← The Wolf Of All Streets
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- [00:00]
David
Dollars in stablecoins and bitcoin to go higher and to offer Bitcoin services and ETF inflows were a record last week. Lots to talk about. Scott is in or actually en route to token 49 in Dubai so it's going to be Larry Leopard, myself and Mike Mlone this morning on Macro Monday. Let's get to it.
- [00:23]
Larry
Let' let's do.
- [00:39]
David
Well we got a lot going on and a little going on at the same time. Not a whole lot this weekend we're still in the the markets are done with their tariff tantrum but the real economy looks to be offering a bit could be money printing incoming who knows why don't we get started as we always do Mike with the morning meeting what did what what what did the doom and gloomers say this morning?
- [01:02]
Mike
Well it's a good lead up Dave and hello to you and to Larry and to our listeners and viewers First Serana Wong pointed out the GDP now cast from the Atlanta Fed have been posting negative numbers even if when they take out gold their outlook is for GDP is around very very weak around 4 10% but it's looking forward was the key thing that really struck me she expects this payroll number to be decent she's above estimates of 165,000 the and 4.2% that's the consensus but it's the next months May and June she thinks will be very weak it's logistics and trade leisure and hospitality they're just collapsing plunging was the world she used so looking forward looks bad ism she's expecting 48.5 from 49 Gina remains still quite bearish this is impressive for me to hear that from Gina because she I thought she was a permeable for a while and I realized she's not her points are key thing on the way up we've covered most of the gaps we're back to long term downtrend is what she thinks still well below that 200 day moving average S&P 500 around 5700 but the key thing she pointed out is guidance is at record levels lows there's a record number of sales misses and margin expanses has flatline set to contract that's the key thing from the majors and then Audrey our fixed our FX strategist pointed out she thinks we've meet peak negative peak tariff negativity for now which is part of the reason I think gold has pretty good peak at 3500 for now we'll see we go for the next few months back to you.
- [02:39]
David
So the real question, Larry, this one's for real question in my mind is the Fed always reacts to published data and makes them late. They've been to. Been late on pretty much every move that they've done in, I don't know, forever. Except for this past summer where everyone looked at it and said, what the f are you doing? The entire world expects these numbers to be better. I've heard you're not the only ones who are above consensus. I mean, you know, job numbers look great, but if you talk to, and I mean literally anybody in the real economy, you hear tales of, oh, my God, I'm about to lay off these number of people. It's all what's about to happen because of all this, all the people buying stuff brought forward in order to take advantage of the fact that tariffs haven't kicked in yet. So the question is, does the Fed look at what's about to happen and say, oh my God, or do they wait for the actual print that says, you know, that jobs, you know, new jobs are a minus number in the hundreds of thousands and they look for unemployment to like, explode over five and a half percent. I mean, do they wait for that or do they actually have anything that could be predictive?
- [03:51]
Larry
It's a great question, David. I don't really know the answer. I mean, they should anticipate, but often, as you say, they haven't historically, and they might want to wait for the print. I mean, it also goes a little bit to the politics of the situation where it's pretty clear Powell doesn't want to help Trump, and Trump has been nasty about Powell to Powell. So at the margin, Powell would want to be a tough guy, and he wants to kind of hang on to his potential, potential reputation as a Volcker, which was really the inappropriate thing to be in this circumstance, but that's what he's trying to do. So I, you know, I, I don't know, I call it a coin toss. I mean, I think if you go to CME Fed Watch, you see the odds are pretty small that they do anything in this next meeting coming up. And I, I guess I'd have to go with that, you know.
- [04:36]
David
Yeah, that's what it feels like to me. I mean, Mike, I mean, given that everything that, that Gina's describing and all your economists are describing looks like there's a train. You're watching the train. You can see a half mile ahead that there's an end of the tracks and it's going into a canyon and the markets are Effectively looking at this and saying, I mean, you know, what do people make of this? They think people are just dumb and that, you know, they're waiting for, for the actual bad news to, to show up or, you know, what, what's, what's going on? We'll get to Bitcoin in a second. But you know, just in terms of the stock market, it looks, kind of.
- [05:15]
Larry
Looks very first Mike, I'm sure Mike has a view but my, I have a strong view on this. I think people still are locked in the buy the dip mentality, looking backwards, you know, that, that Trump is going to, you know, he's not serious about these tariffs, will negotiate with China, everything will be okay. He just grabbed a lot of turf. And I still think there's a lot of happy talk and a lot of happy, you know, I think Wall street is deluded about how this is going to turn out. I think it's going to turn out worse than Wall street is currently pricing for. And so I'm, I'm very, very bearish. You know, at the 5,500 level, I don't think we even see 57, the 200 day moving average. And I think we'll take out the April 7 lows, you know, sometime in the next 30 to 45 days. That's my view.
- [05:56]
Mike
And I guess it's, I have to say, Darren, we agree almost completely, which means one of us is probably going to get stopped out first and then it goes that way is trading bear markets. It to me feels just like 2008. I just remember in July when that price of gasoline, average price of gasoline went above four bucks a gallon. That was it. And I just into short positions. But you had to take pain first. And to me that's what's happening with tariffs now. Our economists point out, yeah, it's inflationary, but two thirds of most of these inflation numbers are services and they're starting to get hit hard. But I think that's the key thing is we're in a transition. My view is this is a bear market this year and I expect The S&P 500 is more likely in the year down 20% than up maybe even 5 to 10%. And it's just normal reversion that's overdue. But we're in that stage where yeah, it's, you can. And also it's, we've had the first salvo. We've had gold tell us there's a problem and it got too expensive. It front run the market. We had the stock market go down tell us a problem and has to bounce back. And I complete with I think we all agree with Larry knows we know how markets work. This is something that people haven't really seen mostly the junior traders for 15 years. I just remembered the last two 50% drawdowns. Yes. P500 last 25 years were very good years for me when I was trading just because I recognize the things I pointed out last year. The key thing I want to point out this year so far is if you look at your statement this is a less lesson I learned from market market map sorry Market Wizards Charlie DeFrancesca he was one of the key guys in the trading pits. I knew he he died a long time ago. He pointed out the key thing that matters is your statement. It doesn't matter if you're you have a view. It's what that statement says. And so far in the year I see virtually every stock market next is down. I see gold. The best performing crypto's on actually bitcoin up a percent or two. Most crypto markets down 15, 20% and everything else is just down. So from a trading rational standpoint, from a statement standpoint, from a statement point most people are losing money. Traders though are loving this. I just look at this as a great trading environment. We bumped up to good levels, maybe we get higher. Bitcoin is a great leading indicator. That's why I thought this first bounce down change still is worthy of a short that 60 Vix is a great buy and now it has to prove where it's going. But overall the big picture macro is I don't think it's proven yet. Maybe by then this week people will see something to prove it. But the bottom line is nothing really matters unless risk assets go down. And I think we're way overdue for that normalization. So I end with the Keith the thing thing I think that's happening stuff Dave and we all discussed two years ago is when the Fed eased last year that was on the back of first of all they stayed too low for too long. The prices everything went up and now everything's gone up too high. And they used when the stock market was on a tear I think they made a mistake and just added another thousand points to the stock market. Now when it goes back and and to inflation now when it goes back down it makes pain worse. And we all know cryptos are the leading end of risk assets.
- [08:48]
David
Well okay, so, so let's, let's look at that because the market I think has been saying telling us something Differently over the last two weeks. And what the market's been saying for the first time in a long time actually is logical to me. Now that's a, that's a really interesting thing because markets are rarely logical in, when you're in the market, then you look back six months after whatever you're talking about, and then all of a sudden you go, okay, that made sense. Because in the short run, markets are crazy. In the long run, they tend to get things right. So if you think about what's actually happening right now in the stock market, I'm with you guys. I hate to agree with you, but I am. I think the trade, the, the trade is. If I, if, if I were a macro hedge fund, I would be short the S and P and probably the Nasdaq, but definitely short the S and P, which, and probably want to focus on the manufacturing sectors and the things maybe big tech is going to keep is going to catch a bid, be the same reason bitcoin's going to catch a bid. But you're going to see the real economy get hammered. You're going to see liquidity conditions improve. Powell may hate Trump, but he doesn't hate, doesn't like unemployment, doesn't want to be at the steward of a depression. So, you know, it's a game of chicken that, that, that in that particular case, Trump will win. But he won't. But it won't be. It'll be whatever it's going to be. Maybe he lets it happen first. But in any case, corporate earnings, earnings which do matter for stocks, are going to get hammered. I think we all agree with that, right? But on the same token, liquidity is going to come in. So I think the trade is short S and P, long a basket of gold and bitcoin, Bitcoin for the adoption curve. That's happening. And gold, because gold is literally that exactly as you say, Mike. I mean, it is what it is. And to me, that's the actual macro trade. Now, we can talk about why I think bitcoin is going to be more like gold and exceed it. And we can get to that later. But when you talk about. I notice I'm not talking about the rest of crypto, if. Right. You know, I'm talking about bitcoin right now. I think bitcoin dominance will increase during all of this. And yes, there will be some winners in crypto, like there'll be some winners in the tech sector. But the truth is, if the real reason the markets are going down are because earnings expectations get crushed that really will just massively increase liquidity and not necessarily hurt assets like gold for sure or bitcoin, which is effectively been trading more like gold over the last few weeks. And, and the reason for that is there are more people who are investing that way as a thesis. I mean, Larry, you run a bitcoin fund. I mean you talk with investors every day.
- [11:16]
Larry
Yeah, I agree with you. I mean, I think people, you know, and James, who's not with us this morning, I'm sitting in for him, had a great thing in his stack or in his, you know, information this weekend where he showed there's really separation that's beginning to occur. I mean we're seeing stock market down, bitcoin up. So this bitcoin is no longer just a widget on the triple cues. One thing I will comment on back to the Fed, you know, I mean the Fed cutting last year, to me that was just clearly political. They did that to try and help, you know, the other team win the election and it didn't work. You know, and I look at the CME this morning, it's an 8% chance they cut on May 7th. I mean, I think what's going on here is I actually think Bessant and Trump are going to force the Fed into cutting. They know that Bessant's not stupid. He knows that what he did would tank the market. And the market is a bubble. It's a bubble or has been a bubble created by ZIRP from 2009 to 2015 and 2019 to 2022. I mean, they're just enormous distortions. I mean, Hussman's done the work to show that the valuation of the stock market is higher and more overvalued than it was in 1929. Coming out of 29, it fell 80%. So I think there's nothing but downside risk in the stock market. When I see people talking about we're going to, the Fed's going to cut and we're going to go to all time new highs. I mean, Mike, you and I both remember, I'm sure you do too, Dave. I mean in the last two bubbles bursting, 2008 and 2000, the Fed cut all the way down. Didn't matter. When a bubble bursts, it bursts. And so I think this is a bubble bursting and I'm very bearish on the stock market. I think the stock market ends a year down 40%. That's my personal view. But you know, what do I know? I mean it could be wrong. Back to the Bitcoin thing. Yeah, I mean bitcoin, it's interesting as we've seen and some good charts have shown. My partner David Foley put one up about a month ago. It's on our thread that shows that you know, gold tends to smell debasement before bitcoin. And so you know, gold just got on a tear and you know, it's up 60% in a year. It's very, very rarely ever done that. I mean really rare and it's probably overextended but bitcoin was kind of flat during that time frame and, and now it's playing catch up and often what it does is it catches up and it goes further because it's, it's more volatile. So I, I see Bitcoin at 140, you know, this summer. I'm very constructive on bitcoin.
- [13:34]
David
So Mike, obviously music to your ears. You've been talking about market cap to gdp. What happens if the GDP does what your economists are thinking it's going to do? Toward the back half of this year that market caps the GDP number. If the stock market doesn't come down significantly, what are we going to get to three?
- [13:56]
Mike
Well that's part of, I mean that's the key I guess sore thumb on the global market is we have significant deflationary forces out of China. That's no known. Everybody in the world is pushing back on their exports because they have to and they're just, they're loading their exports in the world. Remember we've seen this from Japan 30 years ago and it wasn't nearly as big. We have significant deflationary forces in things like crude oil. It's all heading that lower. And you see it in gold doing the opposite. And the sore thumb on the global scale for that deflation from the inflation which is all less in history is that's how you get it. You have to get inflation first and then you go to deflation is US stock market but it's not just gdp. It's versus the GDP of stock markets of the rest of the world. So I like to watch this S&P 500 versus MSCI X US index from 1968 to 2013 basically 1 to 1 and then it jumped up to 2.1 in the last 10 years that starting to head lower. And when it becomes prudent on a global money management basis, it's hard to dispute this night. Dave, I think what our listeners want us to do is disagree. But if it becomes prudent on a global basis, just manage your money when you're overweight the US to sell that. That's a problem and I think that's what's just happening. And I agree with you completely. One of the best ways, well, one of the best ways to get the Fed to ease, to get inflation to go down, to get somewhat deflationary forces is have the stock market back up 20, 30% and it's way overdue. And then by the time we get the midterms, have it stabilized and still heading higher. And then point out all this, all this investment into the heartland which is by the way. Oh, by the way, I'm cutting, I'm not going to tax your, your wages, I'm not going to tax your, your overtime or your tips. It's going to get the boats. It's a great setup I think for, but the key thing that the premier thing, the primary thing I'm still thinking expecting is this all makes sense to me. If we get that finally at least maybe a 1/3 drawdown, which is an S&P 500 which is the base case of economics and Bloomberg Intelligence. But the kind of thing I just need to point out is that to me is a very unlikely case where Bitcoin's going to outperform gold. So I point out in the year gold still up 20%, Bitcoin's base beyond. And I look at this level here as okay, prove it. This is a lesson I learned in trading pitch. You get to key level, you see. Prove it. Prove that strength. So far it is. I have to agree with that. But let's get through at least these weeks. Numbers.
- [16:11]
David
Yeah, I think that it's, that's important to look at a couple of things. So let's, let's talk about, let's, let's, let's. I want to shelve the bitcoin conversation for a few minutes. We have some time to get there because both Larry and I are going to hammer at you but for different reasons, different things but so, but let's.
- [16:26]
Mike
Come on, make some better discourse.
- [16:27]
David
No, no, no, that's cool. But I think it's important to understand that we're all basically trying to tell people is that the global macro situation is, is, is not pretty because of what's happening. But I think it's really important. You keep saying something that I think is demonstrably wrong, but demonstrably wrong. I agreed with you up until probably two weeks ago, which is that the way to force the Fed's hand is the stock market. I don't think that I, I don't think Besant even cares about the stock market. He came out on this weekend again and said the same thing. What he said this weekend was really important. He once again made it exceedingly clear that he cares about the bond market. He wants the 10 year down. I don't think he cares in the short run about the stock market, everybody. I mean, Trump does because, you know, people yell about it. You know, it's like Bessette made the point this weekend, which I think was fascinating, where he said in this interview, the one that I saw, he said two things. The first thing he said was, listen, you know, the stock market is more or less unchanged from where you people all screamed about where we're having a crash. And the media, as far as the average person knows, the stock market is still crashed if they haven't looked at their own 401k because the media is saying said it crashed and they never said it recovered. In reality is recovered almost all the losses. April is actually unched. And today we're basically unchanged. So, you know, he, they're looking at the media and, and they're kind of shrugging their shoulders. But in the same interview he talked about how important it was that for the U. S Long bond. And that is important and that's what he's fixated on. So I, you know, I mean, Larry, what do you, what do you make of that? I mean, what are his tools? Because this morning, you know, what are we at 4.3? We're still in the same range. There's no panic. But it, but it definitely a bit of a hit over the week.
- [18:13]
Larry
Well, clearly he cares about the bond market. But, you know, and, and when the stock market took its initial dive, the bond market caught a bit and the tenure came down into the 3, 8 area. But that didn't last long and started going in the other direction. And you know, they're really kind of trapped, as we all know, and that's somewhat of a problem. Let me just add one other thing on the stock market that I think some people haven't really focused on. You know, our stock market has always been the world's best stock market. And there's an enormous amount of foreign capital in our stock market. There's a net $15 trillion positive foreign investment balance in our market. And you know, another thing we haven't mentioned at all is that in the first quarter the dollar also went down 10%. So you're a foreign investor and you own U.S. stocks. Your U.S. stocks go down 10% and then, you know, the dollar goes down 10%. Well, you just lost 20% in your local currency terms. And so I think that, I think one of the things, and we've seen, I've seen some numbers that show that a lot of investors are losing confidence in the United States. I mean, you see all these, the people in Europe aren't taking trips here anymore. I mean, this, you know, this Trumpian, you know, throw a grenade into the party strategy, see where it all lands, you know, create a lot of chaos. I mean, I get it. You know, there are those who say it was a smart thing to do, he's got to break the glass, got to grab a lot of turf. The flip of that though is you create so much uncertainty in your own currency, your own markets, that everyone decides, hey, you know what, The US Isn't a safe place to invest anymore. And this great equity growth market economy that we've enjoyed kind of goes away. And, you know, I mean, we know a couple things. We know the top 10% of the population accounts for 50% of the spending. We also know the top 10% of the population owns 84% of the stock market. So take the stock market down 40%. And guess what? You know, that top 10% looks at their retirement account, looks at everything else and says, I'm not going to buy the extra car. I'm not going to, you know, rental the house. I'm not going to, you know, they just cut back on everything. And so I think Trump and Bessant are thinking, well, this is okay because they aren't the ones who voted for us. We're out to help Main street, the bottom 50%, and that's all fine until the job losses start and then Main Street's going to get hit too. So, you know, it's a toxic brew. And I think, you know, the thing, my personal view is they overplayed their hand and that China is going to make them pay for it. I mean, China, you know, you notice how Trump said, oh, we're going to talk to China. And Z is like, we haven't talked to him. You know, we're not, I mean, you know, I mean, China, I mean, you know, we entered this fight with a, with a glass jaw, which is our financial markets, which are highly levered and very, you know, very unstable. And you know, they entered the fight and they think in 50 and 100 year time frames. And so, you know, they could make us suffer here pretty badly in my view, if they don't come to terms with us. And, you know, the world enters A very serious business downturn. I mean, you know we go back to the Smoot Hawley stuff in the 30s and when that came through, I mean what it did was just devastating. And you know, I mean we're seeing you know, container shipments just kind of go to, you know, trend towards zero. That's not good. And you know, in a highly levered economy like the one that we have, this stock market to me is just a disaster waiting to happen.
- [21:33]
Mike
So one thing I love that Dave points out is the smoot hauling came when the US was a net exporter. This is the difference now is this is the difference now. I think the historical context what happens number one was not ever underestimate the self correcting mechanism of the US if this doesn't work out come midterms, there'll be pushback come next election. Trump's gone forever. We switched back the old days. We're fine. If it works, it'll set the stage for the next hundred years. I think be very under, very unsmart to underestimate the United States in this space versus a country that's led by one person. That's China, one human being. There is absolutely no self correcting mechanism. And you're seeing the issues now with what happened with housing getting too expensive and you just can't stop the thing. Nice love. When Treasury, Treasury Besson points out the, the Mickey Mouse thing with the broomsticks when he's in Fantasia. That was Sorcerer's Apprentice. There's an unstoppable force right now of that supply and coming out of exports coming out of China. It's the same thing I see in cryptos, but that's another story. It just obviously I'm American but just point out the facts of history here. China is very much worse than Japan was when they peaked and heading that way now where are they going to export? They're toast. I mean just good luck. They're just. Let's remember what happened. This is the last 50 years. The US being the benevolent biggest demand pool country in the world that charged zero tariffs. That's just changing and it had to change. It has to reset this off this global bounce. But let me just finish with that thought here. This is happening. I think it's gonna be good in the long term. In the meantime, the self correcting Mexican. The main point is we all agree on it means the name thing that people did for less. Who knows decades to it was like I learned from another person. I'll mention my history John Lischio. People who remember him, as a great journalist economist, pointed out traders in the pits for dope soft sniffing dogs. But that's what capitalists are when it comes to profits. We were dope sniffing dogs. We found any way to enhance profits that was offshore. Now it's going to go back. So the key thing is getting any. Prof. The key thing I want to point out is I don't see how we get through this without just some normalization of U.S. equity values. We all kind of agree on that, which means everything goes, goes down. But I will agree with what we all said is what best in view is to me, if I keep saying the same thing, maybe eventually we'll be right. Gold was the last big trade for a while. Bitcoin was a great trade for quite a while. I think it's just overdue for some normalization. That's where you can disagree a little bit. It's too expensive, too high. To me, the next big trade is that normal deflation where U.S. treasury long bonds will be the next big trade. And guess what? I've been wrong for a while. I admit that a lot of people, I know, the smart people have been wrong. So I'll end with one other person, another market wizard, Marty Schwartz. I started in the trading pits in 98, 1988, and I remember executing for him on the night desk. He started getting bullish. He had got a bunch of money. He was trying to buy long bonds. He was early, he was wrong. He got stopped out and the next year he started getting in and he did great. Just a little lesson I learned is okay, he was early and wrong. It was leveraged, which Dave knows you should never do, but I come from that environment. But he got stopped out and then he went back in and did very well. Just this is what I think was happening with bonds right now. Yes, I've been way early, keep saying the same thing, but I think they're just going to drop 200 base points and get towards China, which is 165.
- [24:40]
Larry
Wow. So see, Mike, I would, in a normal backward looking environment, I would say you're completely right. But I think the rules have changed in the sense that and gold is telling you that the rules have changed and the rules have changed because everyone fully understands that the governments are trapped and that they have to do the big print. Somebody should write a book about it. And since, and since they understand that.
- [25:08]
David
Since Larry doesn't want to promote the big print. Hold on, Amazon.
- [25:13]
Larry
Yeah, and since they understand that, they know I, I think more and more of the Bond market is becoming aware that they're the sucker at the, the table. That, and you know, I mean, it's going to take some time because right now, I mean, the government's not printing much. I mean, but, but that as we all know, I mean, one thing the Federal Reserve you can count on is they will change on a dime. I mean, they weren't even thinking about, thinking about raising rates. And then they did the fastest cycle ever. Do you know what I mean? And I mean at some point when this gets bad enough, they're going to turn around and go back to Zerp and QE like, and your head will spin, right?
- [25:47]
David
So here's the question. If, let's say for the sake of argument that you're right, Mike, there's a logical inconsistency in what you just said. And let me point it out. In a world where the US bond brings long rates down 200 basis points, corporate earnings are suffering because we're in a real economy recession, to think that bitcoin is going to stay correlated to the stock market is silly. And it's silly for two reasons. Reason number one is even assuming bitcoin is at its mature asset and it's essentially trading around where its size is relative to gold. Gold and bitcoin are more likely to be together. But the second reason is adoption. And we always, we always ignore that. You know, most of the people who are buying, and I, I say this every week, but I, but it's really important because this isn't just Michael Sailor anymore. It's not, you know, he, he's not some dude wearing, you know, some billionaire kind of Zen master wearing, you know, Yoda robes and you know, acting like a Jedi saying, ah, the force says bitcoin is going to be a, a million, 10, 10 million, whatever dollars. You know, it's not just him. There's 80 companies with Bitcoin on its balance sheet. There are multiple sovereigns mining and getting into bitcoin. There are 20 bills for states buying it. And most of the people, the smart money people who are buying it are doing it because they see, and here's the word swords that I've been using for three or four years now. It's an asymmetric potential return to the upside. Not symmetric, asymmetric. As long as that's the belief. Unless something happens to change that belief, I. E. A 51 attack or something that changes it, that matters. And it matters to the way people be particular. Now, even if you don't believe bitcoin's Going to outperform gold. The fact that people are buying it as a hedge or as a, as an outperforming mechanism vis a vis stocks. You have to credit that is true, yes. Backward looking. It has been correlated to risk assets. Why? Because there's been this monster thing. You've said it many times, Mike, and we all agree. We had the largest liquidity inflow in, in human history and everything went up. Sure. Everything was correlated due to that. Right. Okay, that's gone. It may happen again if these guys are dumb, but whatever. And that's Larry's point is that they are that dumb and they are going to hap. It is going to happen again. And whether it does or not. But take that out of the equation and now look at where. What, where you're at. And that to me is the biggest difference, the even look. There's a few things to keep in mind on the macro side. So one of the major thing that's happened on the macro side that you wouldn't care about is inflows and outflows. And I'm not talking about ETFs now. I'm talking about the fact that Tether has been trading now at a slight premium for four days, five days, the last couple times that turned. That is basically just so the audience understands. The reason Tether trades at a premium is because people outside the US not inside the US outside the US need to get dollars into the crypto system to invest in crypto. Of that bitcoin gets a disproportionate amount, roughly equivalent to bitcoin dominance. And so you have outside people buying into crypto. That is what's supporting the crypto market right now. Now, could that turn in a dime? Of course it could turn in a dime. But it's really important throughout this, all this uncertainty that you're seeing that at the same point foreigners are dumping stocks, as you both mentioned. So I mean, I just think that that is a really important thing.
- [29:15]
Larry
Yeah, I'm with Dave. I think bitcoin is a very good bet for this year. I think Gold continues to be a good bet for this year, although it's really had quite a move. And it should easily. It could and should probably consolidate. I think the stock market's a bad bet. Bonds are kind of mixed. I mean, I hear your point, Mike, and you're right, historically, you know, they should drop, but I don't know if they will. It all depends upon how fearful of that future debasement. You know, the bond, the typical bond investor is And I would submit based on what's going on, they should be pretty damn fearful. But they may not be. You know, people get a lot of, people get a lot of things wrong. Right.
- [29:55]
Mike
So let's, let's have some discourse on that one. First of all, the, one of the most important things I've cared about always in this space, Dave, is what you mentioned is not so much tether as the proliferation of crypto dollars. It reminds me very much when I was in Hong Kong in 2018, pointing to all the bear market stuff in cryptos and everything. And the key thing I pointed out as a bull market is bitcoin dominance and the proliferation of crypto dollars. Tether was only $2 billion. Now it's a complete bull market. It's part of the reason I thought it's. Finally we had our president back then who thought it was silly Internet money, who flipped over like what do you not understand about something? Who is base layer is a dollar is investing in Treasuries. He figured it out. He got it. That's my point is what you said about earlier about all the inflows is one of those bearish things I've ever heard because they are expecting a profound shift in what's happened in the history of highly speculative risk assets, most notably cryptos, to diverge from its high correlation to the base layer, which is the stock market. Now that is a call I will not make yet. I predicted it years ago. At some point that's going to happen. They'll trade more. Bitcoin will trade market Treasuries. And then we saw Trump get elect and we saw the massive proliferation of excess supply of cryptos in the massive hubris and the financialization of this space. It's way over leveraged long. So I'm just pointing out the same thing I did in 2018. I think Bitcoin can risk losing to zero. That's not profound. That's what it's been doing historically. So I'm sticking with what normally has happened. You both are expecting something that's very slow probability. It's never happened before in history. Good luck with that one. I wish you luck. Maybe it'll happen. I want to see the proof. The first sign of that would be stock market going down and bitcoin staying up on the year. I haven't seen that. That's my thought is okay as a trader. Test shorts here and that highly respective risk asset. The whole world's buying things. And then I look at it. When you have an asset that absolutely can't go down yet. Has a history of going down. You probably should be careful and look at it as a rational person. All right, I'll try a little of a put ratio spread in that type of position. Prove me wrong. I want to see the market prove that view wrong. I want it. I hope it proves you right. I hope it proves me wrong. But I fully expect the absolute rational thing. You're thinking about something very profound, unusual. The rational things. Expect normal reversion. Protecting all cryptos. I think most of them will lose zeros. I think Ethereum is going to drop to around 200 bucks. It's just where it was in 20, 19, 20. Not a big deal. Doesn't mean just got too expensive. It's a big deal for people who've long, but not for people like me. Who remembers Internet stocks in 2000, 1999, they love most of them went to zero. And then in 2007 and eight in the housing market. So this to me is a normal expectation. If the stock market goes down now, if the stock market drops 20 and Bitcoin's up, that is going to be a major profound revolution. I don't think that's going to happen.
- [32:36]
Larry
But it's been happening, Mike. I mean, just to look at the.
- [32:38]
Mike
S P short term, the short term, yeah, but okay, happened how much? Stock market's down 10% and goes up 25%. So that's the beginning. The beginning. Here we all point out we knew it was expensive. I still think we should be overweight gold and risk off assets and underweight risk offs on assets. Bitcoin has a higher correlation to the stock market than it does to other cryptos in some cases. And it's very volatile. I'm like, good luck. If it's going to outperform the stock market when it goes down, I mean, short term, sure.
- [33:10]
David
What's the, what's the relative performance since November 1st?
- [33:15]
Mike
Okay, you can pick a point in time.
- [33:17]
David
That's a really important point in time. Right. Because that's before. That's when the regime changed. Right. You know, so it's, it's not random. It's, you know, okay, you know, by that by November 1, the markets that were pricing in Trump winning. So okay, here's the poly market. I'm just asking a question.
- [33:33]
Mike
Pull it up right now. I'm the Keith going to right now. I'm just pointing out the keys. The key thing I've been watching for decade a decade now is the bitcoin to gold ratio. It's the same as 2021, biggest pump in history. It got too expensive before we got it got down to 25 is too cheap. Now it's bumping up near 30.
- [33:52]
David
Can I make a point? Because there's a, there's a very specific. In the middle of your, of your last soliloquy, you made something, you said a little sentence fragment which I think is really. I want to pull at that thread. You said at some point it's going to be more like Treasuries and more like gold. Well, in order, I said.
- [34:09]
Mike
That's what I said in the past.
- [34:11]
David
Yeah. Okay, so fine. So for people who believe that that is true, understand that it. There has to become a transition for that to happen. That transition is, is you throw a zero on the back end of Bitcoin in order for that to be the case. Right. And so the question is, if you have an asset which in order to achieve that now it may, obviously the probability isn't 100. It was 100, it would be trading at 940, 000 instead of 94, 000. Right. So, you know, the fact is, in order to get there. How does it get there? We talk about deterministic paths all the time. How does it get there? It has to do that now. Will that happen? That's the question. So the question then is, what do we think about adoption for bitcoin to become more like gold and really compete at least on the edges, as gold does with Treasuries and fixed income? That's the question. And that's where a fundamental disagreement is, I think. Larry, do you agree with that?
- [35:07]
Larry
Just to answer your question, I just ran the numbers quickly. Since November, since Trump was elected, Bitcoin's up 55% and the market's down 5%.
- [35:15]
Mike
Right.
- [35:16]
David
So, but it's important because the reason that, that I say that Mike isn't to be obnoxious, although I'm clearly am obnoxious. I get that. And I'm always speaking you. So, you know, I understand it. But the reason I'm saying it is when you, you pick a time, which is right before the inauguration that we've already had the anticipatory blow off top, which clearly got overextended and traders lick their, lick their chops and smart people made a ton of money by shorting at that overextended first attempt out. If you normalize all of that, you kind of go back to November. And so 55%, it doesn't matter. The outperformance is, is Dramatic. And, and that's really the point. Continue. But it's not going to continue in your point.
- [35:56]
Larry
Mike's point's well taken. I mean we, we've only got you know, six months of data points or less. You know we're early in the, in the tank. But, but it is starting to occur. You know it is starting but the.
- [36:07]
David
But the price is still going to be Mike's way.
- [36:10]
Mike
Well it's, it's, it's, it's, it's like we're at the good test. Now. My bottom line point is that I've made predictions in the past that bitcoin was going to add a zero. I'm fairly simply it's going to drop a zero because it already added the zero. And that has a good reason to give it back partly because everybody's so bullish. The difference is now it has 14 million dependents and every time you see those things go down it pressures bitcoin partly when you see every all these allocations to bitcoin there is imagine the stop in this space there's gonna be hitting us A markets always hit stops. It's a lesson again I learned from Charlie D. You go for the stops and then you buy it. I think it's more likely to hit the stop and then go back up than to just keep inching higher from here because a lot of these people are in it expecting nothing but to go up, expecting past performance which they've seen and but he get rich. It's usually how it works. They'll get stopped out and then it's the time to buy like Amazon and 2002.
- [37:00]
David
So let's go back thousand for a second. I know Larry, I know you're itching to tell Mike that you know all the people you talk to couldn't give a crap about altcoins and that bitcoin that they're not dependents. It's the other way around. That's the statistical relationship. But, but forget that. Let's go back to 2000 because I think that this year reminds me a lot history doesn't. It does rhyme. And people who remember that we had a massive 14 sell off in one day in March of 2000 in the NASDAQ. I was sitting on the trading desk at Solomon at the time and you know we it, you know that March was horrible. It was down significant but the market against all odds with everyone saying okay, you know there, you know people were doomed doom predicting ground higher into June, July and then started a weekend and then, then the Fall was bad and the whole next year was bad. With the crescendo of September 11th being the, when the markets reopened after that was pretty close to the pico bottom at that point. I mean it is, you know, it was that. Now do I think that we're going to have the same sort of thing now? No. Why? I think that it would be an, I think that this administration would prefer and it if you're going to have a crash in the stock market for it to be in 2025 and for 2026 to be the rally off the bottom and make people forget what happened in 2025. Just like no one remembered when the election time the Afghanistan debacle from Biden. People don't remember. I mean they just unfortunately the entire electorate is like fine. It's like you know, Dory and Finding Nemo. You know they're gonna only remember 2026. And so what happens now? Everyone keeps talking about oh this is going to have impact on the midterms. Sorry but no, I wish, I wish the people were that smart that they could actually remember things. But people don't. And so I think that that's what we're looking at. You're right. I think this fall and in this late summer, this fall could be extremely ugly for what you, you like to term risk assets. I just think that will be the final proof of what's going on in Bitcoin because I think it's. First of all there's two things about Bitcoin. It's really small relative to the, to the stock market. Meaning that if you're going to pick something to save that's a hell of a lot easier to save. Takes a lot less capital to create the demand to that the supply just isn't there anymore. Right. To sell. And second, second is it's not tethered to earnings. And we're all talking about a serious earnings recession. Right. Does anyone disagree that we, we think that earnings in corporate America are going to have a real problem. That to me is my thesis. Now maybe you're right. Maybe it's opium. Maybe I, I, I, I, I'm wrong and maybe there won't be liquidity coming in in the back half of this. I think the market's anticipating too much liquidity now to hold up the stock market. I, I just don't see how we're not going to see a serious earnings recession. That to me is the issue.
- [40:06]
Larry
Yeah, no, I think that's, that's coming and then the questions are how does that Ripple through all the other marketplaces. And, you know, it's to be determined, right? I mean, probably most importantly, the question becomes, you know, where is that Fed put. Does it exist and at what level? I mean, in 2020, you know, in Covid, when, when the S and p was down 32%, he panicked and came in with all the guns. My sense is he doesn't want to have to panic. But my sense is also that if things get, you know, I mean, we know, for example, I mean, what. You know, there's some great things have happened since I was last on your show. I mean, when, you know, when they. The bond market got in trouble and arguably in big trouble. And that's why they did the 90 day pause on the tariffs. Correct? I mean, I think Cassette went to Trump and said, sir, we're losing the bond market. We can't have that happen. We gotta pause this shit. And so they did. And, you know, that could happen again. And if. And when that does happen again, you know, that's the third Fed mandate that I talk about in my book. I mean, that's when the big print will come in. So, you know, the question is just how far does it have to go? How long does it have to take? And at that point, you know, then Powell will have the political cover and he'll be able to say, hey, yeah, I'm an inflation fighter, but look, we were in a serious problem here, and the house is on fire, and look at how I came in and saved it, just like Bernanke did. That's. That's what's coming next. But the question is, what's the point at which that recognition takes place? And I don't know the answer to that, but I, you know, I think it. I think that's in the next six months.
- [41:37]
David
So, Mike, here's. Here's the interesting question. Does anybody. We all anecdotally know people. Do you know anybody that's involved in any company that sells goods, whether it's a retailer, a manufacturer, whatever? You know, anybody who isn't afraid of being laid off? Anybody?
- [41:56]
Mike
Well, that's the key point. It's not so much if they're actually getting laid off, it's your fear of getting laid off. That's a key thing that suppresses consumer spending. We all know it's a psychology of the human. And that is the fact right now there's a guy in my condo who's French and he works with a lot of import companies. He's glad he worked ahead. And a lot of his competitors are getting hammered. But that's the key thing. I think that's happening. I think if just look at the lessons of history. When you get to two times GDP and the highest market cap ever versus the rest of the world, there's only two examples in history. 1929 in the US, 1989 in Japan. Maybe it's different this time. And I just point out that when this whole thing started with cryptos in 2009 and when the whole rally started in the stock market, they've been together on the way up. The same thing with the dollar. Everything's linked. Cryptos, bitcoin, the dollar. Now they're starting to tilt lower, certainly crypto indices. Now I do get it. Bitcoin is digital gold. It's market capital. Its dominance will increase. But when the whole space goes down, you don't want to be long of highly volatile risk. Asset has a history of trading with risk assets, typically. And that's what's been happening this year. So let's look at flows in ETF. There's maybe up to $4 billion total of inflows in bitcoin. Yes, we've had a lot in the last few months, but there's almost $30 billion in gold. The thing is, we've had four years of outflows. That's my point is I still think gold is going to be the better performer at the end of this year. Better than bitcoin. And most notably, if the stock market goes down like again, we've seen that and it's already bounced a little bit. That's my point. It's okay, prove it now. But the macro is this is not anything. We know the examples we live through. But historically I did live through the one in Japan. I remember trading there a lot, remember a lot of my Japanese customers and people at ibj, the people I work with, they got it. They did well. But the general Japanese consumer didn't understand. And general Japanese didn't understand how expensive their market got. No, it's just it normalized. China is normalizing. It's us's turn.
- [43:54]
David
Well, yeah, there's a couple things in there. First of all, Japan was fascinating, right, because they were at pes. I'll never forget. You know, there's Business Week articles, all sorts of stuff. Look, I built the first index, our business on the street. I spent like the month of April of 2000. What is it, 1985? God makes me feel old. But I spent the month of April at the Imperial Hotel as the kid programmer building the Ability to trade the Osaka 51st versus the, you know, versus the stocks there and sent over my team, you know, to help build index arbitrage in Japan. And you know, you went to the Japanese stock market and it was funny. So if you went to the TSC in those days, on days that the market was up, they would stand, they literally would stand and clap. And when the market went down, it was like you could hear a pin drop. I mean, it was like such a, it was, it was really, really interesting. You know, it's like the national psychosis was about how the, the market was. And then that was right at the beginning of the time period where it dropped from what, 50 some odd thousand down to below 10,000. I mean it was, I mean an 80% drop top, you know, peak to trough that. That's big. We, we've never seen that. Oh, it's, it's, it's, it was, it was crazy. So understanding that. But why was that true? Well, Japan had this thing called Koretsu, which was the, the cross ownership of all the, all the equities and it was all tied down. And so the liquidity in the stock market compared to liquidity in the futures market was really, really tight and people really, really small. So the futures were 5x more liquid than the stock market. And so what happened was the Japanese companies were not allowed to sell a share of their, of the whole of this. And so they were kind of hamstrung. So the foreign companies came in and started selling futures. And of course that translated through to the stocks and you ended up seeing this thing pinwheeling down and down and down and that kind of locking in the market, it doesn't exist anywhere else. I have no idea what's going on in China. I'm not gonna, I'm not gonna lie. I have no idea if there's anything like that. But the reason I point this out is when you, you lock down your markets, bad things can happen. We don't have that problem here, right? That doesn't mean it can't, can't rhyme, right? But it does mean that, that we don't have that problem. There's, there's no structural reason for stock markets to underperform for decades like they had there. But even there, look at the yields that are in Japan. I mean, you know, we're, we freak out if it goes over, you know, the, if, if their yields, you know, potentially got to 2%, we look, oh my God, that'd be horrendous, right? You know, what would they do, yeah, exactly. And so you know it's, it's just a very straight. It's a very strange situation for us to understand but it is different.
- [46:42]
Mike
So let's but back up on that. I mean that's some great history and stories I really appreciate from you Dave. So I just love doing the analysis and top three major exporters in the world you just mentioned 1. Japan, China and Germany. Their average yield of their tanning ode is below 2% 1.8% Germany's the highest at 1 or 2.5% yet their exports about 25% of their GDP. Germany is the worst. They're complete export predator, 50% in their GDP. Getting hammered. And by the way BYDS and Teslas are pretty good because the compared their internal combustion engines. Everybody all the Toyota and Honda having a major problem. You see that deflationary thing. The key point is those three countries have GDP around 30 trillion. A little bit less about the US they're severe deflationary forces. And US has got one thing holding it up it's stock market. That's why I look at it. I can't take that risk. And Bitcoin is part of that.
- [47:41]
David
Let me ask you a question because specifically to that point have your economists analyzed what what is the correlation of consumer demand to the wealth effect or how important the wealth effect is for those who don't understand asking Mike about how much consumer spending is being supported by people who have their. Their stocks that they're using to rely upon as opposed to jobs.
- [48:03]
Mike
So I'll check in with that. I've looked at it. It's the highest ever in this country. Particularly if you go back to 1929. Only the elite owned stock market and they got hammered. But the key point I liked I used last year is we created and created $12 trillion of wealth from the US stock market. That's the most ever. It was 40% of GDP. Now this year we've only taken back to. Now we've only taken about back about 5 trillion. Now we've taken back almost all of it for a little while and we've bounced. There is. It's unprecedented how much that will matter in the economy. It's no comparison. There's no way to really check in history because 1929 was the only example. Now everybody's in their 401ks and now we all know that there's a. The if you look at US unemployment rate, it's a bull flag. We fully expect it to go near 5% by next year. That's our economics team. And that means people can't contribute to a 401k if you're losing money. If your neighbor's losing money, you have to find other ways. It's just this is a key case. There's no historical example, just like the tariffs. There's no example of jumping this high of the amount of wealth that's related to the US stock market in terms of your average human being in this country. It's uncomparable. Now I'll check the economist team, but they'll just tell you what I said. It's. There's nothing to compare to.
- [49:13]
Larry
Yeah, that's right. It's quite a bubble and I think we're on the same page about it bursting Mike. I think we're just slightly different. How it's going to affect the bond market and the bitcoin market.
- [49:24]
David
I think that's really comes down to.
- [49:27]
Larry
What'S the policy response. I mean you show me what the Fed does the big print. We could, if the Fed wants to sit on its hands, watch the whole thing crumble. Yeah, I mean everything's going down but.
- [49:40]
Mike
It'S, it's the point.
- [49:42]
Larry
It's.
- [49:42]
Mike
It's the point. Okay, so it's we all know started with the 1987 stock market crash when green spend ease 50 basis points that day. Now we, but we've reached the point of maximum return. We've reached the point where, okay, we've created way too much liquidity and we found that the risks of inflation. We still have too much liquidity and inflation and risk assets. So the Fed knows that and that means that it's now just back to the normalization period I like to call it. We have the high. I think we've had the macro high price cure. You see this commodities on an annual, maybe semi more than a couple year cycle now I think it's happened the equity market, we've seen the high price cure. Now we have to find out where the low price cures it. Fully expect the Fed will ease, but they're kind of behind the curve right now. When they do ease, it'll be a lot. They'll still 50 at a clip and then we'll get to a point I think where it's going to stay down for a long time. It was definitely in bounces because we've realized, okay, we've learned all those lessons of history of too much liquidity, inflation, the Fed and they'll buy bonds. That's what they always do. Why should that stop?
- [50:40]
David
So it's funny because the policy response.
- [50:43]
Larry
Will make buying bonds a suicide mission. That's what I would say.
- [50:47]
Mike
Well, no, when you, when it's your market. Come on, what do we do after. During World War II and even after World War II, we didn't have a big print, but we got out of that. You know, we grew out of it.
- [50:55]
Larry
Well, by exporting.
- [50:56]
Mike
Part of it was export.
- [50:57]
Larry
That was a completely. Yeah, they did yield control, but it was a completely different situation. I mean they had a much better demographic picture and they weren't running enormous budget deficits. I mean, the minute the war ended, the budget went into a surplus. So that's what saved us there. We, you know, we can't get this budget into a surplus without wiping out 50% of boomer entitlements. And that's not going to happen. So it's not at all comparable to World War II.
- [51:22]
Mike
Well, we used to have a saying when I was in the bond pits that supply drives bull markets. And the lessons were Japan and China. Now I mean that the GDPs are much higher and they have the lowest rates, but they're exporters. So I got to see that beef of it of having deflation in actual. Even though we have more supply and actually have bond yields going up, that's really never happened in this country. And if it happens, great. It'd be like bitcoin going up and stock market going down. It's never really happened in a long term picture. I'd like to point out it. There's only been two down years in SB 500 since 2008. That was 2018, 2022. And each time bitcoin went down many X's the stock market did. So like I said, it's just, let's see it. It's just usually it doesn't happen that way.
- [52:06]
Larry
It's gonna have to separate, no doubt. But it's in the process of starting that.
- [52:11]
David
So it really is. Yes. When you talk about it from a policy point of view, the question becomes how does the government respond? Look, we all keep saying the same thing. What I think are two things. One we don't know and it's very uncertain what they're going to do to help the supply chain dependent companies. What we saw in the pandemic was we learned something. And unfortunately it looks like they didn't learn this lesson. At least Peter Navarro didn't learn this lesson, which is sad, but we learned the lesson that the economy is very interdependent and we are massively dependent on upon Certain exporters, not just for finished goods, but for parts inside of goods. We didn't learn that lesson, or he did not learn that lesson, but the world did. And the Fed had to come in and do what they did because people were going to be out of work all across. And there was at the same time shortages driving inflation. What is the most inflationary thing that we can do into our economy? We could screw up supply chains. We learned this. Navarro did not learn this. He needs to go to remedial seventh grade, eighth grade middle school econ to remember to learn this. And, and the reality is we have the Secretary of the treasury probably using those words to President Trump saying, you know, president, with all due respect, we learned we can't screw up supply chains. We need to moderate. And so I think that's what you're seeing. Sorry about that. That's what you're seeing.
- [53:39]
Larry
Someone compared this to Covid too. You know, it's almost the same thing.
- [53:43]
David
But what does that mean? That means that we are the reason the Federal Reserve is like, what the hell guys? Is if you do things that are going to be massively inflationary, not because of the tariff one time jump. If you just did a 10% across the board tariff, no, but this, this wouldn't have happened. This was not about that. This is about uncertainty of where you could get your finished goods from, where you could get your parts and components from. This is about screwing over supply chains. And China is way too important within embedded in all our supply chain. You know, as I said, I talked to people in three different industries over the last week. You know, apparel in, you know, a piece of tech and machine goods. They all said the same thing. They all said that they're afraid that they're not going to be able to even get the components they need to get to be able to sell stuff. That, that's really important because that's massively inflationary, even way beyond the effect of the actual tariffs. So that's what's doing. So we'll see. So if the administration recognizes this and fixes it, that could be a big deal. But the other big deal is that is almost certain to create a dramatically higher amount of economic pain. Right. Than people think. So I'm not saying that, I mean, but I am saying that it could happen.
- [55:09]
Mike
But that's an analogy. I'd like to use that. I remember in 2008 when the price of crude gasoline, just saying this average price went up to $4 a gallon. That's only three. So that shows it's it was like July. Crude oil went to its all time high of 140 and by the end of the year was trading $40 and the average price of gasoline was below to that to me it's now I think it's worse because it's the whole supply chain thing when you can't get your Christmas lights but that's also a short term thing by come a year from now we'll finally realize oh you know we don't have to just offshore we there's ways we can create things in this country or nearshore but right away right now that's the key bent I'd say is yeah it's towards a normal way overdue recession that we didn't get in 2023. Now we have a great catalyst for it and I'd look at it as this year's don't be beholden to any long positions unless it's risk off assets and look to be trading tactically and so far that strategy has worked out really well and I stick with it.
- [56:04]
David
Yeah no I I get that I I get that. I mean it's funny there's one of the comments we got on Twitter is from Joe Carlosar I and he's like the market's only down 10 these guys are predicting a market crash. I can't believe how bearish we all are. I I want to be exceedingly clear from my perspective is we are careening toward that direction. In my point unless there's a policy change right. I think that earnings is going to have a serious serious earnings recession which will get reflected in the market to see somewhat unless policies change and we get easy money. If you get those things I think you can rescue the stock market but I think you need to do both. I think you tell me what do you think Mike? I think you think that you think it doesn't matter.
- [56:54]
Mike
Here's the problem. If we rescue the stock market eventually it's going to happen. It always has happened in history. You have to normalize when you have way overvalued risk assets in the US on a global basis and historically is the sore thumb the US stock market everything else trickles down from the cryptos are part of it. I think the process has started. Yes if I'm a trader I probably need to get stopped out a few times before it goes the right way. What I remember the first time I worked with Marty Schwartz but right now I look at it it just seems too easy as the first short was bitcoin getting unchanged on the year after it was seemed too easy when it was a 60 to buy. Now I don't trade anymore. I just look at it as I hope I would have done. But that's why I think the market's looking at it. And the thing is the masses, I don't get it. But why think masses do on a global basis are selling us stocks on rally rallies and. Because they have to. It's prudent. Unfortunately now.
- [57:42]
David
Right. Larry, your final thoughts?
- [57:45]
Larry
No, I just, I'll stick with my bearish guns. I think that this isn't going to be a good year for the market and I think it's going to be a good year for, you know, sound money, which is gold and bitcoin. So you know, it's, it's. To me it's a pretty simple strategy. Also good for gold stocks. Gold mining industry is just terribly undervalued and at least sound like Peter Schiff. Well, gold miners are going to become the new central banks. I mean they, they produce sound money.
- [58:15]
David
And well they, they do so by pulling it out of the ground at enormous costs of energy. Which Mike, I think you still think you're still calling for oil drop significantly.
- [58:27]
Mike
Well, see that's not profound to say it. It always. It has the last 20 years there's an excess of supply. Demand is declining. And who is who? We have a vested interest in going lower. So $62 a barrel. Yes, I made the call way too early. If you keep saying you'll be right. I think it gets to 40. Even natural gas pumped up to 4 this year. Typically bottoms near 2. We had a colder than normal winter. Are we going to get that two years in a row? In a global warming environment, it's more likely head that way. All the grains, the grains have had a decent massive supply coming out of Brazil. Why? Because the prices pumped up and they're all heading towards a low price cure. Unless we get a drought this year, they're all going lower. That's my point. This is just a normal trajectory. You need some kind of shot.
- [59:05]
David
We need to dig into that a different time. It's time to wrap. But we'll see what happens with the US food supply, what RFK does. Because there, there's going to be some interesting things going on on commodities. The only point I'll make on oil is simple. It's in 20, $25. What is 40 from history given how.
- [59:24]
Mike
Much monetary massive deflationary. Crude oil is one of the most deflationary commodities. It's a major commodity. But it's completely. I mean the price we see in the screen was first trade in 2005. That just shows you how humans create more with less every day. And we use. The problem is now we're using less. I mean it's just the fact I say my plug in hybrids.
- [59:41]
David
Can I ask one question? One question I'll ask is what was the cost of production the last time? Bitcoin.
- [59:48]
Mike
Bitcoin.
- [59:49]
David
Last time oil was at 40 the last time.
- [59:52]
Mike
Today it's about $50 a barrel break even cost. And it's been. Our data goes back from about 10 years. It's been dropping from 70. It's that. It's the, the. The rapidly advancing technology of drilling technology. Drill one drill now and you can go out horizontals, 20, 20 of them for four or five miles. It's just unstoppable. And now the rest of the world's adopting that and even China's adopting our techniques in evs and. Sorry. And genetically modified seeds and things. It's just humans create more. It's super abundance. There's a great book about it. It's a wonderful thing for consumers. But bad for prices. It's right.
- [60:24]
David
But it is good for inflationary expectations. That is good. But anyway, we could go on forever. Anybody have anything final to say or. We'll wrap it here and we'll see you all next week. I think Scott will be back from his jaunt to Dubai, then down to Miami for Formula one. He's racking up the frequent flyer miles.
- [60:41]
Larry
Thanks, Mike. Thanks, Dave. It's always good to talk to you, Mike. I really appreciate your perspective. Thank you.
- [60:45]
Mike
Thank you.
- [60:46]
David
Thanks, guys.
- [60:46]
Mike
Thanks.
- [60:47]
David
Take care.
- [60:47]
Mike
Thanks, David.
- [60:50]
Larry
Let's do.