before you have data. And if you're continuing to decline, I think you should be looking at Zillow real time rent. The Federal Reserve of Cleveland actually pulled out some sort of real time monitor. They're Both well below 2% and I think well below like about a half of what the official data is on housing. So knock that out. On the other side, I do like truflation. I think truflation's got its own set of flaws, but it tries to go out and get real time market prices from the Internet. Like basically how you and I shop, right? You look and you see what's out there. So I think we have these old data sources that everyone's just stuck to. And I think Warsh has done a really good job. He's talked about inflation being inflation. Hawk, we're going to see deflation come in or far less inflation is going to point us to these other metrics. And I think he's going to be able to cut and not see the long end spike. I am worried. If we have a month of this shutdown and you start seeing diesel and jet fuel go up. And to me it really hinges much more on diesel. Diesel just flows into shipping, it flows into ag. So I kind of. That's the one thing I'm keeping an eye on. Can we keep the cost of diesel down? With this disruption, I think we're fine. If that gets elevated and extended for a month, then maybe the Fed has a reason to think about not cutting. But I think we're still getting a cut in September and whether or not
- [14:35]
C
it's a cut or, or rates aren't going anywhere. I mean, we all know what they want to do. They need to bring the meat. I don't know. But the long term matters. They need the middle of the curve to come down. They need business investment to increase. And that's what they want. Right. You know, there's no, no doubt about that, that that's, they've been very clear. So what's the best method to do that in, in your opinion? I mean, is it, is it the short end? You know, he already made it very clear that he's not gonna be able to shrink the Fed's balance sheet. That. That ship has sailed. I mean, I think that's one of the most. I, there was a market rally when he said that. And I, I just, it's very hard for me sometimes when, when someone says 2 plus 2 equals 4, why the market should react. Because it was so effing obvious that despite the fact that he hated QE in 2008, 9 and 10, just like I did, we're in a very different situation. If the Fed tried to sell off their balance sheet right now, all capital markets would tank. It would be a disaster. And it's not like he doesn't know that. And of course he knows that, and that is not going to happen. So it feels to me like they pretty much have to continue to juggle and keep these balls in the air. I like to use the word manipulation because that's what it is. The notion, the reason that I'm a bitcoiner is I believe in sound money. And whether it's gold or bitcoin or something else that comes up in the future, if you believe that something else will happen. The truth is the world needs a standard by which to measure value. And value is harder and harder. I mean, I can't tell you how many normal people, people who aren't economists, are saying things like, I don't understand why the price of this stuff is going high. And they do things like they blame the war. Well, no. Or they, it's like, no, it's not. You're printing more money. We're about to go over 40 trillion in debt. It is at a cycle that is impossible to stop. The supposed conservatives are running $2 trillion deficit. What do you think happens with President AOC? You know, how much money are they going to have to spend just to bail out New York and California as all the richer people leave? And they have no tax bases and they continue to provide all the services that they want to Provide. I mean it is, we are in the middle of. People don't understand how much this could accelerate. They don't get it.
- [17:04]
D
Yeah, no, I think I, I think Warsh is going to have to do things he doesn't want to do. I think we're going to wind up maybe not increasing the size of the balance sheet but starting to maybe sell some of the front end bonds that the Fed owns to buy longer dated bonds. Because I do think he has to suppress that longer end of the yield curve. And I don't think we have to care about 30 years. I kind of view 10 years and in as kind of the benchmark because 10 years really feeds into mortgages. I could see him also doing something to try and sponsor the mortgage market. Right. Mortgages are kind of 10 year yields plus a spread. He's going to try and get 10 years down. He's going to try and decrease that spread. So I don't know whether, you know, we got Fannie Mae and things to kind of buy more of their own debt just to keep that spread down. So I think you talk really tough on inflation. I think he's done a good job on that. That's controlled the yield curve and then you got to start working it way down. I think you're going to have to take extraordinary measures. And as you point out, and I haven't run the numbers in a little while because I think we all got a little bit comfortable that tariffs are going to pay down the deficit. All these things Doge was going to do a lot more than I think Doge has turned out to do. And interest payments is becoming a meaningful part. I believe interest payments are becoming as big as the discretionary part of our budget. And that's just scary.
- [18:09]
C
Right?
- [18:10]
D
Like you lose control of that, it does spiral. So I think as a nation we need to figure out how to get those things down. So I think all this kind of, I think the kind of like you say, I see why people think we're going to get rate hikes. I think it's insane. I think if you look through this and think about as Warsh is trying and on top of that, the one thing I can say, and I think Warsh has to deliver for the President for a bunch of reasons. But I've always been convinced whatever you say before you're the Fed chairperson, you go five notches more dovish. Once you become the Fed chair, you do not want the blame for bringing down the economy. You are going to err to the side of this so as much as Warsh might like to take down bond market, he's going to be told, Besson's going to tell him, you start shrinking the balance sheet, stocks are going to freak out and then we have bigger problems. So do not touch the balance sheet right now. I think is going to be what this administration and people are just misreading. I think Warson more power to him that he misdirected all these people. But I think we're still on this path to easier money because that's the only way we keep asset prices higher and keep our deficit from raging higher as well.
- [19:15]
C
I mean it is amazing the irony that the ultra left, the Bernie Sanders no oligarchs, people keep pushing for things like wealth taxes when the entire United States economy is balanced upon the notion of the wealth effect. It is really fascinating and how people could be dumb enough not to understand it. And it is crazy. But the truth is, if you think about that, and I'm glad David's here because I know you're going to agree with this, the, the notion that there is a Federal Reserve and Treasury working together, that you could look at hard assets, anything other than, wow, this is an ideal situation for hard assets. And yet if you look at what's been going on, how people have been investing over the last several months, you would think that it's exactly the opposite situation.
- [20:12]
E
Yeah, I agree with that. So I was able to list it in to most of you guys. I would only kind of caveat this with the idea that I don't necessarily believe that rate cuts need to come for the markets to do well. So I kind of like, first of all, I, I'm with you. I don't think hikes are in the picture. And I think anyone who believes that, I think that's just wrong. The macro environment basically supports risk taking at the moment. And if I play like worst case scenario, like are we actually going to get two hikes, three hikes, four hikes, Like, I think that scenario is impossible at this point. Now you could do what the ECB did and the ECB was very clear in their meeting like a while back where they did an insurance hike. That's a possibility. Of course, Europe has very different energy concerns than we do in the US but also energy doesn't drive core pce. Like that's not what like is driving the, the price pressure on that side. It's shelter and shelter costs have so far been moving the other direction. So I absolutely believe we're on a secular disinflationary trend. And to your point, I, I also think that the Fed and the treasury absolutely are working together now. I'm not. I try not to be a conspiracy nut. Maybe I sound like it sometimes, but certainly I think that part of the reason that Warsh was chosen was like he was going to fall in line with what Ben wants to do. And so far you can argue about whether Besant's track record has been like, good or disappointing. But like, I absolutely think that he's trying to control the eel curve at the moment. Like, he cares very much about the term structure. Granted, he's pushing everything to the front end of the curve. And that's where, Peter, like what you're saying is absolutely right. Like the interest cost is starting to build up faster because so much is now being borrowed in the like, three month, six month, two year, like, rather than doing the long end of the curve.
- [22:07]
D
Yeah, David, I just add two things. One is, I think you mentioned the housing and that's so artificially inflated. If they would just go and use real time Zillow, any rent, you would see that we're forcing some metric that didn't work. And if you pull that up too, like if you go back to 2020 and 2021, Zillow was really high when OER was showing up low. And that was part of the Fed mistake. They were looking at the wrong data. That was a problem. And then to your other point, I think we need Fed independence, but that doesn't mean the Fed can't cooperate with other parts of the administration. I think a coordinated administration makes a ton of sense and you can maintain a element of, you know, separation, but to me, coordination is a good thing. It's kind of, I don't think it needs to be corrupted, but I think working together, implementing a policy across various levels of the admin is the way it should work. And by the end, I think Powell and Trump are just going to fight because Powell wanted to do anything opposite Trump said maybe. And how Trump was overly aggressive. I think this changes and the one thing I'm hearing from some of the macro people is Trump is supposed to be a little bit happier because war is keeping Trump in the loop a little bit more on his thought process, whereas Powell pulled away and Trump just likes to be involved sometimes. So I think this can play out pretty well and reasonably coordinated. And I don't think that's getting rid of Fed independence. It's just being smart about managing our entire balance sheet more thoughtfully.
- [23:29]
E
Yeah, I don't think that the politicalization of the Fed per se necessarily means that the Fed operates completely divorced from what the administration is doing. And I agree with that. Like, I don't think that people love the optics around this and maybe that's a different story. Like we can argue about that all day and that's kind of like more a marketing thing or whatever. And I don't really care about that, but I care about what direction the Fed is doing. And part of the reason I think Warsh came out so hawkish in that first meeting was precisely because he's like, I need to set a direction for people to understand that like, you know, we are going to fight inflation. And that I think is consistent with the record that he's had as well. But that doesn't necessarily mean that he's going to like, actually act upon that and say, like, oh well, we need to hike rates right now just because oil prices are climbing back up above $9 a barrel.
- [24:24]
D
And the other thing too, I, I often complain, I feel like economists are the best at straight line extrapolation. So whatever happened the last three months is going to continue the next few months. Like there's everything pointing to inflation coming down, right? So like every component coming down every. Right. And so I'm kind of like, I think that's what he's done. He's like, oh yeah, I'm an inflation hawk. I'm not going to cut of inflation's high. Oh, miraculously inflation is going to come down and he'll be able to cut. I, I think it's like this lazy point, this recency bias is just insane.
- [24:54]
B
Yeah, I agree. I think we should, we can either talk more about Bitcoin or we can talk about Trump selling his Truth social posts for $100,000 to high frequency traders. Which direction would you guys like? Let's do that one. Because, Dave, I see you shaking your head Truth Social to sell Wall street firms the fastest access to Trump's post. So I didn't do too deep of a dive in this, but from what I understand, it's only for extreme high frequency. So you're talking about potentially milliseconds earlier access, is that correct, Dave?
- [25:22]
C
I mean, I'm old enough to remember
- [25:26]
B
you just gave us the sailor.
- [25:29]
C
I'm old enough to remember I was at Two Sigma securities when there was a whole scandal. I think it was Two Sigma when I was running that. I think that was when the scandal came out that there was somebody who was getting the University of Michigan thing milliseconds faster than Others. And it was an incredible brouhaha. There's no version of this, to my mind, that should be legal. None. It is worse than the Goldman Sachs huddles that they did back in the day. Now I'm going back 20 years. Effectively it would be brazen insider information and selling access to information for trading purposes and, and the only reason anyone would ever pay for it is to be able to trade. And of course, if the administration does it, people would do it because they'd say it was legal. But honestly, this is why the whole Clarity act thing over ethics pisses me off so much. Because what is needed is, is something like what John Deaton has proposed, which is a broader ethics bill that stops everyone in the White House from selling or profiting based off of anything that's investment or capital market or trading related. And it shouldn't be crypto only, should include stocks and stuff like this. This is an insane paragraph. People could accuse you of tds, but I happily voted for Trump three times, right? So I do not have tds, but this pisses me off almost as much, maybe more in certain sense than the meme coin grift. I mean, it is absolute corruption and should never be allowed. And the fact that it's being talked about so brazenly is either raw ignorance on the person who promoted it or somebody who just says, listen, I don't give a shit anymore and if you're going to call me a grifter, I may as well be a grifter. It's literally, to me, unconscionable. Now why is it unconscionable? It's unconscionable because the notion of being able to learn information faster and front run other people in trading, we have decided was bad. We decided it was bad when Ivan Boesky did it in the 80s. We've decided it was bad forever. This is objective. Objectively, we have decided as a society that inside information is bad. Now there are good arguments, there really are, that says that there shouldn't be any worries about inside information, except for maybe when you're a politician, they're the worst example. Because if you're a politician, you could affect policy and therefore profit from it. That's insane, right? That doesn't make any sense. But private companies, we've decided it's bad. If you're a law firm and you know about a merger and someone goes through your garbage cans, figures out about the merger and profits from it, we'll put those people in jail. So here you have the President of the United States saying, oh, I know I'm going to say something that's going to move the market. You want to pay me to find out earlier? I mean, come on. I mean honestly, this may be the single dumbest thing I have ever seen that this administration proposed. And whoever even suggested it should be fired summarily. That's how, that's just how bad it is. Sorry for the race.
- [28:31]
B
Good news though is that the teleprompter guys also.
- [28:35]
C
Well, but he got fired. But he got fired. He got fired. They know it's wrong. They know it's wrong. It's no different.
- [28:45]
B
Well, maybe their argument is it's not wrong. If theoretically anybody can purchase it, even if it happens to cost a hundred thousand dollars a month, it's complete.
- [28:54]
C
I mean one of the reasons why I am so I look, I'm a f fan of I like him personally and I think he's doing the right thing. I think Paul Atkins is a great SEC chair is he understands that raw speed never should have been made into the holy grail of trading firms. And that's one of the things, that's one of the problems with the order protection rule and the trade through rule and all the stuff that he's going to get rid of. And by the way, that's a big deal for crypto and for understanding crypto rails. And that's worthy of a discussion. Probably a deeper dive you and I can do one of these days. But the reason is because we have effectively made a 40 mile triangle in northern New Jersey and who can traverse it faster, worth millions, if not tens of millions of dollars to trading firms. I mean firms with Doppler radar and laser towers on data centers connecting it that people don't think about. Well, why should speed matter? Well, it only matters in market moving information. This is the most obvious example of that and it just, it shouldn't. Right. Investment investing shouldn't be about who has faster, better access to information because that effectively creates a competitive moat and allows the individual to be frozen out and or smart people to be frozen out. Anyway, this is a triggering one for me because to me it's exactly the opposite of what they should be doing.
- [30:15]
E
Yeah, I feel like we've seen in the past, I mean like I've spent, I spent 20 years in sell side research where like basically you had to abide by FINRA rules which is that research has to come out at a universal time for all things because if you don't like there are people who will get access to Information sooner than others and a lot of that.
- [30:35]
C
Hey David, can I ask you a question? Were you, were you in the business when Reg FD went live or were you all post Reg fd?
- [30:43]
E
I was there when it went live.
- [30:46]
C
So you know how much that affected Reg fd, For those who don't know, is regulation fair disclosure, what David just described, it's by rule. And before that rule there were multiple firms who had incredible track records that those track records blew up after that rule because they no longer had that inside edge. It's one of the least talked about but most important rules that the SEC has put in, maybe ever. Yeah. I assume you agree with that.
- [31:17]
E
I agree in part because I knew colleagues. I mean at that point I was still junior and they were much more senior than me that went to hedge funds and other places and it was well known that they weren't necessarily the best analysts on the street. I'm not to disparage them or anything, but like it was because they had early access to information and you were buying that. And in a lot of ways it was unfair. These were corrupt practices. I didn't know. What I was seeing at the time, by the way, was I was still like just a kid out of college and I was like, well, what's happening? That doesn't seem right to me. And then like later I was like, oh, it's because it's not right. These are not good practices. And like I, I'm like, you know, you guys probably remember as well when like there would be the odd slip up from like the Bureau of Labor Statistics and non farm payrolls came out 30 seconds before like it was supposed to. And we knew someone on the street had it. We don't know who it was. Or maybe you did know someone but you didn't say anything about it. And it was just like. And it completely just 30 seconds, whatever. Like shouldn't by all things in another world maybe like we don't but like it does in this world. Like fellow 30 seconds count for something because there's HFT now, there's other things and people are trading this stuff. So I'm with you, Dave. I, I think that this is absolutely disgusting as a practice. And I mean we know we have like the emoluments clause and other things to theoretically prevent the benefits to like politicians, but we just obviously isn't effective here. Like there's, there needs to be something to kind of control for this. And I'm the same way. Like there's a lot of things where I can debate like, oh, that was good. That was, that was, that was wrong or this, that. But like under the Trump administration, I don't hate everything he does. I don't love everything he does. But this is definitely falling in the category for me of like, this shouldn't be allowed.
- [33:06]
D
I'll just pile on for one second. I'll take this from the flip side. I am a registered rap. And you know, there's some of the people listening to this are registered and they've got, you've got to be careful what you say on social media. You have to be so careful about anything. And I can't move the markets. Like no one really cares that much what I say. This is the President of the United States who's. But like, it just seems so bizarre, so contrary to anything that this market tries to do. I think the SEC goes overboard on certain things. You know, we still, if you give a hundred dollar one hundred five gift, it's like, oh my. And like you could lose your licenses and stuff. That's the same price since I think 1994. So 100 bottle of wine used to be nice back then. It's like, whatever you're going to get now the whole thing's insane. And this proposal came out, you're just like, this can't be real.
- [33:53]
C
Yeah.
- [33:54]
B
I have a friend who ran for office and our group of friends, everybody gave him small donations because he was running for small office and obscure race that had nothing to do with anything. And one of my friends gave 500 bucks and his wife got fired from her hedge fund.
- [34:09]
C
Wow.
- [34:10]
A
Yeah.
- [34:10]
C
That is, that is crazy. I mean, look there, there's no way to look, look at this other than just pure grift. And it's just, it's just bad and it's. And effectively the polarization of our politics is cancerous to our politics, to our body politic. You know, it is putting. Is doing all sorts of ridiculous things. You know, we found over the last couple of weeks there's been a bunch of stories. I think it was Anna Paulina came out and made the comment that the very first thing they teach you when you go to, when you, when you, you take office as a freshman is you're supposed to vote with your party. Meanwhile, you have people like John Fetterman who 60% of Pennsylvania Democrats want him to leave the party. And he's thinking about it, but he's a moderate. He wants to be, he wants to be an old fashioned politician. And by the way, I applaud him. I don't agree with him on everything. I agree with him on some things, I disagree with him on others. But that's the way the Senate is supposed to be. Supposed to be people voting their own conscience. And we don't have that. Whenever you get more and more of the Trump effect, you get, it pushes people into more and more vote with the party. Depends what jersey you're wearing. That's the big deal. And that is absolutely toxic for getting anything real done in America. It's allowing, you know, extremists to control both parties. And that is, that is literally the opposite of what we need. So from a real macro point of view, that is a macro bad, but that's why it has me so annoyed. And, and I'm sorry.
- [35:45]
D
One thing, I hate to bring a politics and I, I'm Canadian, so I do not vote in the US the one thing seems to me everyone in the US has to start thinking about voting in primaries. Much more. Like the primaries seem to now shape everything. And it feels like, you know, primaries get what, 5% turnout or something like that. It's like we're shaping our political future based on primaries. And still too few people seem to pay attention to primaries. I think it's already too late for this cycle, but it feels like more and more people. If you're going to do anything about this, you got to do it at the primary stage because that's where you can stop some of it.
- [36:15]
C
Yeah, well, New York has, New York very much understands this now, but we don't want to go down.
- [36:23]
B
Yeah, I think at this point, most people, you're going to get less excitement to vote when people have the opinion that they don't like either option. Right. So I think you're so polarized right now that it's not like, I think someone who dislikes Trump maybe also doesn't want president aoc, as Dave always kind of jokes about. So it's going to be very challenging.
- [36:42]
C
It's not a joke. I mean, you know, it's not a joke. I think it will be very bad for the country, but it will be very good for Bitcoin. And it's worth, it's worth, it's worth understanding that that is, that's one of those things that people should understand because basically both parties are in the business of buying votes now. And when both parties are in the business of buying votes, you're going to get more spending, you're going to get bigger deficits, you're going to get value destruction of the dollar. But that makes the price of other things go higher, particularly those things that aren't indexed to stuff that, where taxation will destroy it, et cetera, et cetera. So it is important to understand that, I mean look, Bitcoin is worth talking about here because it's one of two to me, one of two possibilities. Possibility one, it gets destroyed, it doesn't survive, it gets killed one way or another. And whether it's through quantum or through internal warfare, by the way, both of those threats I think are massively overblown but is either destroyed or it continues to gain more and more adherence as that store of value. I think that the data is highly suggestive that we are far more likely to go in that direction than we've ever been. And yet the market's mispricing that. And that kind of mispricing doesn't happen very often. And to me that that is a big story. Because you know, if you look at it, Scott, I mean I hate the four year cycle. I really do. I hate, you know, slavishly believing that, that things that have happened in the past will happen in the future. And no other cycle has ever had this kind of, of underpricing relative to network effects mining every, every freaking metric you look at. But boy does you know, did the 200 week moving average, you know, come in. I mean some of the best and I mean most thoughtful bears out there. There's one account I follow on X that actually I was praising and other people were yelling at him. It goes by the name of Dr. Profit. He, he has some very well written stuff about why he's flip bullish now in advance of everybody else thinking that well we're gonna be able to buy it cheaper in September, October. He's like, well look, that's not the way markets work, people. If everybody thinks that they're going to be able to buy later, they're not. You're not going to be able to. And there's a reason for that. It's not because bitcoin is going up in price. It's because the dollar is going down. And so I keep telling McGlone when he looks at his charts, he has to take into effect into account if you normalize the chart of Bitcoin's four year cycle by the amount of dollars that have been created, this, it's, it ran its course already, it's slightly accelerated and it's actually fallen by almost as much as previous cycles. And you just have to look at it that way. We are pumping $2 trillion more a year into the economy, we have to, because that's what the deficit is. I mean, these numbers have to equalize. And so this isn't going to change. And the war in Iran, I mean, unless somebody thinks you're going to get some massive peace dividend and Trump is going to somehow convince the mullahs to become a democratic society or some such thing like that, I don't see how that that resolves. Anyway.
- [40:04]
D
Yeah, I'll file on. I actually like bitcoin here. I think I really like how it's consolidated in and around the end of the MSTR story. Right. That seems like MSTR still hasn't really bounced that much. You know, last I checked was mid-90s or something like that.
- [40:18]
B
It's more cash today, by the way, for those who, for those who missed it, they, you know, we do have a story here, which is what. They raised more cash, sold more stock, didn't buy or sell any bitcoin. So same as last week. Yeah.
- [40:29]
D
So I feel like that consolidated. And last week, you know, given what was going on with, you know, Socks, the semiconductor stocks, there was every excuse for bitcoin to maybe get caught up. If anything, it looked like you were starting to see some outflows out of tech and semis and possibly into Bitcoin ETFs. Right. You had, it looked like across the board, you had a little bit of inflow. So I feel like this crowd that's really been very concentrated and playing kind of the AI trade. And to me, it's a group that moves around looking for where's the biggest opportunity, what can we move, what can, you know, price quickly, where do we get the leverage we need? They've been kind of stuck in that, you know, semiconductor AI build story for a little while. I think they might start coming back to crypto again. You kind of had this consolidation phase. You had every reason to sell off a little bit more last week. And I like that bitcoin's doing it without MSTR itself. Again, I can't. Don't have a live price before me right now, but it's kind of done it on its own. It's held in. You know, I would be less confident if, you know, bitcoin was holding in at the 64,000 and MSDR was right back to 150. Like, okay, it feels like we've moved beyond. And these, you know, digital asset treasury companies are a part of crypto. They're not the sole driving force. It felt for a little while they were becoming the sole driving force up and down. I like that they're taking a little bit of backseat that we're able to move on. I think you're going to start seeing some people look at this. And again, everything we've been talking about, you know, this. If people are having these discussions, you start looking, okay, well, where am I going to move my money? And maybe people start thinking again, well, let's take a look at bitcoin. Let's, you know, it was that130,000 not too long ago, you know, in our time. Where can it go back so I'm actually constructive right now? I think I need to see a move somewhere below 58, 000 or something to get nervous. But I think I want to buy it here. I think you could see 80, 90, 000 in the coming months.
- [42:14]
E
Yeah, I agree with most of what Dave and Peter said. The only thing I disagree with on Dave's side is he said that now politics is now driven by which party can spend the most money. And I was, I'm, I'm a cynic. So I think when was it not the case where, like, it wasn't throwing money at like this. I think what's changed is like social media and AI and being able to deceive people on the back of like bots and those things. But like, man.
- [42:38]
C
Okay, David, you got it.
- [42:40]
A
You got it.
- [42:41]
B
Yeah, you can see that one.
- [42:43]
E
Yeah.
- [42:43]
D
I'll bring Royal Cup Soccer into this. You know, they all flop and fake. The debt ceiling is always like flopping and faking. They're all like, oh, you know, they're so happy to have the debt ceiling because they're all going to negotiate it higher and everyone's going to put their own hand in like, I want this, I want this. And then they're all, oh, sorry, but it's all lies. They are all happy every time we get the debt ceiling because it gives them an excuse to go back to the trough and they get it. It's kind of insane. I mean, you're gonna have a debt ceiling. It should be. You can't pass a law that will push us above the debt ceiling ever based on this, this or this. And it's just a joke to me. Until that happens, every incumbent is, as you point out, they're always going to spend whatever they can because their job is to keep getting elected.
- [43:21]
C
Right. But let's go back to Saylor for a second because, you know, while I agree with him on, on his macro thesis and I think that people do not understand how to Value the, you know, MSTR stock, STRC stock. I think some of the valuations and what people say are wrong for a of reasons. He has been absolutely perfect as a contrary indicator of how he trades. So he smash buys the top and he smash sells the bottom and it's, it's, it's almost uncanny. And that's exactly what's going on here. And by the way, it is incredibly constructive. The doom loopers, the ones who were calling for 40,000 or 50,000 or 30,000 on Bitcoin, were all saying that the only reason bitcoin is sitting at 60 is because sailor's been buying. And here it is, he's been selling now for three weeks and bitcoin is actually higher than it was before he started selling shares.
- [44:22]
B
Yeah, he saw Bitcoin twice.32 and 3,000 Bitcoin matter.
- [44:26]
C
It's not buying, it's raising cash.
- [44:28]
B
Not buying. Is the story correct?
- [44:30]
C
And so it effectively has destroyed that narrative and people just haven't figured it out yet. Well, some have because there are people who are accumulating bitcoin here and those figured it out. It's just that the retail herd hasn't figured it out and the retail herd is notoriously slow to react and will buy only when the price starts to move significantly. As you have said many times, Scott, the best advertisement for bitcoin is number go up. It's the worst meme ever.
- [45:00]
E
But it is so true of resilience and that people aren't recognizing that the Sailor doom loop isn't working out. And I'm not saying that it's, this is going to be a permanent state of affairs but at least for right now it's showing that if there is this kind of, you know, self destructive kind of Sailor driven force, it's not happening now and it probably won't happen for a very long time. No, I think that that's what people are missing.
- [45:28]
C
Yeah, I think that is interesting that
- [45:30]
B
when he's raising cashier though that, yeah, I was going to say it's interesting that he's raised cash a couple weeks in a row and STRC hasn't really got a bid as a result. You would think that maybe it would give the market a bit more confidence that STRC can float towards bar knowing that now it's what it's got to be, 22 months of coverage or something. But maybe bitcoin goes up and so will strc.
- [45:50]
C
Well, here's the thing about strc. STRC is a high yield debt instrument. No one wants to admit it, but it is the difference between STRC and high yield debt is high yield debt is valued explicitly based upon the ability of the company to cover the fixed dividend payments or the fixed, you know, coupon payments on that high yield debt based on corporate cash flow. STRC is valued based on two things. Thing one is the long term price view on Bitcoin. Will Bitcoin appreciate and significantly enough for it to be paid off? And thing two, will the company be able to survive and not have to suspend the dividend payments? Thing two is what the cash raising is all about. But is it enough for a perpetual preferred? If you think about it over its full life, whatever the hell that is, it's going to be a long time. It's a long time. And so this small amount of cash really doesn't matter. What matters is still bitcoin price appreciation. When bitcoin price moves higher or people become more bullish or constructive on Bitcoin, STRC will go to par. It won't go to par before that. And trying to make it do that is a fool's errand. But that said, from an investor point of view, if you believe if you are a fixed income investor limited in what you can buy to fixed income style investments, then you're going to be in STRC. That's why it's in the high 80s to low 90s depending on what day or what, what minute you're in and not in the 70s because of, because there are people who are in the fixed income world who have money that say this is a good investment for my portfolio long term. But like bitcoin will be a small allocation of those portfolios but there's enormous amounts of money in fixed income portfolios. And so that's what, that's the whole STRC game. I mean personally if you treat it like a bank account because you need to sell it, buy it, sell it and treat it like an on demand checking, you could get badly hurt. If you treat it like a long term instrument that you're going to hold for the next 20 years and you believe in Bitcoin's price stability and appreciation, then it makes sense and that those are very different things. Scott. And you just have to look at it that way,
- [48:02]
E
creating like a menu of different products that he can sell to different segments of the market. And that sleeve just goes to like thick invest or fixed income investors and you know, like each of these things. But it's not made for you and me, it's not made for most People who will be like oh yeah, eleven and a half percent. Let me, let me take like no, I'm.
- [48:21]
B
That's the problem with the marketing, right. That's not a sailor fan obviously but it's you know when you do like
- [48:28]
D
commercials and it's a tiny fraction of the fixed income community that will actually look at something that's a non rate of perpetual preferred where the dividend can change up or down. So I think he, you know, it's a tiny, tiny, tiny fraction of the fixed income. It's not a real fixed. You know, the convertible bonds had a more normal home. Right. Those kind of, this is kind of a weird one off type thing that I could see why some people do, but I would not. When I look at it, I don't consider it a fixed income product. I, it's kind of this funky thing with a coupon and like you say it's to me like when it was sold somewhat, you know and you listen some of the pitches, it's like an easy way to own bitcoin or you don't have as much. To me it's a completely separate thing. You either get this dividend or you don't and you get paid and, or you don't. And if you want bitcoin risk, you're better off owning bitcoin. Like you're not. I don't, I don't see why this appealed to a lot of people. Like to me it's. If you're really into The Bitcoin story, 11 and a half percent doesn't sound that exciting per annum, you know, accumulates and all that. You know, I feel like something needs to be refined and it's certainly not digital credit as it was kind of initially kind of sold as I think you are seeing more products of those sorts come along and people are coming at that, which is that again might be another thing where the lack of scarcity of this is maybe also holding price down a little bit. Where okay, well they've got this but other companies can do this. What can they do? And I think you're still, your target market is a tiny, tiny, tiny fraction of the fixed income. So that's going to leave some indigestion. You need to create something that the ETFs, the preferred ETFs have to buy something that fits into the index world well. Because right now I think in fixed income you want something to do well, it has to be in the indexes. And you look at even giant corporations, some used to issue non index eligible and kind of get a bit wonky. But basically there's these large bond indices and the bond market, even more than the equity market, is kind of governed by those indices. There is so much money that just tracks that. And people used to do $250 million bond deals because that's the size they needed and it would not be index eligible. Everyone issues index eligible now because it's free money. You know, these people have to come in. Same reason MSTR worked hard to be in some of these indices. Same reason SpaceX, they tried to force into some of these indices. Right. If you can get the passive buyers in. So I think if you're trying to design some sort of income product for, you know, the crypto community, if you can find a way for it to be index eligible, that just changes the game because then people really do have to buy it.
- [50:59]
C
Yeah, I, I, I, I don't even know what the Lehman Hag index is called these days, but, but that's the
- [51:04]
D
Bloomberg, it's the Bloomberg Corporate index. Bloomberg bought the Lehman stuff.
- [51:08]
C
Okay. So yeah, that was, I was involved at Salomon Brothers with the index group quite heavily. So I go back a long way on the stuff. It's very true. I mean the amount of passive investing is there. That's kind of my point. The strc, I got annoyed when people called it an infinite money glitch or all this other. Anytime people talk about perpetual motion, I immediately want to run the other way. I don't care whether it's positive, negative, the thesis I agree with or I disagree with. I just think it's terrible. But it is a tiny part of the fixed income market, the catalyst for strategy, and it is the catalyst will be the unlocking of credit rules as applies to Bitcoin, how it's used as collateral. And no one wants to talk about that. It's both inevitable, but we don't know when. And right now it is punitive. All that needs to happen is Bitcoin needs to be treated the same as stocks, meaning based on volatility and liquidity value as how you haircut it in the way. It's within the banking system and the FASB people and the Basel people have all talked about it openly, that it's something they need to do. That's the big unlock. Because that's when all of a sudden you can actually create digital credit products. STRC was never digital credit. It's a methodology for being able to offer a high yield product. It's not the same thing. I've always Hated that marketing. But digital credit will become something that's quite real for obvious reasons. And there are lots of people, Scott and I both have friends who are in businesses that are making money doing things with this, operating under the constraints that already exist. Right. You know, whether it's people reserve or leaden, two different flip sides of the same coin, there are businesses that, that are showing that it can be done and that's a big unlock and I don't think anybody is. When your price strategy, you price the actual MSTR stock. That's a large part of it. That's one of the reasons I hold some. It's for that unlock and we'll see whether that happens or not.
- [53:08]
E
I think the only challenge with that is that we're waiting on FASB and Basil rules to change. I mean gold like since the 1970s was still rated a tier 3 asset until 2019 and I think only my tier 1 asset in the US as of like I think last year. So the challenge is that this could take a very long time to, for people to, to recognize. But that's the whole point of it, right. Like you're, you're getting in early while these generational changes because at the moment like on balance sheet sovereigns cannot recognize it as an asset that can viably be used for collateral or credit or other purposes.
- [53:52]
C
Exactly. Now one could make a strong argument that the reason that gold was like that was because there you can't. The spot market for gold is ridiculous and verification is harder, etc. Etc. And Bitcoin doesn't have those problems. But, but your point is absolutely well taken. These things always take way longer than people think they're going to take. Right. Measure it in decades or at bare minimum years. What you think should take weeks or months. So yes, you're right.
- [54:23]
B
Well, I think I've come to summarize is that we all think the bitcoin bottom could be in and that things could head up even though McGlone isn't here to tell us it's going to 10k. We all think it's bad that Trump is selling his truth social posts to high frequency traders. And we all think that the war is not having much effect on markets. So pretty much and okay, wait, we have like one minute left. We have like 10 stories here in Clarity Act. I just want to say it so obviously Clarity has a little bit of time. Mark Warner saying that he's tired of being in crypto hell. Welcome Mark. We've lived here for a decade. Mike Novogratz Saying that we're down to wordsmithing on ethics. Right. Which kind of ties into the entire selling truth social folks. And BlackRock warns of the urgent need for the Clarity act because it's all the volume is going to go to Asia. I don't think it's passing personally but maybe my I guess less cynical, still cynical take is that if you don't follow the ethics rules that ways why would Trump even care? Maybe he'll just sign it to get it done and then do whatever he wants.
- [55:25]
C
I think that's true. But I will continue to say follow the money. Since the banks have figured out that if they don't get Clarity passed that Genius is going to be the law of the land and they're screwed when it comes to stablecoins, I think that they will pass it and they will neuter the rewards piece as part of it.
- [55:41]
B
Yeah, yeah. It's like the cynical positive take for Clarity act there. Right. Well the banks win, so we get clarity.
- [55:49]
E
Yeah, I, I will take the other side. So I was a big believer in Clarity act early in the year and now I'm less so in part just because how are you going to get it all done before the August recess? Because you need to get it passed through the Senate floor. Then you need to send it back to the House. The House has to marry it to the existing bill that they have there. Then it can be like reapproved and sent. It's just too short a period of time. And plus you're down two senators. It's just, I don't know, like it seems like really, really hard to get a done just from a process perspective.
- [56:21]
C
Yeah, yeah, the process is tough but this might be one of the only things that could get done on a bipartisan basis even with the midterms. So you know, post the, post it simply because the banking lobby is probably going to say listen, we, we, we realize that we've screamed as much, we've gotten as much of the language that we want. We need it. I, I, I, I, I am the ultimate cynic. I'm not gonna lie. I just think that, that, that they have way too much power but once their power shifts to be for it then I don't see where then, then the against it become the Elizabeth Warren kooks who, who think that you can, you know, control everything and, and I think that she's marginalized enough on this that it won't matter.
- [57:02]
B
Well meanwhile, just as just an update for Genius act, it hit its one year birthday when all regulators and agencies were supposed to have given their rules and none of them have. So we have a law that has no actual rules, that may not even extend for them to give the rules beyond this year. So there's a lot of confusion to genius too. We're really killing it. Don't know if you saw that story, but that that is the case. It was supposed to be done last week. None of them provided it. And now it's kind of in limbo itself. Even though it is law, nobody knows what the actual rules are for that law. Okay, it's 1002. I think we covered it all.
- [57:34]
D
Thank you, Peter.
- [57:35]
B
Dave, David. Well, David, Dave, thank you guys. And we will obviously be back next week. McGlone will be back next week. He took his two weeks off markets. And I'll see the rest of you guys with daily. Well, thank you guys.
- [57:50]
A
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