← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
Middle Class Is Wiped Out! - Arthur Hayes’ Warning On Money, Bitcoin, War, China & Economic Collapse | Arthur Hayes PT 2
01:17:05
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- [00:01]
A
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- [00:45]
A
Welcome back for part two with Arthur Hayes. Okay, before I ask my next question, I really want to prime people. So I, I started doing financial content for one reason and one reason only. When Covid hit I didn't understand money printing so I was really worried about so my background. I don't know how much you know about it, but I used to work in the inner cities. So I've seen a lot of people up close that are in the grips of poverty and I was like they're going to get destroyed by what's happening now. They're living paycheck to paycheck. Businesses are going to be closing down, they're going to lose jobs. Like this is really going to be a bloodbath. And so I wanted to start making content around how I thought they could approach it just on a day to day level. What should they do? So the basic stuff, get your spending under control. Invest in an index fund. Like don't try to be clever, don't try to time the market, don't be a trader. Just like get your money into an index fund. There's a guy named Wall Street Trapper who I think is, is brilliant at speaking to people that don't have a financial mindset that did not grow up with that. And he was really helping is helping them migrate into. Think like an, make sure you own equities. If you're going to wear Louis Vuitton, own Louis Vuitton stock, right? So it was just really that that's really what started getting me into this. And then as you ask more questions, you know, as, as the island of your knowledge grows show, so grows the shore of your ignorance. I just started realizing, oh wait, like I don't understand this part, I don't understand that part. And so you finally end up at Robert Breedlove and what is money? And then it all starts to unravel. And then I was like Wait a second. The thing that I was trying to protect people from, it's a totally different game and this is terrifying. So we're about to go into a part of this game, trading, looking at trends, riding waves, looking for signs to get off the train, all of that. But I want to say because I, I just really believe that the vast majority of people should have a long term horizon, that they should buy something and not mess with it. Like for instance, I'm very heavy in Bitcoin. Bitcoin and Ethereum are just by far my two biggest positions in anything. I own some gold, I own stocks, but other than maybe Treasuries, I'm just not in anything. Like I'm in Bitcoin and Ethereum. I didn't sell anything during the, the bear market. I was like, my thesis is still true. Tomorrow's gonna be more digital than today. Therefore I believe that money's just gonna get more and more digital, meaning more and more people will rely on cryptocurrency just to say it in this most blunt way possible. So I'm like, as long as I believe that to be true, I, I will certainly ride this out. Now I also have markers where I'm like, yeah, I would because I know that we're probably still in a cyclical or I should say because I believe that we are still in a cyclical cycle. I don't think we're in what people call the super cycle. And it's only going to go up and it's then going to stabilize from here. Probably going to reach wrench would be my guess. So if I miss out on some upside, whatever it is what it is. So I have certain triggers where I'm like, if it hits this number, I will sell some of it. I would never sell all of it, but just taking some of my profits. Okay, so with all of that highly encouraging people to be very thoughtful and this is something you and I talked about last time. The reason the cliche of buy low, sell high is so oft repeated that it is a cliche is because people actually do the exact opposite. If you can hear my voice right now, the odds that you buy high and sell low border on a hundred percent. Because it's so hard, man, it gets so exciting. And even my dad, like a month ago he was pressuring me to help him like get his, his Coinbase account going so that he could start selling his Bitcoin because it was like starting to rise. But then it started rising so much, he texted me back and he's like, actually, I don't want to sell right now. I want to hold. And I was like, dad, you need to pick a number. What is that number where you'd be mortified that it hit and you didn't sell. Don't get sucked in. Okay, that's a long preamble, but I feel extremely to be true to myself and my mission. I had to say that. All right, what are the signs that people should be looking for in this bull run to know whether it's time to get off the train or to keep adding more?
- [05:07]
C
There's no, like, one thing, right? So if you think about the last cycle, what was it? So, ftx, this company came out of nowhere. Sam Bankman fried, you know, wonder kid of the world. As I said in my essay, the right kind of white boy gets crushing it. He put his company logo on a stadium in Miami for $135 million. I don't know how much he paid the Major League Baseball association in the US The FTX logo on all the umpire outfits in, in the, in the United States. And too, that, that's, that's interesting that this company that didn't exist, you know, two years ago is buying all these things. What does that say about the business that this person is in? And this is Obviously in late 2000, I'm 21, and you probably would have thought that was extremely strange that this kid that you never heard of within a year and a half was able to start buying all these sports teams, logos, hanging out with politicians, blah, blah, blah. Maybe something's a bit overvalued. Now, what really got me sort of bearish. And I wrote about this at the time, probably In December of 2021, obviously, I'm a big macro investor, consumer of research. I spend probably a few hundred thousand dollars a year on various research publications. And there's a person that I really respect. His name is Felix Zulof. I like to call him my macro daddy. He's an older Swiss dude who used to run the large trading desk at ubs and he has a research outfit. And he's very attuned to credit cycles, and credit cycles being the amount of money. And what's the rate of change? Is momentum accelerating or decelerating? Now, obviously, if momentum of.
- [06:58]
A
I don't understand that rate of change.
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C
What, so the, the momentum, as in, like, how fast is something changing? So it's second derivative. Yeah, the creation. How much credit is in the world? Right. How much fiat is there floating around? So traditionally, you look at, you know, US dollar, euro, Chinese yuan, Japanese yen. Focus on those four economies. You basically have the entire world economy. How much of those countries central banks and governments creating of credit money is that accelerating or decelerating? Now, ever since COVID that had been accelerating as different governments in the US being the biggest, had certain Covid stimulus measures. And so the amount of money that was gushing into the world was probably larger than since World War II. And so obviously crypto and everything else just zoomed higher. Starting in late 2021 as inflation started to show up, that, that momentum started to roll over. And so I remember I was sitting in my apartment, I forgot where it was and I read the, read one of his reports in, in December and I p that together with all this ridiculousness that of FTX paying all this money for these sports sponsorships. And I was like, this doesn't look right, time to get off the train. And so over the next two days, I dumped my entire portfolio, except for essentially Bitcoin and Ethereum, entire crypto portfolio. And then I wrote a massive essay about why I was going, why I sold all my stuff. Now, did I top tick the market? No, I think top tick of mark was like November 2021. I probably finished selling in end of December of 2021. But that is sort of the, the mental process. Is there obscene things going on in crypto and are they out of whack with sort of like the macro narrative? And I'm really focused on how much fiat liquidity there is there in the world, because to forecast how useful the technology is from a fundamental basis, it's just very, very difficult. I think a lot of the returns are usually driven by fiat debasement rather than Bitcoin or Ethereum or any of these other cryptos are massive networks. Because to be fair, there's only a few million people, if that, who use these things right now for anything other than just, I don't know, sending money between the different exchange accounts. So that's sort of my game mental worldview. Now that was 2021. What does this cycle look like? I think this cycle is a cycle where we break the sovereign debt markets, where every single major country finally admits that we will do anything it takes to make sure that the government does not go bankrupt. And so we're going to remove all this pretense about caring about sound money and we're just going to start printing money like it's going out of style. And so I think this cycle is going to be a bit different than the last cycle. Where the Fed and then every other central bank said, oh, we've overdone it, let's try to reduce it. They tried, but the governments are still printing money because they need to get reelected. And we're in an inflationary environment. You know, there's too many old people, everyone's going to go to war at some point. So everyone's beefing up on defense. And so the central banks have come back in and said, okay, we got to print money, but we can't really call it quantitative easing or the, you know, the things that we called it before. So we'll make up new names for it, but it's the same thing. And so we want to protect the government bond market and make sure the government can continue to borrow at below the economic growth that they're creating. So I think right now we're in this cycle where people are realizing this and you have the professional investor class are also realizing it because they've had the worst bond performance, at least in the United States since the War of 1812. Over the last three years, U.S. treasuries 30 year treasury is down to 50% on a real basis. That is the worst return since 1812. Now you wouldn't know that by listening to the financial press, but bond investors are getting absolutely eviscerated. And as they come to the realization that this is not good, maybe we should own something else that's sort of this secular rise and sort of bitcoin. So I don't think it's going to be a similar type of credit event that's going to cause prick the bubble and crypto and everything else that happened in 2021. But there's going to be some change in that mindset and that's what I'm looking for. And there's no real one thing you can point to. It's kind of just be cognizant of the fact of why do you think the market's going up? Is there something that's happening that's challenging that worldview?
- [11:44]
A
I really want to push you on this. This is very interesting. Okay, so you said a lot of things, things in that. So I just want to cycle through, recap what you just said, make sure I understand it and then I'm going to see if we can start prognosticating about some of the things that might be the signs this time. Okay, so in 21 we were at a point where for people inside the know of crypto, yeah, sure, everybody knew about it, but something happened in 2017 during that bull run where it really started to like I was starting to hear about it, they were making documentaries about it. And at the time I was not somebody that paid attention to finance at all. Dude, I not have been more heads down building businesses and, but I was still hearing about it. Like it, it sort of cracked that first thing and then it just disappeared. Now I didn't realize there was a, you know, a, a retrenchment. I wasn't paying attention like that. But it, people just stopped talking about it then obviously I think it was in 2020 it starts really popping off again. And then in 2021 it's insane. So, okay, now we have. If I had to boil down what you were looking at in that moment, the rate of adoption, speed to awareness, however you want to think about that was just way outpacing what you would expect to happen from a, this isn't euphoria perspective. And in fact that's, that's a, a marker I want to put on the table right now. This euphoria, I never felt it before, cultural euphoria. Obviously I'd felt it in my own life, but cultural euphoria is a very different thing. And then I, I now know it when I see it and so that starts really popping off. Okay, so the rate of growth of just to use FTX as an example was just too much. Okay, so question number one. The second thing that you look for is the momentum in the credit market, credit liquidity being the same thing, it's money printing. So they're just the governments are pouring artificial money into the system. Those two things in 21 they gave you the signals that, okay, we've got heavy euphoria, things are moving too quickly in terms of rate of adoption. And the very thing that crypto is a response to inflation of the money supply has slowed time to get out. Makes perfect sense now as we go into this next cycle. You've said something multiple times in this interview and sometimes you say it very casually as you just did, which is everyone's going to be going to war soon, so they're building up their military. Hold on. That's a very big statement. So is that going to be part of what you're looking at? Because one of my employees here was doing his breakdown of what he's going to look for, what his selling signs are and he very similar to what you just broke down for 21. But I worry that he's going to get blindsided because he's looking at old signals in a new market. Do you have Sort of the beginnings of an idea of what you're going to be looking for in this moment. Is it a build towards war? Is it euphoria if it's not credit? Like what, what is on your mind?
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C
Well, I think that we're going to get some sort of Reddit event in the government bond markets and they were
- [15:06]
A
gonna say, you thought they were just gonna print, print, print, print, print, print, print?
- [15:09]
C
Yeah, they're gonna print, print, print. And I think some people are going to try to exert an influence of saying, hey, we, these bond markets, they still matter. We're not going to buy a Treasury at 4% when nominal growth is at 6% or whatever it is. Right. And there will be a, an event and there'll be a, there will be a, a way, an off ramp to say, okay, we want to reform the system or, or change something and we'll see what the authorities decide to do. I think they're just going to keep printing more money and we keep going higher.
- [15:45]
A
Can you say more about that please?
- [15:47]
C
If we think back to the stats I just said, so the bond market as of, we want to think about really when this, this bull market started to gain a lot of steam, was it October of last year? So essentially what happened? And I'm going to focus on the US treasury market because that's the most important one globally and every other market sort of depends on that. From a government bond perspective, you have this thing where interest rates on the debt was rising, but at the long end it was rising faster. So post the September Fed meeting, the spread between the 10 year bond and the 2 year bond was increasing, meaning the 10 year yield is rising faster than the 2 year yield. And in general both are right, the yields are both rising at the same time, which is basically called a bear steepener in fixed income trading terms. And that is deadly for banks and the entire financial system because the entire financial system is modeled post sort of 1970s 80s on this assumption that when back end interest rates rise too quickly that the authorities will come in and print money to save the system. Now they did do it, so the market got it right. But in the meantime, all these financial institutions and the way that their complex financial derivatives are structured ignore this particular quadrant of the potential outcomes and thus have massive losses. And this is what we were seeing across the banking system. So if you looked at the, you know, regional bank stock index or KBW index, which is all US Banks, they're getting crushed going into late October of last year. And so what happened the US treasury and Janet Yellen, she said, okay, I'm, I'm going to save this market. I'm going to issue a bunch of short term debt and take money out of the reverse repo program at the Fed, which is just this $2 trillion facility of cash just sitting there. That's outside of the financial system. And she offered a higher rate on short term treasury bills to entice this money out and which reflates the system, gives more credit money into the system. And that sort of helped, you know, fuel this bull run that started essentially on November 1st of 2023. So we're going to get another event like that because if the Fed, the Treasury and their other global central banks and fiscal governments, if they continue to do what they're doing, but say that on the one hand we want to try to fight inflation by not printing money, we're going to get another situation like we got in the third quarter of last year where the bond market says, hold on a second, what do you want to do? Do you want to safeguard the value of fiat currency or do you want to make sure that the government is funded? And I don't know when that situation is going to happen. There's lots of tricks that they can pull. Probably a little bit too mundane for this particular venue if you really want to get into US money markets. But there's going to be another situation like that and you could see a general risk off, meaning financial assets decline on that situation, on the fear that maybe this time they're not going to save the banks and print the money and reflate the system. I don't think that's going to happen. I think they'll do the same thing they've done every single other time. But you could get a situation like that. But if I have to really think about what could stop this particular bull market, it's going to be something about the belief of institutions buying bitcoin. So what's the narrative right now? You never sell because the institutions like BlackRock and Fidelity, they're, they have to buy all this bitcoin because there's all this pent up demand from institutions who want to incorporate bitcoin into their portfolios. And there's all these diamond hands out there who aren't going to sell their bitcoins to very low supply of bitcoin left to sell, which means the price goes asymptotic on, on the upside. Now obviously that can be true for a while, but it won't be true forever. And so at the point in Time where we start to see a massive leveling off of the allocations of money into these products, then that narrative starts to shift and people become less confident that there will be a few hundred million dollars of buying a Bitcoin every day from all these major ETF fund managers. And I think that might be the thing that I'll be looking for which says, okay, whatever the price of Bitcoin is at that point, maybe it's time that I think about, at least for the other non Bitcoin and Ethereum assets, getting out of all of those. Right. And I have a very big venture capital portfolio of early stage crypto tokens that will need to be liquidated. And then on a more philosophical level, I have to think about, well, if Bitcoin has risen at such a high level relative to the energy that it represents, and maybe I should own a power plant or a massive stake in ExxonMobil or something where I actually own the fundamental energy source. And I got it at a very cheap price relative to the price of Bitcoin. And that's a way that I can take some chips off the table in Bitcoin terms. But what I probably won't be doing is selling Bitcoin or Ethereum for Fiat because I still think that the Fiat system is. And I don't want to participate in that. But primary energy, if I can own those resources at a very attractive price because Bitcoin and Ethereum and these other assets have been bid up to such an insane level, then that's probably something I should be doing.
- [21:28]
A
Okay, so to recap, the thing that I found really intriguing, because I've not heard this idea before, is that there's going to be an incident in the bond market. Now, what I took that to mean is that something is going to happen that will make the biggest buyers of bonds step back and say, we're not going to buy bonds anymore. And now the US Government is in a really dark place. And I think it was you that said Powell is just out there flexing. The person who's actually in control is Janet Yellen, because the treasury can ultimately just tell them what to do. And because I think it was Powell that said, like, we can't keep doing this. We can't just keep printing, printing, printing.
- [22:11]
C
Yeah, he says it, but he has no power. He can't. He can't tell the federal government what to spend his money on. He just, he's just, you know, the central bank.
- [22:19]
A
It's interesting you say it like that. So am I right? Is that what you're saying that people will say and, and enact? We are not going to keep buying bonds because your fiscal policy is irresponsible and it's causing strangeness in the, the bond market that makes it problematic for the reasons that you explained earlier. And that is, I mean that that's catastrophe for the treasury if I'm understanding this right.
- [22:50]
C
Exactly. Their number one job is to make sure that Janet Yellen's job is to fund the President and whatever he or she would like to do. Right. If Biden wants to spend on through bonds. So she must have a well functioning US treasury market and she will do whatever she can to make sure that is the case. And so if it means changing the rules on the fly, or if it means co opting the, the central bank to do what she needed to do, she will do that or whoever is in the her seat if she leaves after the Biden administration. So that's that person's job and they will do that. And so when this really bad thing happens in the bond market, then we get to the final stage of essentially the, the sovereign bond bubble, which is okay, let's stop fucking around. We will print money in whatever quantity is needed to keep the 10 year bond rate at X, whatever that is.
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A
Right.
- [23:48]
C
They'll go full Japan. That's the end game. Then we get Bitcoin, 1 million, 10 million or whatever, whatever. And, and then it's okay, at some point we get off the train and like okay, well Bitcoin's great. It's gone to this insane value because they printed all this money. Is there a real asset, real energy producing asset that we should own that is more essential than bitcoin? And I've gotten it at a great price because of how high bitcoin has been bid to. Again, it's more of a theoretical, philosophical thing of is there something else to buy when you want to sell bitcoin? That's not fiat.
- [24:26]
A
Well that, that's the second part. So there's two things you said that I think are really interesting. One is what happens. The second one is how you respond. Okay, so the what happens scenario, I was actually misunderstanding it, so I'm glad that you clarified. So what' really happening is the bad thing happens in the bond market that pisses the bond purchasers off. They stamp their feet and say hey, you need to calm the bond market down. Which they're going to do by saying we got you. We're going to print money until the end of time. Don't worry we're going to maintain the price that you need to not end up being underwater. That is going to cause a massive run into cryptocurrency and that's going to create that just hyper euphoria potentially. Obviously, I know you're. This is just the. I've asked for the thing that's in the back of your mind. This isn't the thesis you're operating on right now, but that could potentially cause a massive run into crypto, which creates that euphoria that I was talking about, drives the price up. The numbers you threw out a million, 10 million, whatever, I know those are sort of the fantasy numbers that you hear people in crypto circles throwing out as the end game. But if it makes that kind of run, you're like, okay, now's prob. Probably a time where I go, all the big wins have been had. I mean this is just like Warren Buffett said, all the eye popping wins of Berkshire Hathaway are in the rearview mirror. Like you're not going to get that anymore because there's. I'm having a hard time finding a place to put this money. So you know that that isn't going to be. We're now getting into the zone I was talking about earlier where Bitcoin just becomes sort of boring. It just chops side to side for the next two decades. And that's when you start looking for, in the example that you gave, the underlying energy producing asset that you can be in once you've taken sort of the max out of the value, the volatile value of crypto.
- [26:26]
B
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- [26:56]
D
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- [27:26]
C
It's a put Option on government bond market. And so I think we're at the point where the largest government bond market admits that we can't afford this, so we're just going to print the money anyways. And that's the option that you're really trading on Bitcoin. You want to be around for that because that's going to be. And if it happens this cycle, it's going to be absolutely insane. And so that's when I'm writing an essay right now. And the tenet of the essay is people don't have enough imagination about how ridiculous this bull market can get. So if we combine the bitcoin is now available from a financial perspective to be ingested into tradified portfolios. And you have tradified portfolios, do not want to own bonds because everybody knows that this is what's going to happen in the Treasury Market and JGB Market, ECBs bonds, China bonds, all the different bond markets. If these confluence of factors. This is the situation where the 40% of managed money that's in fixed income or basically sovereign bonds globally, a portion of that goes into crypto. And so you have a massive amount of fiat that can only go through a very, very small door. You just get insane price appreciation across the whole space. I don't think people appreciate that right now. They're like, oh, is Bitcoin's at 70,000? Maybe I should take some out to. Well, no, you fucking shouldn't. This is a time if this is the narrative that you were operating under when Bitcoin was 16,000. We haven't even gotten to that point yet. We've just started. This is just like the amuse bouche. It's not even the fucking entree yet. So it's. We're just getting started in this thesis of the collapse in terms of we have this one asset that's real, we have this whole fugazi financial system. For the first time in history, we have an ability to express a put option on these bonds in an easy digital fashion versus, you know, going out and holding a vault of gold, which is quite difficult. So that is the insane bull market thesis that I've been operating under. We're marching towards that. I don't want to be under allocated. If I'm right, if I'm wrong, we get, you know, maybe bitcoin goes to 100,000, 200,000, whatever it is, and okay, cool, made a good, good chunk of money. We'll prepare for the next cycle because it's coming. If it's not in the 2025, 2027 time frame it'll be when there's the global world war of the, you know, end of the decade or a little bit after as we've come to this situation where every government's printing money because they're going to war with each other. So that's the trade. It only is going to happen once. He's got to be around for it.
- [30:04]
A
Okay, so that is the, I mean for anybody that's holding Bitcoin, that is certainly the fantasy scenario. Do you see going to 100k in this cycle as an inevitability or do you see something that could derail us from that Now?
- [30:33]
C
I think it's an inevitability and more. And because now we have the baking system, least in the west. And Obviously there'll be ETFs in China and in the UK, China being Hong Kong and Europe as well. So you have Tradfi now has a stake, has skin in the game. And like this is amazing. We have had the fastest growth in assets in these products of any ETF ever. And so BlackRock, largest asset manager in the world, this is their best selling product so far, right? Trading billions of dollars a day. They're you know, getting ingesting hundreds of millions of dollars a day of inflows, they're charging fees on that Fidelity, all these other asset managers, crushing it, right? But you have all these institutions, the sell side financial institutions who depend on the fee that BlackRock pays them to access the markets. So if you think that you're a trading desk and a JP Morgan, a Citibank, Goldman Sachs, Morgan Stanley, blah blah blah, you're like fuck yeah, I love crypto. BlackRock has a price insensitive buyer. All these people allocating, they need to buy and sell Bitcoin every single day to manage their fund. There are people doing arbitrage trades who now need to interact with me on a TradFi basis to trade these assets. If there's an ETF, ETF, Ethereum ETF or some of the other altcoin ETFs that these funds want to launch, great. More fees, more times for me that I have to do things for these large asset managers and it's volatile, there's buying and they're selling. There's opaque markets. People don't know what the price of these things should be. As a sell side investment bank you're like this is fucking amazing. And so they aren't going to stop with Bitcoin. I think there was read some TWEET today that some lawmakers in America were Democratic lawmakers are saying, oh, petitioning Gendler to say don't allow the Ethereum etf. Now maybe that would have been a very convincing argument if the banks didn't have a skin in the game. But banks run governments, the Tradfi banking system in the US runs the US government. And now they have a stake in. Let's financialize crypto. Let's make as much money in fees as possible off of this amazing product that has been doing gang going gangbusters for the past eight weeks. Fuck that. We're going to launch every single crypto we can while the going is good and earn these fees. And so I think there's just going to be more capital coming into play as you have the Tradfi financial ecosystem putting on a full court marketing press to convince people why, oh yes, look at the US government. It's unsustainable. Jamie Dimon says this about every single quarterly report and his said the US government spending too much money, there will be a fiscal crisis and now he has a way to directly profit off that, which is, oh yeah, we have a Bitcoin etf. Now I'm going to change my tune on Bitcoin. I'm going to safeguard the way for my clients to own Bitcoin. As long as you custody with JP Morgan and use a BlackRock product, it's all gravy because we're getting paid to do it. And so now you have the Tradfi marketing machine out there saying it is safe to invest in crypto. Here's our product that you can do it. It's custody by these big banks. Why wouldn't you own it? So we have interests aligned in terms of a price perspective for a very short period of time. So I think again we're just getting started. It's just Bitcoin. Why wouldn't you do more of it if it's so successful? An Ethereum etf, a Solana etf, every fucking crypto you can during the cycle do it. It's literally just paperwork. And watch the billions of dollars gush in the fixed income market is however many hundreds of trillions of dollars. Obviously not all of that's going to go into crypto, but even a small portion of that that says I don't want to own government bonds because of all the things that we've talked about today and now JP Morgan, my, my RIA is telling me that I can invest in this product and it's custody that the bank I don't have to worry about private keys. It fits into my investment mandate. Don't have to do any more forms it. Let's go. I get to import this thing that is going to, on its face, solve the problem that I'm trying to escape, which is a government bond market that is not paying me what I should pay to take on this sort of risk.
- [34:49]
A
Hearing you talk, it really. There's something about the. The energy, the intensity around the bond market that's making me see the relationship between us, the buyers of bonds and the government in a way that I never really thought about it. I always saw it as, this is a place for me to put my money that's safe, that I'm going to get some sort of mild. But when you start thinking about it in terms of, hey, you're asking me to fund the government and all the things that it's doing, you better pay me a worthwhile return in order to do that. This goes back to one of the things you were saying earlier. I don't remember what triggered this thought, but the thing I really want people to be able to do is just something super simple to put their money in, to not have to think about it to get that return. But of course, that for some people to win, somebody else is going to lose. But gets very interesting with bonds. Helping fund them grow. To grow the things that they're trying to spend the money on. Very intriguing. Let me ask you where. What do you think happens with ETFs when the natural volatility of crypto kicks in? Like when I think about, okay, Bitcoin. Yes. Volatility. Super strong narrative. Eth. Yes. Maybe a little bit less conviction on my part for eth, just because I think it's a harder narrative around the distributed computer. Just think it's harder for people to understand. How does that translate? Am I storing wealth in the in
- [36:26]
C
E if, like, I don't.
- [36:27]
A
So that was a little trickier. Once you get down to like, Solana now it's like, whoa, now we're really talking narrative. You've got to be deep in that com. It. It becomes like, do you buy into the tribe? So that feels like it's. It's really going to have volatility, which could be amazing briefly and then really traumatic. So how do you think ETFs will respond to that level of volatility?
- [36:51]
C
The banking system is saved by the central banks and the government squashing volatility and printing money to save them every time they fuck up. But at the Same time, they essentially take all the fun out of markets. Nothing fucking moves anymore. Passive investing is destroying the banks because they can't earn any money, because nothing moves. There's no dispersion, there's no difference between Tesla and Microsoft and Nvidia. Right? So why even invest in the stock market? Just put your money in your, you know, retirement account, check the box, and it just goes into, you know, spies and Q's. So if you think about a trading floor and obviously have a lot of friends who work in trading, no one's getting paid like they used to because nothing's moving. So now we have a new asset class. It's. And you have insane volatility. You have a fundamental appetite for a new type of financial system. And you are the gatekeeper between capital that can't exit the tradfi system and these crypto products. It's going to be amazing. You can write research reports for days. You have thousands of different things doing thousands, like different people, characters saying they're going to do this, that and the other thing. You have so much dispersion, so much volatility, so many things to talk about. You could call your client maybe a Solana today. Maybe it's, you know, dog with hat tomorrow. Doesn't fucking matter. You have a, you have an ability as a salesperson. Have a conversation with your client to solve their problem. Government bond markets aren't paying me. Hey, guess what? This week it's Solana, next week it's Eth. Next week is Bitcoin. This happened, that happened. There's stuff going on. You have a conversation. Oh, great. Okay, I'm gonna allocate here. Oh, sell this, buy that, sell this, buy that, sell this, buy that. Trading fees, emotion, pathos. This is what markets are made of and what has been destroyed by central banks over the past, you know, 30 years. Banks are gonna love this. The trading desks are going to love this. They have a reason to call their clients now. These products are going to make them billions of dollars because we are unlocking human emotion in a form that's digestible for these tradfi institutions in a way that hasn't been available to them probably since 1997 to 2001 in the dot com era. So that's what this is going to bring to tradfi and they're going to fucking love it. And they're going to do whatever they can politically to make sure that there is nothing stopping these ETF fund managers from onboarding as many different crypto assets as possible. Now that they've gotten through the bitcoin hurdle and they've seen how successful it is and how much money they're making from it.
- [39:24]
A
Okay, so that is a really interesting picture that I have never heard anybody else say taking a, a different angle on that. It feels like an angle that has to be considered is the people that are in ETFs want the set and forget thing that you think is destroying the passive investing that you think is destroying the markets and that when there's volatility there, there is going to be an outcry to the government to protect them. Louder than anything you've heard in a long time. Because you know when somebody's thinking about being in an ETF it's like they're not going to the ass egg to go and buy and figure it out themselves. So there is an amount of I don't want to deal with it, I just want somebody else to do it. So two things are going to happen. One, volatility hits and the they, they a subset of people will freak the out and then it becomes a question of how does the government respond? I'm guessing with regulation. So that'll be interesting. And then the second thing is when you have people having a reason to call their clients, I worry that you get into the wolf of Wall street days of penny stocks and hyping people up and selling narrative and there is a reason that those guys went to prison. Are you not worried about the, the way that people will get suckered in by con men?
- [41:01]
C
Well, the comment, and if, let's take it, let's assume that this is what happens. The comment is your JP Morgan salesperson, is that guy going to jail? Probably not. Jamie diamond gonna go to jail for anything that happened that J.P. morgan? Absolutely not. Now again, I think that the tri banks will overdo it. Right? They're going to pump this narrative. They're going to beat the drum as loud as they can because this is, it's going to be soon to show, let's see, maybe end of the year there's going to be some banks that were probably very crypto forward and you're going to see in their financial results and they're going to tell the market, hey, guess what? My sales and trading operation beat expectations by some wide margin because we went hard into crypto trading and facilitating the flows related to these whatever the suite of the ETFs are and OTC trading and blah blah, blah, blah blah. Right. And then every other investment bank and they're, you know, managing Director committees. We're like, well what's our response to that? We can't let XYZ bank have this desk and we've been poo pooing it for the last decade. Go hire a team now. We need to be this, that and the other. That's, that's how these banks work. It's, you know, usually it's Goldman Sachs and JP Morgan make the money first and then everybody else scrambles a follow and it up. And so that's probably what's going to happen here. And I agree with you, of course the volatility is going to be insane on the upside and things go down as much as they go up sometimes. And when the bear market starts and maybe some of these more questionable cryptos that got put into some of these investment products go down 95% because something happened on the network or you know, some developer rugged them. Yes, of course there's going to be public outcry of oh no, my, my retirement account had this ETF and I, I watched the commercial on CNBC and you know that guy in the suit said this was a great investment sir. And I put my money in and oh shit, I lost it. Representative xyz, you gotta fuck these people because that shouldn't, I shouldn't have been allowed to buy this product. I absolutely agree with you. And the second that we start seeing that as a movement catching steam and the bank's ability to beat back that narrative, they can't forestall that. That's probably a sign that we might, we've reached the peak sack peak saturation of like the institutions in crypto and whatever the price is at the time, it might be time to take things off the table. So I hadn't thought of that before but as you say that that is probably another thing I'm going to keep in the back of my signpost of okay, has it gotten so out of hand and losses started to creep in that the bank's political power to just ram things through has been checked a bit by some outraged small mom and pop investors?
- [43:37]
A
Yeah, I, so nothing. Another thing that I said last time. But nothing is ever as good as you hope it will be and nothing is ever as bad as you fear it will be. I have a feeling that a lot of this, like there's going to be just enough volatility in Bitcoin that it slows down the ETH ETFs then there's going to be enough volatility in ETH that people really stop to think that we really want to do Solana. And then there'll be some scandal on one of those as, you know, a bunch of people get sold a narrative right as it dips and they, you know, God forbid if they're doing it on margin, but they find themselves in trouble and they get, they lose their money, get liquidated, whatever, whatever. And I have a feeling that will just slow things down. Like the this sort of Wolf of Wall street orgiastic picture that you were painting while it got my blood pumping. And I was excited. I wouldn't participate in that madness, but I could certainly see how that would be thrilling because I think that volatility is a feature, not a bug. Which was a weird realization for me that I found myself moving towards volatility, not moving away, even though I would advise other people, like, hey, you have to be really careful, it's so volatile. But I was like, wait a second. That's actually why I'm doing it, is because I have a thesis that I think will overcome the short term volatility. But I want that, I want the opportunity to buy low so that there's ultimately the shot at selling high. Okay, so sloth slow. I think the train wreck will happen so slowly that it might be more imperceptible than we think. How long can we print money before that bad thing happens in the bond market? And I'll set the table with Japan. As far as I know, they print money like fiends. Is there an obvious breaking point or are we like at the 10% of what we can print? Mark, 90% of what we can print.
- [45:38]
C
So let's use two countries and the big narrative. And this is sort of the Keynesian monetary, modern monetary theory, MMT crowd is the government. There's infinite capacity for the federal government to have debt. And the first example there is a look at Japan. They have a. I don't know what the debt to GDP of at the government level is like 300% or something. And look, this is perfectly fine. You go to Japan, everyone's nice, food's great, trains run on time, super safe, blah blah, blah. What they don't understand is what Japan actually did. There's a great report by Deutsche bank and I forgot what it is and it's the label. Is Japan the best curate, the biggest curie trade ever run? So everyone always looks at the central government's debt to GDP and they say, oh, it's ridiculous. They forget that they think Japanese. If you've ever been to Japan and done any business there, you'll Realize that Japan is a socialist country with capitalism that was hoisted on it. They're, they're a very collectivist culture. And I'm not saying that in a negative way. That's just how they are. So you have to combine things that you otherwise wouldn't believe as one into one to get the real financial picture of Japan. So you have to look at, okay, yes, you have government debt, then you have the corporate and private sector of Japan. The people of Japan, they own something like US$3 trillion worth of assets around the world. Japan is probably the richest country in the world on sort of an aggregate basis. Because what happened after the war, the US made Japan a colony for a bit, lent them a bunch of money, helped them get off their feet and said, we're going to give you access to our market. Please sell us shit. The Japanese said, great. We're going to essentially subsume the individual and promote the collective. So everyone, we're going to financially repress you, but we're going to make really, really good stuff. You're going to have a job for life. We'll pay for your education, healthcare, cheap transportation, good food, work really hard so that these major companies can sell great stuff to America. And that's what Japan did. They started with America, then it went to Europe, then it went to China and Southeast Asia. They are the largest holder of U.S. treasuries, which is just the savings of the nation. Plus they own in total about $3 trillion of just assets, mainly in United States, but around the world with all their savings. So if you add that back to their debt and then you add back the private savings of people, which is estimated of like $5 trillion of just money and is sitting in bank accounts of the Japanese people because they haven't spent anything for the past 30 years because of the deflation that they've been having. You get a much different picture. You get a debt to GDP of around like a hundred percent, something much different. So Japan can print all this money because it owns the fucking world. They're not that broke. And so people say, oh, Japan just prints a bunch of money. It's okay, it's okay. Because they were extremely productive. They had a captive market in that the richest country in the world from a GDP perspective, America, they could freely sell anything they wanted into America and that's how they got so wealthy. So that's the Japan example on the why it doesn't really work. Then you get to China, China says we're completely state socialist. Again, not saying that in a bad Way the central government owns essentially all the most productive companies and we are going to debt finance our way out of the poverty of the 1949-1980s. Right? Massive transformation in the society. And there wasn't an infrastructure project that China didn't love. And they've run up with something like a 300% debt to GDP. They built all this stuff. Now if you believe that debt, you can print as much debt as you want, then why isn't China responding to this property bubble by printing as much money as they can and just doing the same thing they did for the past 20 years? Because they've reached the capacity of the amount of debt. They know that the more debt I spend, I produce no value. And I just make the problem bigger. I create more angsts amongst the population. I create more desire for people not to have children. I create a declining population because people cannot make ends meet because I've just overproduced and there's just not enough real return there. So there is an internal capacity. So China and Japan are probably the two examples that prove the point that I'm trying to make, which is there is a capacity limit for debt. It's not some number that we know once you go higher than this, that things, you know automatically happen. There's a paper by Ken Rogoff, I forgot what it is. And he did a study and basically the study was that once you get above about 130% debt to GDP on a government level, then you're almost, you're assumed to have a financial crisis sometime in the near future. Now again, you can't put a time frame on it. The US is around 130, 140% so it's on that path to doing so. Does it have capacity to load itself up with a lot more debt? Absolutely. China's at 300% GDP, right? So you can, you can go that far or even farther maybe, but again then you start to have the decaying society. You get to have, you get to have this moral angst that is amongst the population who feel it. They can't put their finger on why they don't feel confident or why they feel angry. But the reason is that the government has again taken away their dignity by fucking up the money monetary supply. So again, I don't know what that number is. We're in the territory where something could happen. And so my thought is as an investor, I want to be long that volatility by being long a put option on the sovereign bond market, which is crypto. I don't know when it's going to happen, but it's going to happen if they continue doing these same things. So why not buy something where I have insane upside if it fucks up? And what's my downside? It's a super liquid asset. As soon as, if it's not working, then I sell a bit of it, whatever. So I have an asymmetric return Debt.
- [51:53]
A
The debt flywheel. How is it possible, given our need to, at a minimum, make interest payments that we aren't already in trouble? So I think right now our interest payments are already our third biggest line item. It's more than our national defense. We're adding a trillion dollars to our debt every roughly 100 days. That will compound. So what takes 100 days now will be 95 and then 90 and then 80 and then 60. I don't understand how we're not at the end. What, what am I missing?
- [52:41]
C
Because the money, because there's so much money trapped in the tradfi Western financial system. It's there to be inflated, it's there to be taxed. Every dollar you have in your retirement account, every dollar you have in the, in your tradfi bank account, every stock that you hold that is required to trade on the, you know, the clearing functions of the US or the European governments is ripe to get taken by the government via an inflation tax. So that's how they're able to do it. Because this capital is sitting around and not doing anything. The pension funds are forced to own government bonds. The banks are almost forced to take their excess reserves and buy government bonds. And so that's how they're able to keep the game going because there's all this capital that's sitting around that they can inflate away. Now that's why crypto is such a fundamental problem, because it's an escape valve. It's outside the system. I take my fiat, I sell it and I buy Bitcoin. Can't take it away from me. You don't even know I have it. And so that's why the ETF is such a key component, which is, okay, recognize that we have a problem. We're not going to change our spending. We don't want to outright ban the thing. Okay, now it's time to allow these fund managers to ingest this fiat into a derivative, but keep the Bitcoin within the system, you know, so that is why you can afford to do this. And of course, the US is a reserve currency issuer, largest military in the world. Again, you have the ability as the empire to do this a lot longer than other countries can. Now, to the extent that other countries stop saying I'm willing to sell you oil or food or whatever in dollars, then the ability to keep this game going, the time frame diminishes.
- [54:33]
A
Yeah. What do you think about the petrodollar being used to have at least a response to our financial warfare, which may be a little unfair, but when we for people that haven't thought through this yet, when we inflate the currency that spreads it to people like Japan that own trillions of dollars in bonds so we're supporting the inflation tax. Do you see people weaponizing that, do you think? Because I've heard people say oh my God, de dollarization is imminent and I've heard other people say get out of here, there's literally nothing else. So people would flee the dollar to what?
- [55:17]
C
So I think that they're get missing the point. So de dollarization started in 2008 when the US authorities decided that they're going to save the banking system by this massive money printing. And if you look at the charts and you take a look at amount of gold that foreign central banks started buying with the nadir was in 2008, now it's ticking up. Similarly for the the effect of foreign central banks on buying US treasuries, the height 2008, now it's tapering off. So de dollarization is happening slowly at the margins. The Roman Empire, the British Empire, these empires in fall overnight. It's not like overnight you just stop using these currency. It's a slow process. It happens at the margins. We're already seeing it in 2023, 20% of all oil sales were in a currency other than the US dollar, highest ever. So the petrodollar is breaking down slowly at the margin. Of course the western world and the US major allies are going to continue using the dollar whether you know, China, Saudi Arabia, whoever uses it or not. That's not the question. The point of for an investor and trying to save is okay, align myself with the trend but don't get blown out of water if it takes a long time. If de dollarization is a trend, if the trend is to have a multipolar situation of currencies being used. What do I know that central banks and countries have used in the past to trade between themselves to settle debts and trade flows? Gold, okay? That's why I own gold. I own gold because I know the countries who are not going to use the dollar to settle their trade imbalances. Will use gold and are using more gold. I want to be alongside that trade. Okay, well what about the people? The people don't want to continue to be over by inflation whether they're rich or poor. Here's a global decentralized digital system that anyone richer pork and access. Okay, I want that system too. Another put option on the current, you know, order of things. And again, I think people try to get more holistic about it like right or wrong, like I believe America's good or bad, it doesn't matter. All, all I'm saying is we're going to change and I want to be long the change and I don't know what it's going to happen in the future. I just know it won't be like it was yesterday.
- [57:38]
A
Is there anything right now that is a plausible replacement for the dollar? Is it bricks I know is trying to back their currency with gold? I think central banks are buying up gold. Is it a return to a gold standard? Is there another governmental currency that has more respectability, less inflation?
- [58:00]
C
I would say that, you know, in my view the most likely outcome is that countries will continue to use a dollar or whatever currency is to trade amongst each other. So let's say that I'm, you know, I have some oil, but I also import food. So if I sell more oil than food I need to import, I say, okay, don't pay me the difference in dollars, pay me in gold. But I can still invoice my oil in dollars or whatever depending on who's buying it. So I don't think there's going to be one particular global reserve currency. I think there'll be different economic spheres and the trade between those economic spheres, the nets of that trade will be settled in gold.
- [58:41]
A
Interesting. Okay, are you surprised at all that gold does not go up in a similar fashion to Bitcoin?
- [58:51]
C
No, because gold is different. It's bigger door. It's not digital. It's not the new, new thing. The drivers of gold are very, very slow and methodical central bank purchases. The crazy volatility in gold will be when let's say that, you know, the US government wants to help the situation. They devalue the dollar in gold and say, okay, I think the gold on the, on the Fed's balance sheet is held at $35 an ounce. Same price it's been since 1970s. Right. They say now our goal on the Fed balance sheet is valued at $10,000 an ounce, which is basically them devaluing the dollar. Gold shoots up, up massively. And now all of a sudden, a lot of these financial problems go away because the Fed has so much gold evaluating it at a certain price. And now the dollar is seen as a stronger currency. So that's a situation that could happen which would massively one off increase the price of gold by 3 to 5x. And other countries could do the same thing who hold gold at an artificially low value, but could revalue it higher on their own balance sheets. So that is probably the gold bull market scenario that I'm sort of. That's why I own the thing. That's the optionality that I'm playing is a revaluation by central banks to make their currency seem stronger in gold terms.
- [60:12]
A
I've never heard that before. What, what would trigger that?
- [60:17]
C
Oh, a war budget crisis. I mean, the same things that, you know, the government's done in the past. Right. When the gold window closed, I think FDR depreciated the dollar and gold terms by like 80% overnight or whatever it was. But obviously you couldn't own gold as a person. He did it after that, said, okay, I'm gonna take all your gold now. I got all your gold. Guess what dollar is worth. The gold is worth way more dollars now. Sorry. So I think that's a sort of situation that could occur.
- [60:55]
A
Okay, let me see if I understand this. You're. I don't understand this. Why would you want to make gold more expensive? What do you plan to do with that? Buy more gold? Buy more dollars? Like, what are you doing?
- [61:12]
C
No, you already have a bunch of gold. So at least the US Is a very stark example. The US Federal Reserve has however many metric tons of gold, a lot of it, it's held at, I think it's $35 an ounce or whatever. That price is very low value gold right now is valued at.
- [61:26]
A
But are they artificially holding that price down?
- [61:29]
C
They're not holding it. They're saying, this is what, this is what we value gold at. So this is so our balance sheet. If you think. Think about what's a dollar worth? It's worth the assets that they hold. What's the only real asset that the federal government has in a monetary sense? It's gold. How much gold do you have? What do you value that? So US Being the reserve currency issuer could say overnight, we think that gold is worth $20,000 an ounce. And guess what we have? I don't know how much they have, but. And so all of a sudden I was like, oh, they've just devalued the Dollar and gold terms but they own a bunch of gold. So now the dollar instead of being a US treasury backed currency and the US Treasuries are trash because of all this spending, it's now a gold backed currency and guess what? They've got a lot of gold and it's worth $20,000 an ounce.
- [62:17]
A
So hold on, hold on. Sorry, sorry, sorry. My brain is just too small for this. But I really want to understand this. So are you saying that they are repegging the dollar to gold in this scenario?
- [62:32]
C
Yes. Well it wouldn't be a peg per se. It's, it's. What do you think a dollar is worth right? If, if this, if you're, if you believe in this de dollarization thing and that country's like I don't want to hold the dollar because it's inflating away, it has no value, it has no assets backing that I don believe in the US treasury as well. Then the federal government and the Fed could say oh actually guess what, we've got all this gold. It used to be worth this, now it's worth that. This new price that we believe gold is worth is massively above the current clearing price of gold. For certain individuals we'd be willing to exchange gold for dollars. Not everyone obviously, only certain individuals, certain probably sovereign nations. And all of a sudden the dollar becomes a strong currency again because it,
- [63:18]
A
why on earth, why on earth would a government do that? Like if I saw that you just changed the value of your dollar massively, why then would I exchange gold? Because I'm thinking ooh, dollars are still great. I still want to have dollars and I have gold and so now I'm going to get those dollars. Like to, to me again I'm sure I'm just missing something but to me I would see that as such a wild manipulation of the currency. I'd be like I don't want anything to do with a currency that just changed three to five and you should old Bitcoin.
- [63:53]
C
But this is how fiat currencies have worked in the past and this and this was done in the 19.
- [63:58]
A
What's the incentive?
- [63:59]
C
Is it because you have to devalue the currency? The US needs a weaker currency. A weaker currency helps you sell your
- [64:05]
A
X. I get our incentive. But something is only worth what someone else is willing to pay. Why is someone else willing to trade their gold for dollars in that scenario? Obviously someone is or they wouldn't do it.
- [64:16]
C
Well no one's don't have to trade anything. I'm saying the the government himself itself says that we believe gold is worth this price. Right now they say it's worth 45 or 35, whatever it is on that balance sheet. Now it's worth, we will exchange gold at this price way up here. And they're able to do that because they own a ton of gold. If you didn't own a lot of gold, then I would agree with you. Why would you do that? This is more with a way to engender a belief that the dollar has a large gold value. Well, okay, here's what we value gold at on our balance sheet. And we're able to do this because we're the central bank and you can exchange gold at this price. Now it's much higher than the price that it is around the world. Now that only works if you have a lot of gold. US has a lot of gold, China has a lot of gold, Russia has a lot of gold. So there is a thinking out there that any number one of these countries that have been accumulating a lot of gold could say our currency is very strong. Guess what? We're willing to bid for gold at this high price. Therefore, sell me oil in my currency because you know that you're going to get gold at a very attractive price because this is what it's worth. Sell me medicine, sell me wheat, whatever it is. So it's a confidence game amongst other issue, other trading partners to say my currency is worth a lot of gold because gold has historically been the real currency of the world. Not these fiat things, man.
- [65:42]
A
Again, so that seems false. What you're saying is my gold is worth a lot of currency. My currency is worth a tiny bit of gold. If my currency used to be $35 buys you an ounce of gold, and now it's a thousand dollars buys you an ounce of gold. The gold got expensive. The currency devalued in its purchasing power. Anyway, I also have a currency debt, probably tearing their hair out right now. Say that again.
- [66:08]
C
But I also, but I also have trillions of dollars of debt. So now my currency devalued in gold terms, but I owe a fixed amount of debt, right? So the reason why, and that's the reason why I devalue your currency is, well, I own, I, I owe all of it. I owe a lot of it. And now it's worth less. I've decided it's worth less. So I can pay you back, but you're getting paid back in depreciated dollars. Now obviously going forward. People who trade going forward have a different deal than people who have traded stuff in the past. So again, yeah, I agree with you. It's a fucked up way to treat people who invested in and your bonds. But again, it's another option that you can use as a sovereign country is devaluing your currency in gold terms to pay back an unsustainable debt load. If you don't want to outright default by saying, I'm just not going to pay you back, instead of saying that, you're saying, okay, I'll devalue in gold,
- [66:56]
A
I'm going to say, psych, it's worth like one tenth of what you thought it was worth. That's crazy. I can't believe that they can do that. Insane. Okay, let's talk about all the liabilities. Since we're on the subject. Do you think that the U.S. so going back to this idea of Argentina comes in, they slash spending. For the US to get back on track, they would have to slash spending. Social Security is basically a pyramid scheme. Would they be wise to lop off Social Security?
- [67:37]
C
And
- [67:40]
A
could you see that actually happening with any sort of political plausibility
- [67:47]
C
in the United States? Given that boomers are more politically active, I would say that it would probably be a death sentence for most politicians to try to take away those health benefits. Now, a very skilled politician who's able to get a lot more younger people out to vote and explain to them how they've gotten over by the old people in the country. If that person's able to do that and put in that kind of work, then yes, I think that, you know, a reformation of the United States's healthcare system could be on offer. But if, if you're not willing to put in that sort of political work to re energize the younger constituents, there's no way you'll be able to do it.
- [68:33]
A
Did you see the video that Ben Shapiro posted about retirement and Social Security?
- [68:42]
C
No.
- [68:44]
A
Very interesting. Lighting the, the Internet on fire. And he basically said, look, Social Security is not going to play out the way that you think. You're probably not going to be able to reap the benefits. Not with people retiring as early as they are. You should, you know, look at pushing retirement back or removing retirement altogether. If you look at managing a fiscally responsible country. Is that an option on the table for you or do you think that there are better ways to get that done?
- [69:17]
C
Absolutely. You should remove. I think these programs are great for the people, the boomers. Right. They're the biggest beneficiaries of all these around the world. These sort of Social Security programs, depending on how you pay for them and removing them will remove that dead weight. But I think at the other end you also need to reform, you know, global sick care, which is the health industry and the misaligned incentives. Right. People shouldn't be dying the way they're dying based on the shitty food that we eat and the over prescribed medicines there shouldn't be. And that's why people need, oh, I need to have this health care. Because everybody gets sick. Why does everyone get sick? Because we eat processed food and all this dog that's, you know, put out to us as healthy. There's a reason why everybody spends a majority of their money in the last like two years of their life dying of horrible cancers and heart disease and all this kind of shit, right? We're poisoning ourselves every single day with these fucked up food chains. So I think it's not just let's remove the retirement benefits and the health care as well. Let's get at the root problem of why do we treat people the way we treat them in the healthcare systems around the world? Let's have a better relationship with food. Yeah.
- [70:29]
A
One thing I don't think people really understand is that you can obviously, because we print to make all these problems go away. But if health care costs, you know, let's say 10x what it needs to cost if people were actually healthy, you are quote unquote bankrupting the country and that you get to a point where there's no way that the productivity of the country could possibly match that. So you've got the interest payments just absolutely insane. You've got sick care management insane. You've got Social Security, retirement, all of it becomes really unmanageable. I have, until recently I had no visceral relationship with how those expenses actually played out in terms of the budget. Until I started looking at how much the government spends versus the actual GDP of the country. That stuff gets very scary. And that's why we race towards war. We flood into crypto. It all comes back there. All right then let me ask you, where does ETH go? We've talked about Bitcoin. Where do you think ETH goes from where it's at now?
- [71:42]
C
Oh, maybe 30, 40,000. Whoa,
- [71:47]
A
that's mahusive. What, what do you think gets us there? Just the knock on effect of everything that happens to Bitcoin has a trickle down to ETH trickle down.
- [71:56]
C
You have, you have the eth, etf, possibly the Ethereum is the decentralized computer and the decentralized computer has a commodity, the ETH, the currency that pays an intrinsic 4% yield, which is a staking yield. It's the only, you know, crypto asset of that size that has this intrinsic yield and that's going to draw a lot of. It's the Internet bond. It's the bond of the Internet computer and pays you a yield to own it. And so I think that's going to be a very powerful narrative as people start to think a bit more about what ETH actually is. And they're going to allocate and say, oh, well, not only do I get sort of this deflationary network value increase in the ETH, the currency, I'm also getting paid 4% yield in ETH. Where else do I get that sort of return? That's great. I want to allocate to this and there's all sorts of different interest rate strategies you can do around that. But I think that's going to be a big narrative for people who are going to get into ETH and understand, oh great, I get to participate in, let's create a new digital Internet on defi and I get 4% yield.
- [73:06]
A
Why do you think that right now ETH seems to be more to the upside. I don't know if this is true to the dollar, but it seems to be more to the upside than Bitcoin. So I'll see Bitcoin dip, but ETH just keep going. Not that it hasn't had its own dips, but are people pricing in the future in a greater way than they're pricing in the reality of Bitcoin today?
- [73:31]
C
I don't think so. It's a smaller asset, right. So smaller things move faster. Just love large numbers. So I'm not really. Yeah, I don't think so.
- [73:42]
A
So do you think it's rate of, rate of increase will speed up if an ETF goes for sure, just like
- [73:50]
C
Bitcoin, just more, more assets. And you know, if people are actually using the Ethereum network post the, the merge, you, it becomes the, the supply of ETH actually declines. So there's less ETH available the more people use the thing. So if we believe in defi and the network activity grows in defi because more people know about it, they want to experiment, then not only the, the total supply of ETH declines and then you have the etf, you know, taking ETH out of circulation as well. So you get sort of a double whammy effect on, on sort of the price and the upside.
- [74:25]
A
The narrative that I've been Hearing is you're going to get big gains in Bitcoin, you're going to get bigger gains in eth and then you're going to get even bigger gains in Solana. Is that just one, do you agree with that narrative? And two, is that just a law of large numbers or is this people seeking out the highest volatility, clearest narrative assets?
- [74:48]
C
It's oh, I guess timing is everything. So we think about last cycle. So bitcoin went down something. It went from 69,000 down to 16,000. Right. Solana went from 250 I think to seven. So yes, from seven to two 50 is going to be a bigger return from 16,000 to 69,000. Right. It's just, it's the path dependency of returns and the time in which you get in and out of an asset. So you could make much more money in Solana or some other much lower market cap shitcoin than you could make in Bitcoin. But if your ass doesn't get off the train at the right time, you're going to get absolutely wrecked versus Bitcoin. Yeah, you might get wrecked, but it won't be as bad as going from 250 to 7. So again, it's, it's one of those things, right? Yes, you can make more money in lower market cap shit coins, but if you don't time it right, you're going to lose more on the downside. So you have to sort of balance those, those two together.
- [75:48]
A
All right. As a trader, you seem very comfortable with what I'll call trading on culture, trading on trends, momentum. Because when I talk to people about why I'm a believer in bitcoin, why I'm a believer in Ethereum, I can say very robustly that I have a thesis around where the world is going and those are going to be long term adoptions. They're not fugazi, as you have said about other things including the tradfi system. There, there's just something really intrinsic about them. Now there's a flaw in the bitcoin thing. If it can't, whether it's ordinals or whatever, whether it can't become another thing which it, it has that sort of looming specter, but that narrative, digital gold, it being the store of value makes sense. Ethereum world's computer, it's a bond in the distributed world's computer.
- [76:40]
C
Cool.
- [76:40]
A
Those make sense. Beyond that, when you get into NFTs, maybe Solana, although if they can speak to maybe gaming, web3 gaming or something like that, then there There could really be a core thing there. But I have a feeling that's not why you're trading on it, that this is really just about. People get hyped about a thing. I'm able to read the tea leaves. I see what they're getting hyped about. I know the signs to get on the train, I know the signs to get off the train and I trade on that. Is that an accurate assessment?
- [77:09]
C
Yeah. So I believe that I have a. At least for the assets that I have large in my portfolio, I have a fundamental understanding of like what they are, what they're not. And I can trade up the narrative and know when the narrative gets out of whack with what they fundamentally are, then maybe it's time for me to step off versus I don't understand what these things. I've never read the white papers for Bitcoin or Ethereum or you know, reading research from very much smarter individuals on the like technical things that are going on. I just know what I read on Twitter. Your ass is going to get wrecked because you don't even know whether you're believing in something that's true or false. At least if I know I'm trading a piece of shit, I know it's a piece of shit. And I'll size my position accordingly.
- [77:53]
A
That's interesting. Okay, so everything is gambling. Getting in the elevator versus walking up the stairs is a gamble. I think that people would do well to conceptualize all of investing to an extent as a gamble. Know where your break points are, know what your risk comfort is, make your decisions accordingly. Dude, every time I get to spend with you is. Is absolutely amazing. Where can people follow along on your insane journey?
- [78:25]
C
So on X at Crypto Haze I have a medium as well Crypto Haze and a substack Crypto Haze as well. So I write long form articles. I hope that you can stomach a half an hour read. I think it's some interesting information. Or you can read my bite size information on X. I love it everybody,
- [78:44]
A
if you haven't already, be sure to subscribe. And until next time, my friends, be legendary. Take care. Peace.
- [78:51]
D
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