← The Wolf Of All Streets
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- [00:00]
A
Well, good morning everyone. Scott's not here today, so you have to listen to me. So for that I apologize. But we have interesting stuff to talk about. We have a new Federal Reserve nominee. We have metal markets doing. And we'll let Mike McGlone start first doing what he said would happen and what is always happens in these things, which is enormous volatility. And we see fear. What was it this morning? I saw it at crypto. Greed. And fear is extreme fear at 16. So we're getting lots of panic and panic is when traders make the most money. So let's get into it. Anybody? Oh yeah, yeah, sorry. They want me to read something but I don't have it. Yeah, they're gonna, they. Hold on a second. We had technical difficulties by the way. Can people hear me? Because I don't see any reactions and I can't tell being. Being this. Okay, cool. So we have an awesome sponsor today called 0G. AI is reshaping the world, but right now it's stuck in the hands of just a few big players. But what if AI could run openly, verifiably and on chain? That's what Zero G is building. The world's first decentralized AI operating system open to everyone. Imagine a network where you don't trade tokens, you trade, store and run independent AI models at scale. No lock ins, no black boxes, no single point of failure. Just quick, cost effective auditable AI that everyone can use. If you believe the future of AI should be a public good, not another monopoly and not another corporate monopoly. Join us at Zero G AI. Okay, let's get into it. Mike, I teed you up. You behind the mic there or not?
- [01:40]
B
I am Dave, and yes, thank you for teeing me up. I think we have a quote from my colleague Jonathan Levin. Just headlined Trump demanded a Fed dove but chose a hawk. So so far the market seems pretty satisfied with Mr. Warsh as the next Fed governor, pricing in the potential that he might be a little more hawkish. But the bottom line for me is we have potential. You mentioned silver and metals. I think we potentially put that high in, in silver.121.65 was the high in the Bloomberg terminal which has similar inklings for gold. The difference I look at in terms of markets is this is all in the context of we've had a very mercurial present and we have 180 day volatility in S&P 500 running at 11%. If we end the year there, it'll be the lowest since 2017. So my base case is volatility will pick up, we will get. And that's where I see at some point we shouldn't even be considering buying risk assets until volatile gives you a decent bid and a decent discounted price. I look at cryptos as their bear market and you're supposed to be acting accordingly, selling relics. Now one thing I've noticed is tether has broken through that key support of 1.82. I'm not tether, I mean XRP. As far as levels in bitcoin we're still people, you know, still holding their 80,000 but it's broken blue. It's 100 week moving average. It's never done this with volatility so low so probably going to just go down to the next level. I still use a hundred thousand as the key resistance. I don't think we're gonna get near there but I've lined them all up now. Dave, I see even silver I think before you went my test very nimble shorts because it's a bull market now I think it's potentially a peak peaking bull market. We have good resistance to work out anything work against anything near 120 is kind of silly and normal reversion is back towards 50 and we might see that this year. I'll be publishing on that on Tuesday. I still have initially in the same headline as just the normal reversion in bitcoin is towards 50,000 and the bottom line for me is we've reached good resistance in things like natural gas around 5 and the UST bond around 5 in copper around 6 we're there now and Bitcoin image 100,000. There's so many markets have done this in the first month of the year. To me they're worth testing shorts and the bottom line I say that from a prudent standpoint because they're all dependent I think on one thing to get above those levels that I've mentioned already you have to basically have volatility stay real low and the s and P500 to stay above 7,000. Now I might print there again but we know how these round numbers work. It's the first month of the year and I saw I'm sticking with my game plan for this year as voltage will rise. It's a traders environment. We've got some great opportunities so far and I'll end with one other additional one is last year's mean meeting and mode and crude oil was around 65 and right now it's around 65. It's a bear Market, everything's trending lower and you don't sell in the hole.
- [04:44]
A
In the bear market.
- [04:45]
B
You wait for bounces. So is this the peak? We'll see. We have, you know, potential things going on this weekend with Iran, but 65 to me is the first level is a prudent trader. You looked at reset shorts and I just see they're all lined up. And for all these levels to stay above these levels, particularly silver above 100, bitcoin above maybe 90 now and copper above 6 is the stock market has to go up and to me that's where at that stage. So I'm sticking with that.
- [05:12]
A
Well, we all know, I disagree. I think that it, when you value it in dollars, it's different, you know, like I know there's one other person on, on this panel who, who looks at this stuff, but he didn't raise his hand and a lot of you did. So go for it. Hey David, how are you doing?
- [05:25]
C
You know, I always respect your, your knowledge of both traditional markets and crypto. You're one of the few people that understands both. So that's why you and I have intersections. Look, we the complete breakdown of a correlation that a lot of people thought existed three years between silver, gold and bitcoin.
- [05:44]
A
It's broken.
- [05:44]
C
I mean if it hasn't broken, for goodness sake, it's obvious. I actually think the correlation that we, that we have from risk assets and bitcoin are spot on when it comes to traditional assets. When you look at the breakdown that took place after the October 12th deleveraging breakdown, that's when everything started to falter. And if you look at the S and P return, I believe it is flat going back to October. So what we have seen are rotations from a bifurcated market that has existed for much longer than people realize since the baton went from shale oil in 2016 to semis and Nvidia and the revolution that came through gaming through bitcoin and now through AI, it has been an amazing transformation. I do believe we are range bound in bitcoin and we will be as we get closer into the approval of Kevin Warsh it will get better. Kevin Warsh isn't what I would call a bull of crypto or a bear. He's going to find ways to incorporate it with Besant, who I think, you know, they, they're friends, they work together at the George Soros Fund. They were currency experts. They caught both of those trades when, when the yen broke down. I believe in the, in the early part of, you know, in the, I don't know, 2010, 11 range and then the same thing.
- [07:09]
A
They're undeniably the. The point. It is undeniable. And your point. I just want everyone to, to understand. Eladio says a lot of things. Besant and Warsh are clearly aligned and clearly understand that we need to do multiple things to grow out of the debt. Yes, there is a need to inflate the debt away at the same time as we need nominal and, and real.
- [07:35]
B
Genius.
- [07:35]
C
No, we need real gdp. That's what we need, buddy. We need real.
- [07:40]
D
Of course.
- [07:40]
A
We need real gdp, of course. But the point is they understand grow baby grow and grow baby grow is not the same thing as financially, as financialized. And, and that is different. And both of them understand Bitcoin's role and both of them have said things similar to things that Scott and I have said, which is that there's a lot of crap in crypto, but a lot of really good things in crypto. And so, you know, looking for broad based, you know, bullshit is not the same thing as understanding. You know, I did just a quick thing just, just to put this in perspective. Let me find the right tab.
- [08:12]
B
Hold on.
- [08:13]
A
So Kevin War said things that are interesting. He calls bitcoin an important asset. That doesn't make me nervous. But he said something that is one of my favorite. He said it's not a substitute for the dollar, but can serve as a very good policeman for policy. It's something that I've said many, many times, meaning, you know, as a replacement for what gold did do. And he calls it the new gold for people under 40. And that is hugely important. So, you know, if you get on binaries and talk about hawk dove this and you miss the nuance of what's happening, people forget the Federal Reserve is a hugely important regulator. I wish Caitlin Long could join us because she could wax.
- [08:51]
C
They're too powerful, Dave. They're too powerful.
- [08:54]
A
And, and he's also been critical of that, which is another really interesting phenomena here. So, I mean, I think there's a lot to talk about. Anyway, I, I interrupted you. A lot of. If you have any more to say.
- [09:04]
C
No, no. And look, we're gonna get a bottom and we're gonna get a bottom probably two to three months before, before we see the first rate cut. There you go. So three to four months before the first rate cut, which could be June or July. I don't know if it may not be June again. I haven't looking. I'm not looking at the fomc. Calendar. So as you want to all risks want liquidity. I do believe that that breakage in correlation between gold and silver. Gold has more industrial applications. But the gold boom has a myriad of reasons and it is also partly because of the uncertainty of the changing of the world order that is taking place where we're becoming a more China Indo centric world as opposed to a European centric world of the previous century. And that has some repercussions. And gold is, is, is, is, is an insurance policy for uncertainty and that's where it departs from crypto. But I see a bottom in crypto or specifically that the champion of crypto, which is what I look at the top one maybe two to three months before we get our first rate cut and it's going to be a meteoric rise. But I don't know if we're going to break below. I don't think we are. I think we're going to hold 75.
- [10:22]
A
Okay, can you guys still hear me? I can't tell, but Gary, I think you were next.
- [10:27]
E
Yeah, I wanted to, I can hear you. I wanted to bring up and get, get opinion from people here. You know, there's a number of players out there that are putting a correlation between the ratio or historical ratio of crude oil related to how the dollar responds. And also they're attempting to correlate silver ratios with crude which reportedly have been two to three times. So silver's oil has been priced at two to three times silver, suggesting that at a $90 print on silver, you know, we need to be at $300 crude oil. Now I don't see how any of that makes any sense. And I don't know if honest is in the room, but I don't see these crazy predictions for 150 to $450 crude oil. It would suggest to me if that correlation is going to hold, silver has to get just bashed down back to the 30 to 40 range. Because this economy cannot tolerate 75 to $100 crude oil. Well, I mean it probably could tolerate it, but it's unnecessary. There's plenty of it all over the place.
- [11:44]
A
There is such a huge difference. I mean, oh my God. I mean I can't, I would love honest, to be honest, he's saying that because I've never heard anything that makes less sense. I mean silver, we're in a massive structural deficit and the battery technology that has, that is being invented now is no different in terms of how important it's going to be to what Cisco did For routers. I mean routers used to be literally 20 times more expensive for, you know, and Cisco then became, you know, came in, invented cheap, fast, you know, routers, which is powered an enormous, enormous change in the way computations and data centers, everything were structured and it quickly gained market share. If Samsung's battery technology is half as good as they're talking about because of using 32 ounces of silver in one electric car, you could do the math. And right now we have 20,000 tons a year of demand for silver industrially and that leaves us at a fairly significant deficit. The projection is if you got to even 50% penetration just in EVs and that doesn't count what that technology can do in terms of sustainables and terms of solar walls and power and houses. There's so many other applications. You're talking about 60,000, you know, tons, which is more, you know, effectively going from 20,000 to 80,000 in demand. I mean that and mining capacity in silver is really hard to bring online. Whereas you are correct, oil capacity is really easy to bring online. So if you talk about long term trends, that decoupling is guaranteed. Now in the short run, yeah, you know, look, short run volatility is baked in the cake. That's absolutely true. I mean nothing of what I'm talking about has anything to do with what the price, price will be in the next month. But if you're going to talk about 300 oil when our technology for extracting oil has gotten so much better, I think that's nuts. I mean I, and I think that's what you're saying, right?
- [13:39]
E
Well, it's not what I'm saying. I'd love to hear from McGlone, but it's not what I'm saying. It's what other people are, you know, they're going back 90 years and there's a historical trend. I think the point I was, I think all these trends are breaking apart. I mean they're falling apart. Like, I don't think you can look back at history and say, oh these, these spreads, these ratios between commodities and money and currencies are going to all stay consistent. When we're having massive technological changes, like we're just going to have to, I think we're going to have to get used to a very different world. And maybe the metrics that we've been measuring things by are just wrong or they're maybe not wrong. They've been right up to this point, but they're not going to, you know, maintain their linkage going Forward that, that, that's what I would like to hear because I don't see how $100 oil is helpful to this marketplace. But I also appreciate, hey, the dollar is being degraded.
- [14:37]
A
We directly attacked you, so go ahead. And then Amateo, Andre and Mark and then a lot of you again, they've got a lot.
- [14:43]
B
It's, I think it's appropriate to mention that this week silver reached the highest level ever versus oil and versus copper. Now, in terms of commodities, when people say electrification and the demand for electricity, the first place I go to is copper and silver. Now, we've had those rallies. Those are priced in. They're extreme. They're probably going to pull back. Everything you say and read about deficits is over. As of now, that's shifted. When you have a parabolic rally at, you know, at three to four standard deviations, that shifts. And that's how history guides. So one thing people are doing is missing when they make silly statements about that. Missing the difference between the numerator, dominant denominator. It's just an example of how silly expensive silver is. So I state the case. I think silver is going to go back to 50 this year, still be expensive. That might be a low. And the long term high that we put in yesterday was it Wednesday at 121.65 might last for a decade. The problem is I'm going to call my mother and ask her when she's going to start, you know, cashing in that candelabra she used to have to polish when I was a kid. It's just the key thing to remember. And Gary, you're right. There's a major changes going on in markets and commodities. And that's where I point out is stay away from any type of overweight positions and look to be a responsive trader. And there's nowhere near a bottom. I think in most risk assets, cryptos are just leading the way. But in terms of commodities, don't worry about Corel going up. The number one thing to remember about energy prices is we have an election in November, we have a president, there's going to be a sweep against him. If it were right now, if inflation doesn't go down, energy prices don't go down and bond yields don't go down by the time we get to November, which includes natural gas and crude oil, it's going to, you know, incumbents are going to get crushed. They will go down because they have a way to make them go down. So I see. That's why I mentioned crude oil. Short around 65 just to test it. Even natural gas that these contracts around five, it's about the same as the bond yield.
- [16:33]
E
It's probably unlikely Mike, this nat gas move is all about this polar storm that was going to come through here and drop 3 inches of ice and it didn't happen. That's going to come and go now. Like gas will be back to four bucks in a month.
- [16:49]
B
It's at four bucks now. It was 380 yesterday. That's because we got rid of that Feb contract. We're in the March contract now. But you're exactly right. So let's think about what humans do. Within the next six months we will be bringing on as much supply as we ever have. Particularly with a little more motivated motion from the current government from prices particular. And we'll be so set up for a third colder than normal winter amidst global warming. And if, if we as humans fail that that's our fault. So natural gas always goes down after it goes up. And when people tell me it's different this time at 5, I say good luck. I just, you know there's a lot of people in the graveyard who bought five and ended up getting out at two.
- [17:25]
A
Yeah, I, I think that's right. And you and I can argue about all the other stuff on Monday since we got a bunch of hands up. I'm gonna reach. I think I have Amateo as the order, then Andre, then Mark, then back to Eladio. So Amateo, you there? Hey.
- [17:38]
F
Yeah, I'm here Gary. I don't really have an answer for.
- [17:42]
B
Your oil question, but that just seems.
- [17:45]
F
Like a very gross estimation overestimation when it comes to the amount of oil reserves that we have and even the fact that we've now co opted Venezuelan oil reserves, I just don't see that. But I mean I think we've been talking about gold and silver so consistently and I think maybe we finally put it in a top here. I made a post the other day that you could sell all the gold in the world, every single ounce at 5,300 bucks which is not even there now and still not pay off the US national debt. I mean I just think that that's just such a remarkable fact. I can't get over the fact that that's true. To just show the sheer size and scope of the US national debt. And every time we've seen these big market moves we keep seeing volatility increase even though that the stock market keeps tapping all time highs even though many of these big Stocks keep touching all time highs. I just keep seeing increased volatility. And as this volatility increases, metals have been spiking and risk is coming down. The risk appetite seems to be coming down. I think that bitcoin as usual, is sort of a canary in the coal mine here. And so when I look at this new Fed chair coming in with strong currency background, I can't help but think there's going to be a desire to backstop this entire trend of dollar debasement. I don't think that he's, of course it's growth, but if you look at the debt and you look at the whole world spiking metals and now hoarding them, making it illegal to leave countries with them, they're coming for your metal. We obviously know that's the value prop of Bitcoin, which will be realized over time. But you look at all this and you go, okay, how long are they going to let the dollar debasement trade take off? And so I think that eventually we get a desire to backstop that here and try to figure out what to do with the debt. But in the meantime of all of that stuff happening, there is going to continue to be risk off and, and I think that we'll see this leading up to it and I just don't see that reversing in the short term.
- [20:24]
A
Andre.
- [20:27]
G
Hey, happy Friday guys. I tend to disagree, but I'll, I'll lay out my rationale. So first to your point, Gary, I think there is like an inverse correlation between like things like the dollar and metals, right? If you look at like the CRB metals index and for instance like a broad effective exchange rate of the US dollar, right, including emerging market currencies and so on, there's like an inverse correlation. And you saw it during like the 1990s, late 1990s, when like metals prices were depressed, right. But the dollar was like extremely high. Right. And you saw like the, the opposite picture during like the Commodity Super Cycle 2010, where the dollar was very depressed, but metals prices, commodity price in general were very high. And what I'm seeing right now, I think my thesis right now is we're actually looking at the biggest reflation since 2020, 2021, since five years, with very similar implications for bitcoin. That's why I actually put a post out yesterday. I think bitcoin should actually cheer this kind of precious metals, really. And it's only not visible in metals. It started in precious metals, also in some major industrial metal like copper, right. But it has moved on to CRB raw industrial, so industrial commodities and also it's now moving into energy. Right. He saw the spike and I guess maybe like winter storm related or not like, I mean but it makes sense. And now you also see like break even rates picking up. So market based inflation expectations are picking up. And connecting the dots to bitcoin, what it means for bitcoin, I mean many, many observers, many analysts, they've noted that Bitcoin is this kind of macro asset, right. And what we've seen over the past essentially three and a half, four years is like ISM manufacturing index. Right. So the business cycle has moved more or less sideways. Like the ISM manufacturing index was in contraction for like three and a half years. Right. And this kind of reflation in metals metal prices and so on is actually implying like a significant re acceleration in manufacturing activity and so on. And it's actually coming from China because their PMIs are picking up, they're reflating the economy. Right. And so my thesis is we'll see a kind of rotation from gold safe haven assets from precious metals to Bitcoin once you see a return risk appetite. Right. And we probably see this kind of return and risk on yeah, probably once the ISM manufacturing index starts to re accelerate and yeah, I think that could be one of the key catalysts going forward. Mark.
- [23:29]
H
Thank you Dave. So Andre, what was your last point? That, that one, it fell off on my end.
- [23:37]
G
So I mean I think we'll see a rotation once you see a return risk appetite because the bitcoin gold relative performance tends to cycle with global risk appetite. So if you have a risk on Bitcoin tends to overflow gold and vice versa. And I think we're about to see this, it's not too far away. I think it's max two months I think will happen this quarter essentially that we'll see a return risk appetite.
- [24:02]
H
Yeah. So I'm going to start off with an analogy and if you guys have heard it, please put a pin in me, go to someone else. And then I'm going to go into specifically the equity market which draws across a lot of what you guys are saying. The first one is as far as bitcoin is concerned, hugely disappointing. Want to throw up in a corner, you know, everything like what, what Gary's been saying about, you know, it can go lower, I'm not selling but it, it's gonna absolutely disappointing. Now all that being said, realize that.
- [24:34]
A
That the whole world is saying the same thing and that's exactly what happens at bottoms, right?
- [24:38]
C
Yeah.
- [24:39]
H
So, okay, all that being said.
- [24:43]
B
I.
- [24:43]
H
Go back to certain frameworks and once when my wife was pregnant with our second, she was running these, these nursing groups called Eletri League and it's about helping new mothers nurse. And she unfortunately had a meeting, but was upstairs with, with our, our son. Or maybe she was giving birth to another one. I don't know. We've had too many kids and I was stuck with the meeting. She's like, mark, you've heard enough, you run it. So yeah, just figure that out. So a woman says, well, you know, I don't know if my baby is well because I can't tell how many ounces of milk. And all this because everyone says a bottle. And the answer to that was the only one answer I knew. So I'm glad she asked. It was that, does your baby have seven wet diapers? If your baby has seven wet diapers a day, it's getting enough milk. And right now that's my answer to bitcoin. Is there debasement? Is there good hash rate? Are the miners still operable? Is the thesis still intact? We have seven wet diapers as far as the bitcoin thesis is concerned. So that's the only thing that lets my head hit the pillow because this is an awful market to watch. The gap between precious metals when you're having the perfect thesis layout and you're down on a three month, one year, 18 month basis. So that's the broad market. On the equity side, the rotation into small caps. I don't know if we can call this a risk of market. When the vacuum of these 50 to $150 billion companies like SanDisk, Western Digital, you know, even Deere and Caterpillar with the infrastructure trade, I mean, you know, U.S. based revenue, that's, it can't last long because once they get to a certain level, people back off and they can't carry the whole market higher. But I wouldn't call this a risk off market. I would absolutely call it a rotation. It's fiscally dominant and because of the policies from one big beautiful bill, this.
- [26:49]
G
Space was downloaded via spaces down.com Visit to download your spaces today.
- [26:53]
H
And the tax, there's a, it's a huge opportunity going on and it speaks to the data miners which are, you know, shifting from bitcoin to, to data. It's a huge validation of the investment in the bitcoin infrastructure which is now being bid up the ass because they invested in electricity and, and energy contracts. So that's the relationship. Seven wet diapers why? Because the what's bid in the market now is a fucking bitcoin infrastructure. So that's one thing that hasn't been brought up. Hopefully I landed that plane. I'm backing off now.
- [27:28]
B
Dave.
- [27:29]
A
Yeah, I don't understand. It's not bitcoin infrastructure. I mean look, Trump literally yesterday said that he believes that the United States needs to double. That's the number double our electricity production and grid. And that's mostly from AI. Bitcoin is, is a very important component in maintaining and stabilizing grids. But so that that's relevant. But if you understand that we're going to a world where electricity becomes the single most important part and driver, then you position yourself.
- [28:02]
H
Absolutely. And so you're right, it's not a core driver. He's not looking at the bitcoin miners. But my point was, you know, looking 17 years ago. But what Satoshi said is we need to have you know, a proof of work animal. And then the miners went out, built it, they got the energy in front. So the focus of building something that is now converting to a higher margin product, I think you know, AI right. You have what iron going to 70% I think data center over the next 18 months. So I think it validates the thesis about what a good money is built upon because everyone else understands you need to have energy to back everything to be relevant. So corollary.
- [28:47]
A
So Eladio, I know you, you've been waiting patiently again.
- [28:51]
D
Oh no.
- [28:51]
C
This is an incredible conversation. I love what Mike just said before who was talking was this tone who was talking before me?
- [28:59]
A
Mark.
- [28:59]
B
Mark, I love your words.
- [29:02]
C
I think you're spot on. I guess I already follow everybody that I, that I think is smart on act. So let me tell you, I put a chart up that really should be the biggest indicator of what bitcoin will do. And it is a liquidity animal and it's the 10 year which by the way Dave, you're maybe as much of a nerd as I am. In the 1950s we passed a law that pretty much stressed three things the Fed would do. The last one of those a lot of people never talk about is where the level of long term rates are because that gives the government the flexibility to push off debt for future generations. And that, that is the essence of the problem here. There is a breakage in correlation that we have seen for years and there's no question that gold and, and, and obviously silver has completely decorrelated from, from for crypto. Crypto is a pure risk Asset with incredible advances for the, the, the independence of the banking system. That's the future. But we've gone through the first phase and the same way we went through the first phase in AI will not be as easy to make money. And it's a maturing asset and you should all be great, happy. But the problem I see with crypto in the last four years and now I think we're more realistic about how it functions within the traditional markets as it, as we see more tokenization. That is the biggest thing that crypto has going. Stablecoin, what tether just pulled, pulled and buying the incredible amounts of gold that they just did shows you that what we're going to have is a bull market at the same time that we actually have an escape velocity in the growth of GDP in this country. I keep wondering why is it so difficult for people to realize that we will probably see plus 5% real GDP growth next year when we already post a 4.3% GDP growth that's going to offset a lot of this. But stablecoin is the key. It is the, it is the, the tokenization of additional risk assets that gives crypto the biggest push into the future because it's going to help us solve some of the reckless policies that we've introduced with fiscal spending. And the tokenization of, in the CBDC part of the business is going to help traditional assets offset the reckless policies that we have seen in government.
- [31:46]
A
I think it's important before Andre, I just want to make it clear crypto and Bitcoin are not, it's not the same investment case. Bitcoin is correct.
- [31:55]
C
I'm limited by finra, who I'm going to fire soon.
- [31:58]
A
Okay, well, okay.
- [32:01]
C
Specifics.
- [32:03]
A
We, we always do this and it's important. There are, it's not just stable coins. It's eliminating enormous frictions in our financial system. And a lot of those are. And there are just many of them. And you know, we could talk about what those are and what, which chains and which assets. I mean my best guess is north of 95, probably 98% of current crypto assets will be worthless in 10 years. But the 2% that are not, plus whatever new ones that come will be worth 10x what, what everything is worth today. And so if you understand that, then you know, you invest accordingly and you know, you can make your own bets as to which are the 2%. And that's up to you and everybody else. But I mean that's my working thesis and that, that kind of is very orthogonal to what you just said because people who think that all their bags are going to get pumped just because you know you can get more in crypto, well, that's fine, but the value has to go there anyway. Andre, you have your hand up and I don't want to, I don't want to just drone on myself.
- [33:03]
G
No, no problem, no problem. I just want to like connect what, what Nadia has been saying. I mean, I agree. Like if you look at correlations, right, between Bitcoin and US treasuries and gold and the S&P 500.
- [33:18]
B
Right.
- [33:18]
G
Bitcoin shows like a way higher correlation to the S&P 500 things still about 0.5 to 0.6 for past three months. So it is a risk on asset.
- [33:29]
C
What about the QQQs, do you have that correlation with the QQQ? Because I think it's higher.
- [33:33]
G
It's very. It's even higher. Yeah, it's like it's. But still around 0.6. But if you compare to goal like it's zero. Right. There's essentially no correlation whatsoever all past three months. Right. But I think the interesting thing is and what you've also posted here, there's a smaller correlation between Bitcoin and US treasury bonds historically than between gold and US treasury bonds. So gold and US treasury bonds are way more correlated, which does make sense somewhat because it's way more interest rate sensitive. So bitcoin tends to be a better diversifier against bond risks, while gold is a better diversifier against equity risks.
- [34:18]
F
Risks.
- [34:18]
C
Right.
- [34:19]
G
Even during like down days, if you look at S&P 500 down days, gold tends to outperform Bitcoin. But during US treasury down days, it's the other way around. Bitcoin tends to outperform gold, which is super interesting. So both make sense in a portfolio. Yeah. And I just want to mention that and maybe coming full circle to what I've just said earlier. Right. So if Bitcoin is a risk on asset, calls risk off asset. So this relative performance is the risk on risk off ratio. Right. So that's what I meant when I was talking about if the moment you see an increase in risk appetite, Bitcoin should outperform again.
- [35:03]
B
Dave, can I just dig into a little bit on the stable coins. I like to call them crypto dollars. Make a prediction. I think tether this year is going to flip in Ethereum. I mean it's slipping to everything. It's been the most king that really draw me to the space initially was bitcoin was the proliferation of crypto dollars. We all remember 2018 tether was $2 billion. Now it's 148. What stops all crypto dollars from going to. Scott Bessen said going to a couple trillion. It's the key thing I think that's shifted that people I think are not really understanding that is that peer to peer cash factor for bitcoin is done. We don't need it anymore. We've got crypto dollars, we've got stablecoins coins. So you don't need to take the risk but just a normal bear market. Then it'll be. So right now it's bitcoin ethereum tether. To point out that's the most enduring trend in the whole crypto space. It's tether flipping in other cryptos. I think it's going to be bitcoin and tether by the end of the year. Well, one and two.
- [35:57]
A
Well, as I said, we'll dig into that on Monday. My, my best, my. The one rejoinder I would make is everything. More things move on chain in general, the more businesses will ultimately get disrupted by technologies that leverage those. That thing moving on chain. I am not an ethereum bull. We all know that. I don't know there's anybody up here who wants to argue that point, but I think that that's a false comparison. I think the real comparison is the technologies underlying it that will disrupt everything from securities lending to interest rate swaps to, you know, prime brokerage in general. The notion of bitcoin and Warsh's appointment is hugely important in terms of the ability of bitcoin banks to become actual, actual business models. And I had dinner last night with a friend of the show, Matthew Roszak, who's building a bitcoin bank in Poland. And we were talking about what you could actually do, you know, in an economy and what will actually happen and why fractional reserve banking is. It was incredibly important in a world with no information flows and no Internet, etc. But now you can make a really strong argument that fractional reserve banking has enormous, you know, excess risk and probably isn't worth, you know, the, all of the incredible subsidies that we give to the banks. I mean, I mean the banks in the United states alone get $180 billion a year sucked out of the economy and into their pockets, you know, into their bonuses, etc. Etc. I mean it's just, that's just a fact. And when you start looking at stuff like that, understanding the potential for crypto to be a multiplier effect as you get and enables new business models. It has nothing to do with any of these correlations. Everything I'm talking about is long term. It's not trading advice and I want that to be seedingly clear. Anyway, I see both Mark and Andre, you have your hands up before I pivot the conversation. I just want to make sure you have a chance to talk. If in fact if they're not shadows.
- [37:52]
G
Great, I'll, I'll jump my minus the shadow man.
- [37:56]
H
Well, I'll touch on Andre first the correlation and then I had something else really important to talk about which I'll remember the Andre, you're dead on. And I forget. Eladio added that nasdaq's even higher. The correlation going into year end and into the new year was at, you know, kind of at 62 for S&P and I think closer to 70 for NASDAQ with the, with bitcoin and yet the performance had diverted to a nine to a fifth percentile. A lowest Bitcoin underperformed the S and p by like 28%. So and I'm sure you already talk about this but when you're Talking about the RIAs and trying to figure out nuggets and I use these calls to try to even though I blather to try to get these discrete nuggets of information to get people's attention, you know the correlation, it did not correspond to comparable performance over those last three months of Q4 at all. They were wildly different. High correlation, high underperformance. So that's just that one little thing for the group I wanted to share that I find helpful about you. Tell me people understand it.
- [39:10]
C
Can I step in on that point? Because that's really important. Who said that?
- [39:14]
H
Mark.
- [39:15]
C
It was. Oh Mark, that is an excellent point. It's all about staggering of pricing. And if you think about it, Bitcoin is a leading indicator by leading or a canary in the coal mine means that their breakdowns will take place sooner. Three month periods are too short for any reliable technical analysis. I think you need to see if you're going to see a correlation break. Sort of like the the correlation between oil broke and the Dow and the S and p back in 2016. I believe we're in one of those pivot points. But Powell's hesitancy to lower rates and the fact that we had to wait till May is why we're going to have this lull. We're priced. We were priced to perfection from a coral and Larry. A coral and correlational asset pricing model, Bitcoin broke down first and tech has been, has been rotating out. So we've been. So I think that that pricing model of. Sorry I said, a derivative of the QQQs is sticking and Bitcoin will bottom before the NASDAQ 100. And I believe we're starting a correction. It was a buy the rumor sell setup where all the stocks price perfection before these earnings and now they're giving back all their price appreciation in the last two days based off the fact that the markets price things before they happen. And that, and that that is happening at an earlier stage than it used to 20 years ago.
- [40:52]
A
I mean, Robert, are you behind the mic right now? Because I think there's probably a bunch of this stuff I'd love to hear your takes on. So, I mean, look, I think that, that bitcoin trades like an option. I've said this many, many times. When you start taking three month recency, when you take recency bias into it. We had an event on October 10th that was unique to bitcoin that had no impact, absolutely nothing to do with what went on at the NASDAQ or any of the other assets we're talking about. And so when you look at correlations in the aftermath of a 19 trillion, Nike trillion, 19, you know, whatever the number was. It was $19 billion liquidation event, 5 billion of which was in bitcoin. But it took out the entire crypto complex. And it was due to, you know, like I won't make bones about it, it was a brilliantly engineered manipulation attack. There have been those manipulation attacks in Bitcoin for a very long time, but they've never been at this scale. And you can see it on the graphs of it. And so every time you start looking at technical analysis, comparing bitcoin prices to this, it's just without that context, it's problematic. But when you think about what's going on in terms of being able to measure policy and you look at all of the things and indicators you look at, I mean, some, a lot of these correlations are spurious. I mean, and I know you agree with that because I've seen some of your posts recently and I'm curious what you think.
- [42:13]
D
Yeah, I would, I would point out that, you know what I, what I think is informative when it comes to bitcoin correlations. Bank reserves, generally, when those start, I don't see Bitcoin as a transaction vehicle, you know, a medium of exchange or unit of account in that sort of way. I see it much More akin to, to M0 rather than M2. And we know it's very liquidity sensitive. I do agree kind of with that general view that, you know, kind of last functioning smoke detector and one of the earliest indicators of liquidity. Well, if you look at when bank reserves generally start to bottom and head higher in a period of Fed expansion, when it comes to their, their balance sheet generally bitcoin over the next, you know, three months does quite well. Six months over the short to medium time frame, generally when bank reserves start to increase, Bitcoin does as well. And then I would also say that recently it's kind of interesting to me that Bitcoin's been trading with a positive correlation to the dxy. So you know, obviously with gold, for example, when you have the Dixie rallying, generally that's not good for gold and vice versa. But with bitcoin it's actually positive correlation. At least it has been recently. Which to me again kind of plays into the, you know, bitcoin hyper financialization that, that a lot of kind of, you know, OG bitcoiners have have decried, you know, is the market. Clearly there's, there's a pretty strong correlation, positive correlation recently that the market views Bitcoin as part of the dollar complex, part of the kind of US financial system complex. And that gets into kind of geopolitical argument that I've made before, which is gold is kind of a bet on China. In bitcoin, I see kind of as a bet much more on the US but, but that's a separate conversation. I would just say that, you know, with, with the Fed increasing the balance sheet bank reserves I think up by about $200 billion over the past two months and you know, going to continue higher. I think that that's positive for Bitcoin. I think that, you know, the correlation that I think really matters when it comes to, you know, spy QQQ is neither. I think that like something like Palantir, if you look at when Tech and the Mag 7 and the High beta tech really started to falter, it was within a week or two of when bitcoin topped. If you look at for example, you know, SPY relative to RSP relative to XLK or those sort of things, you know, when we start to see kind of the broadening out in, in the equity market and the top in that kind of high beta tech corner that would, that, you know, again within like a week or two, I think it was, was the top in bitcoin. So unfortunately the market views it much more Akin to kind of a high beta tech stock. I don't think that that's accurate. But if we are going into a broadening out, an acceleration in nominal growth, which I've been saying would happen going back to April 2025 when we had that, that negative GDP print, if we're going to continue to run it even hotter and you get a real broadening out, you get falling interest rates, I think that we're going to get much more than two interest rate cuts over the next year or two. If you believe all that, then what is good for the American economy was good for the average median American which is I would argue the hyper concentration of the Mag7 driven rally of 2023, 2024 was not an indication of a healthy economy.
- [46:04]
C
Right.
- [46:05]
D
So what might be good for the kind of real economy, good for the median American broadening out when it comes to growth and you know, kind of this reflation, that cyclical upturn sort of thing that could actually be bad for bitcoin if it continues to trade as a high beta tech stock, you know, a mag seven times two, it could actually kind of be a headwind for bitcoin. So there's a lot of kind of cross currents. You know, I think that there's a lot of volatility obviously a lot of uncertainty over the next year or two. Personally, I bought more this morning. I think sentiment is so extremely negative and, and you know the, the, the ta, the trader in me.
- [46:48]
B
Right.
- [46:49]
D
You know it, it, it's holding that 82, 825 or whatever it was, it's holding there. I don't know, I just see precious metals starting to nuke. I see you know, Kevin Warsh, Fed share, you know, pretty hawkish Fed chair being nominated. Sentiment at extreme lows and it's not able to break that now. If it breaks that, you know, I'm probably wrong and we're, we're headed lower. But I don't know, I, I, I like to buy when everyone is fearful, when everyone is, you know, super bearish. And that appears to be what I see when it comes to bitcoin right now.
- [47:20]
A
Yeah, I think the most important, my most important question that I wish I knew the answer to but I don't because we don't have the transparency in the market is how much blood is in the, is in the streets. How many traders, how much hot momentum traders in the metals complex got obliterated over the last two days?
- [47:39]
H
Dave, did you see that? The Goldmans had a precious, got, didn't got left the firm, I think.
- [47:46]
A
Yeah, well Goldman lost the money but that's not going to matter. I'm not talking about the big boys who could lose billions and not blink about it. I'm talking about you know the, in like October 10th we the estimate is north of a hundred thousand active traders got blown up like completely gone.
- [48:04]
B
Right.
- [48:05]
A
You know in the crypto world I'm sure that the number of people who are trading contract for differences and trading on emerging crypto platforms which are incredible for trading. I mean look at zero sum some people made a fortune the last two days trading. I mean you know my firm, you know people trading on hyper liquid can trade this stuff. I mean there you can trade metals and commodities in a variety of ways. They're just much less transparent than in the crypto world. It's getting more transparent but it's going to take time. I am sure there's a lot of pain and that pain isn't, it's not obvious because if the pain is in the Goldman Sachs is the world, it doesn't really matter if the pain is in people who are wiped out and their money will no longer flow into any of these casinos. That is a big deal. And you know, if you want, if you believe the silver is going to move back toward 50 and this was just a short term blip then you're assuming that most of the people who drove the price are out of the market. Most likely what you have is enormous volatility. I mean I thought and a lot of people did because people forget 80 was the demarcation point. Right, right. That was when the CME raised margin requirements and I thought 100 would be really hard to get through. Instead it went woof all the way through a 20% more which is crazy for a metal. Right? Crazy for something with trillions in market cap. It went 20% beyond what most people thought was a reasonable stopping point where there would be technical difficulties. And so that up and down that's going to cause a lot of carnage. And I don't know, I mean I'd be curious if anyone has any notion of that but that's a big deal. Any thoughts?
- [49:35]
D
Am I seeing this correct that the Shanghai Premium is 29?
- [49:41]
A
That's what people are saying. I don't have good data on that. I would love to have someone who has good data but yes, yeah, there's the premium, you know. Yeah, I don't think Bloomberg cat, you know if it does, I think it's on and look they're sleeping right now. So who the hell knows. Right? We'll see what happens over the weekend. We'll, we'll see. My personal prediction is there's volatility is, is far more likely than sustained direction in, in both metals, but particularly in silver because I still think silver is going to outperform gold. And I, I'm not saying that they're not going to both correct and have a lot of volatility.
- [50:14]
D
And from a narrative perspective, I just, you know, there, there's a cosmic kind of humor sometimes when it comes to markets. What better cosmic humor than Jerome Powell, Chairman of the Fed, being asked if he's worried about gold and telling, telling everyone, oh, I don't, I don't watch gold. It doesn't worry me like, you know, as a top signal. Like what? To me, I don't know. That, that, to me that's just kind of funny.
- [50:39]
H
And Rob, do you say that because a central banker who doesn't look at gold is a problematic central banker?
- [50:47]
D
Well, yeah, like that, like what else? That was the top. If you look at gold, I'm not sure about silver, but if you look at gold, that eight hour candle where the Fed meeting happened was basically the top like within 0.2% or something. So yeah, if that can't get gold higher, you know what, what, what is going to come around to get to, to, to move gold higher? You know what I mean? It just kind of, to me I, I remember thinking it when, when it happened, you know, live during the FOMC meeting. But, but yeah, now looking back, that was basically the top, which I just kind of think is, is a bit funny.
- [51:26]
A
Yep, it's funny. I mean, you know, there, there are some spaces that start up pretty soon that, where you get the conspiracy, the theorists all come out with the tinfoil hats and everything. And I'm sure there are a lot of people who are looking at that, but. Hey, hey, Gary, are you behind the mic? You there?
- [51:43]
E
Yeah.
- [51:44]
A
What is the seven diaper model?
- [51:49]
E
Well that, that's what Mark was talking about just now, right? The seven diaper model. You didn't get it?
- [51:57]
H
Yes, yes, yes, it's all intact. You may not see it, but it's working through the system. That's the point. Look at the input, look at the output. Trust the system.
- [52:11]
A
Okay, I'll leave that, I'll leave that there. Well, anyway, we are, we are getting closer to time and I for one wouldn't mind ending a minute or two early. You know, the markets seem to be stable around these levels. Silver still, you know what Are we? Oh, it's broke 98. It's at 97 now. Gold still just over 5 down from, you know, what are we at? You know, 15% down on silver in, in a day. Gold down 6% in a day. Bitcoin, you know, still sitting right around the 83,000 level. You know, if anyone else has anything else to say, I guess we're going to see what happens next week. A lot of people are talking about, you know, war. Everyone keeps saying about a hawk. I think the most important points about Warsh as a nominee are two things. One, he and Besent are aligned and that's really what Trump wants to do. This administration wants to have treasury and the, and the Fed be able to work together to re industrialize America. And there's a lot of going on, rebuild productive capacity. The other big story on electricity. And Gary, this is important for you. I'm curious if you heard Trump specifically talked about how he has put Lee Zeldin and is doing, you know, praise Lee Zeldin for doing lots of deregulation to improve permitting and building of energy capacity. And that's not a small thing. I mean, lies Elder, for those who don't know, runs the epa, you know, basically on the environment side. I mean, I assume you think that's kind of a big deal in terms.
- [53:42]
E
Of, well, they look, they have to drop regulations, right? I mean, you can't, you can't build these things in the time we need them. And then they have all these regs here. So this will be Europe's biggest problem. They can't get out of their own way. Not to mention they have no resources. But having a bunch of resources and having no regulation, Trump is a, doesn't like regulations. So that should be healthy for us. We can't, we, we can't do this with a bunch of, I mean the requirements from state to state to do electric load balancing is just impossible. They're all different. You know, we just have too many, too many administrators in the middle.
- [54:22]
B
So.
- [54:22]
E
Yeah, I can't imagine Trump not wanting to get rid of some of that.
- [54:25]
A
Yeah, no, I think that that's a big driver in terms of the real economy and I think people need to understand that. So when you start talking about ratios and gdp, understand that's the thing that even if the midterms go the way that everyone thinks they're going to go and we get no legislation at all, effectively for the rest of Trump's term, he has put, he has a deregulatory set of appointees throughout the, you know, throughout the administration for the next three years. And yes, some of that stuff can get undone, but some, but a lot undoing it is not as easy as people think. So we'll see. But to me, that's, that's not a TR that is not a trivial thing. So anyway, on that note, unless anyone has anything else to say, we're going to call it here. We will see you all Monday morning, morning at 10:15. And everyone stay safe and enjoy your weekend. And if you're, if you're not down here in sunny Florida where we're going to hit, I think we're gonna get under 40 degrees here in Miami beach at some point, but still, you know, 68 degrees. Now, everyone stay warm out there. It looks like the whole country is going to be cold. Take care, everyone.
- [55:29]
H
Thanks, Dave. See y' all.