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- [00:00]
Steve Sosnick
I would say since inauguration, Bitcoin specifically has become a risk asset. Whether you like it or not, Bitcoin's done very well in periods of monetary accommodation, but I think at some level was, in many ways it's a victim of its own success. I do think it needs to get to a point where it has a more currency like volatility. Foreign.
- [00:29]
Steve Ehrlich
Hi everyone. Welcome to another episode of Bits and the Interview. I'm your host, Steve Ehrlich and I'm here today with a repeat guest, Steve Sosnick, the chief strategist at Interactive Brokers. So Steve, welcome and why don't you briefly introduce yourself for any of our new listeners.
- [00:48]
Steve Sosnick
Sure. Hi. First of all, great to be back with you. Thanks once again for the invitation. My name is Steve Sosnick. I'm the chief strategist at Interactive Brokers. I apparently just completed 30 years with the firm. That came out like an internal email and I've been getting bombarded with congratulations. Not a gold watch, but congratulations are nice. I joined the firm having been on the sell side for a few years before that with some of the bulge bracket firms. At the time, Timber Hill, which was the firm I joined, was an options market making firm. We were just getting big into equity options trading and they hired me as someone who understood the risks of both options and individual equities. And so for many years, almost 25 years, I was an options market maker. Along the way I somehow got the opportunity to talk to people like yourself and, and I became a talking head and then a writer. And as we moved away from options market making, which we don't do anymore, you know, strictly became a customer facing business, we, you know, my role, my role changed over time to, whereas I became a full time commentator, author, strategist, etc. And as a firm, you know, this is a crypto oriented discussion and you know, we, we, I would say are not one. We've never been one of the pioneers of crypto. We, you know, we prefer to deal and I would argue some more, you know, environments with a bit more regulatory clarity. Being a very heavily regulated firm on so many levels though over time we, we've recognized that, you know, while, while we maybe were at the first, we certainly need to be in the game and we offer, I'm not going to call it a full slate of crypto, but I would say a full slate of major crypto products. And we've actually just announced that you can now fund accounts with stable coins. So we, we understand the potential though I would say you know, we, we, we want to avoid some of the frothier, less regulated, less transparent portions of the business, shall we say?
- [03:17]
Steve Ehrlich
Yeah, well, I mean, that's, that's great. And I have to say, if they do try to give you a gold watch, you should ask for bitcoin instead, I guess, maybe not depending on the gold speed today. And well, yeah, we're going to get into that. So maybe, at least for a short time, gold, gold could be the way to go. But a lot to talk about today. I mean, Greenland, everything going on in Davos as we're speaking. I believe the Supreme Court is hearing arguments on whether or not Donald Trump can fire Fed Governor Lisa Cook. So much to, so much to discuss and we're going to get to all of it. But before we do, just a brief disclaimer. As always, nothing that you hear on this program is investment or financial advice. For more disclosures, please see unchained.com bitsandbps so, Steve, let's kind of dive right into it. The world's attention today is on Davos. President Trump spoke earlier this morning. I guess he assuaged markets a little bit by ruling out the possibility of using force to take over Greenland and its 66,000 inhabitants. Although that, that could always change depending on how Europe responds to that, I guess. But markets are clearly on edge. And when I was trying to think of like how to sort of start this discussion, this is one of those real moments where cryptocurrency needs to take a hard look at itself because again, gold is setting new all time highs. Precious metals demand is going through the roof. People are looking to safe havens as yields on treasuries and Japanese bonds go up. Bitcoin's struggling. And this is just another reminder that although it's purported to be a safe haven, it hasn't hit, it hasn't sort of earned that narrative just yet. So how are you making sense of all of this?
- [05:16]
Steve Sosnick
It's funny you bring this up because I literally alluded to this in a piece I wrote and today you can find these all On Interactive Brokers, IBKR Campus or Interactive Brokers.com look for Traders Insight or search for me. I did allude to this and I think you raise a very important point. You know, for a lot of time we were hearing about, you know, is bitcoin digital gold. And in one sense it can be because it's a non$I, I'm going to say decorrelating, but it's not, let me get to that. But it's certainly in, in many ways it exists outside sort of the, you know, outside of the mainstream of, of, of fin, you know, of, of finance. And I mean that in a, in a positive sense in this case. And you know, it is, it is sort, you know, it's non, it's non dollar, it's non fee, fiat, all that sort of stuff. But what it's showing us is, you know, on, in a period like this where it's hitting the fam, you'd expect this to be, you'd expect something like this to be doing better, and it's not. And so what I think we've seen certainly in the, certainly in the last calendar year, I would say since inauguration, because we're one year in crypto in general. Bitcoin specifically has become a risk asset, whether you like it or not. And, and, and, you know, we really have. Bitcoin's done very well in periods of monetary accommodation. But I think the turning point at some level was in many ways it's a victim of its own success because by, because the ETF launches were among the most successful ETF launches ever, if not the most. I think Ibid is literally the most successful ETF launch. By many measures, crypto became an investment for normies. You know, and I was a, when I, it hit me when a few months ago I was invited to speak at a crypto conference here in Connecticut. I'm based, you know, I'm based in, in, in Fairfield County, Connecticut. And you know, a friend of mine who I used to work with invited me to speak. They host some crypto conferences. And it was around the time where I, and this is something you and I had discussed was I was saying that, you know, regardless of your opinions on crypto, I don't think digital asset treasury companies are really the way to do it because, because to me that it seemed like you were paying two dollars for a dollar's worth of coins, which for better or worse, in many cases has played out that way. But, you know, I, I thought I was being invited in there to sort of be the, the crotchety old grandpa, you know, saying, you know, okay, here's. And I'm not a grandfather, by the way, but in theory, but basically to say, you know, see, see kids, you know, this is what happens. You know, this is where, you know, don't let, don't go crazy in the stock market, even if you like this as a, as a crypto investment. And I was pretty much closer to the average age of the room, the media, let's say now, it could be because the, the guys running the conference were roughly my age, and that's who they appealed to. But I was, you know, the other two guys on my panel were, I'm going to call them, you know, crypto natives, you know, guys in their 20s, early 30s kind of thing in. And, you know, they actually didn't push back too hard on my digital asset treasury idea because quite frankly, they're not stock market guys, they're crypto guys. But I realized that the people in the room in many cases were stock market guys, and they were investing in crypto because it was. Because they could do it in their retirement accounts and because they could just do it like a normal stock. The problem is we already had a pretty high correlation between the price of Bitcoin and the NASDAQ 100. And I think that reinforced it, the enthusiasm over the President leaning into crypto. At the same time, it became very easy for normal average investors, who are not necessarily crypto natives, to get into means that they're looking at it the same way they're looking at everything else in their, in their retirement account. And if they're, you know, and if they are, again, if I'm in the median, that means half the people were older than me. And that means they're retirement retired or close to retiring. They don't want to deal with a 30% drawdown. And so what we've seen recently is, you know, we had this little bounce recently, you know, where, where I guess we went from call it 90 to 97, I think that was largely there was a lot of buying from the said digital asset treasury companies that I think propelled it. But when push came to shove, when the risk hit the market, they went out of crypto and they've gone, but they've continued, people have continued to buy gold. And to some extent, silver is a hedge. Silver's off in its own world, too, I'm going to say. Actually, in many ways, silver is the original and current crypto favor in its own way in terms of being a very speculative risk asset. But, you know, the divergent performance between gold and quote, unquote, digital gold is quite telling.
- [10:58]
Steve Ehrlich
Yeah. And this is a narrative that we've seen plenty of times before. I'm curious if there's anything unique about today's circumstances that you want to point out.
- [11:14]
Steve Sosnick
Unique? I'm not sure. You know, I, I think this is, it's, it's. In many ways, it's all too, it's all too typical. It's a movie we've seen before over financial history in terms of, you know, you've got an asset and, and it's made a lot of people a lot of money through speculation. You know, I'm going to say maybe not to the, in terms of magnitude, this is greater than most. But, you know, we have seen periods where all sorts of, you know, risk assets have gotten very popular, have seen big waves of appreciation and then, you know, gravity, inertia. You need, you need fresh money, you need fresh enthusia, enthusiasm to maintain momentum and, and you know, at some level, the bigger the momentum, the more, the more you need of it. And that's where I sort of came into the, that's where it sort of hit me that a lot of the people were, look that were, you know, who are now in this, are not in it because of any great love of, or appreciation for the merits of, of crypto or blockchain or any of the other stuff. They were doing it because it was going, they were buying it because it was going up.
- [12:31]
Steve Ehrlich
Yeah.
- [12:32]
Steve Sosnick
And now that it's not going up, you know, it, it's not in some ways like, you know, a stock where you could say, all right, I'm going to buy the dip. You know, you did see people buy the dip, and it hasn't worked as well in crypto because this is where it's a negative is. I, I, there's no earnings, there's no revenues. I can't tell. You know, I, we can debate what the right valuation is for Nvidia, let's say. Okay. And, and you know, should it have, you know, should it have a pe of x or a pe of 2 times x or pe of 0.5x that, that's all open for debate. But there's E there. And so we know that at some level there are, you know, there's a value to the asset to, to the productive assets that Nvidia controls. Yeah. Bitcoin is not inherently a productive asset in the same way that gold isn't a productive asset, the same way that really dollars are. It's, it's just, it's, it's different. It's a store, it's a store of wealth. And as a result, it's not as you know it. And this, in this case, it's a particularly volatile historically store of wealth. And so that's where you get into the, that's where you sort of find, find ourselves in, in the situation we're in.
- [13:51]
Steve Ehrlich
Yeah, A couple questions on, on that because I just want to Go a little deeper into the store of wealth and, and sort of the safe haven narrative that, that we've been discussing. And you're a good person to ask because like you sort of like cut your teeth in tradfi over you said decades. But, but you are cryptocurious. If, if I could be so bold and I mean, I understand all the reasons why Bitcoin should be a better store of value in a way than gold. It's easily divisible, it's easily transferable, there's a finite supply, whereas nobody knows how much gold there actually is in the world, let alone when some meteor comes and we start mining gold in outer space. I mean like all these things can happen, but is it just a question of time horizon? Like for instance, like bitcoin could experience drawdowns of 30% in a matter of days or weeks or months, whereas bit gold, perhaps not. And like the safe haven status, maybe it's a difference of perspective. Like safe haven during acute moments. Gold clearly is better. But I've heard many people, I mean, interviewed on this show and talked Bitcoin is sort of like the doomsday hedge. Like bitcoin is the, is the asset when the shit really hits the fan and things completely go, go to hell. Is the debate more nuanced than why isn't Bitcoin just acting like gold during periods like this? Or I'm curious your thoughts on that.
- [15:26]
Steve Sosnick
Yeah, I mean you raised some important points. Part of it is historical. I mean gold has a, sells thousands and years of thousand year head start on Bitcoin. And an EMP wouldn't wipe out gold holdings, but it would severely hamper your ability to trade your crypt, access your crypto and convert that. It's still there's, you know, in both cases neither is really useful as a currency. You have to convert it into something else to use it. I mean, I guess in theory I could go into, you know, I could go into a supermarket with Krugerrands and you know, and spend them or whatever, silver coins. But realistically nobody's going to do that. I think though the difference is just in many ways it's how it's been operating in more recent times and who are and who owns it. I think it's, you know, again, gold is because of gold's thousands of years of history and, and it being perceived as, let's call it a stodgier counterpart, you know, to the much more exciting crypto. It hasn't, it hasn't had the sort of volatile day to Day volatility, it's just much less volatile. Its volatility is more akin to that of a currency than to a pure risk asset. It's gotten a bit more volatile recently, but still it's, it's more currency like volatility or certainly no worse than let's say equity like volatility. Whereas Bitcoin and Bitcoin specifically and then you know, the, the smaller, the, the smaller the market cap of the coin, the, the, the more volatile it gets. These are, these are volatile, these are very volatile instruments. So it's very difficult to view a store of wealth in the same, you know, the same way when it, when you can have huge daily or weekly price swings. Now one of my favorite little features as we've seen this rally in gold and, and this, you know, and the move in, in, in Bitcoin is a lot of, a lot of you know, ink or shall we say pixels have been spilled, you know, pointing out how much, how gold has drastically outperformed Bitcoin recently and stipulated has the math is the math over a two year period the performance is actually relatively, relatively similar. Gold has pulled ahead in, in the last couple weeks but when I first pulled up the chart a couple weeks ago they were like almost identical over that basis. So again I think that flows into the theory of people, you know, portfolio shifts having a big role in this because as you know if you're going to allocate, if you're thinking from again sort of the, the, the, the normie perspective, you know, or the general portfolio manager perspective of I'm going to have a certain amount of my assets in risk hedges or non correlating assets, et cetera. You're, you're going to go to the one that's performing as opposed to the one that isn't. And so gold has been performing whereas you know, crypto hasn't. And I think that's, and, and because they, they are now both equal, equally easy to trade. You know, again Bitcoin's actually, you know, crypto is actually easier in the sense that it's always accessible whereas you don't always have a 24 hour market in gold. But again going back to the, going back to the, you know, the broader investment world, you know, that still operates nine, 30 to four, five days a week to a large extent, you know, or you know, we, we're, we're close to 23,5 at this point in non crypto stuff actually. But still it's not, the liquidity isn't there at off hours Necessarily, um, which, by the way, the fact that you have big moves in crypto at weird times and particularly over the weekends, is another way of saying it's not everywhere. All the time, 20, 24, seven in anything you trade. But I digress. But it makes it. If you're just sort of saying, all right, I want to have 5 to 5 or 10 or 15, whatever percent of my holdings in something that I perceive as being decorrelating, what's the difference if I'm, you know, it's very easy for me to, to sell IBIT and buy GLD if I were so inclined to do so, and vice versa.
- [20:05]
Steve Ehrlich
So let me just put you briefly on the, on the spot. Do you think bitcoin can ever be a safe haven like gold.
- [20:14]
Steve Sosnick
Ever? No, I'm not, I'm not going to say that. I think it's got some work to do though, because I do think it needs to get to a point where it has a more currency like volatility. I mean, remember, gold is the original currency. It hasn't been for decades, but, you know, century or more at this point, but, well, decades. So it doesn't have the volatility. Bitcoin is still too volatile to be thought of a. As a means of. As a, as a means of exchange and as a pure risk asset. Now, it depends a lot on where you live. If I lived in. If I lived in Argentina or Turkey or some other country where generally the rule of thumb would be if my, if my government has to borrow money in a currency that's not my own, I would want to have a big allocate. I've always said you should have a big allocation to gold. I don't see why it shouldn't be bitcoin, especially because it's. Especially because in many ways it's more fungible and easy to move.
- [21:24]
Steve Ehrlich
I have one question on this topic, and then we actually have a little breaking news that I'm gonna, We're gonna discuss. I'm just interested too, because you mentioned other countries. Is it possible that any demand, like safe haven demand that could be going to bitcoin, perhaps could be going to stable coins instead?
- [21:44]
Steve Sosnick
Absolutely. You know, because again, it, it think about going back to the volatility argument, right? I mean, if I'm, if, if, if I can be reasonably assured and, you know, we. I don't want to open the whole can of worms about what's underlying certain stable coins, but let's stipulate that these stable coins are in fact backed one to one by by. By T bills or some other sort of hard asset. Yeah. Because I don't have volatility that way. I've got all the advantage. I've got all the advantages of, of fungibility and the ease of movement, you know and it, and it would be a non coral, you know and it would be again if I own. If, if I'm living in, if I'm living in Buenos Aires, I'm holding US Dollars as opposed to Argentine pesos, you know. Sure. This way at least if I know that I'm putting in X amount, you know, if I'm buying X amount X dollars worth of something, I, I have a reasonable belief that it's going to be continue to be worth X dollars of something. Yeah. As opposed to something that can fluctuate wildly. If you know, if, if four months ago I was trying to move money out of Istanbul, would I be much better off if I'd put it in a stable coin or would it be much better off if I put it in bitcoin? The answer should be obvious. Yeah. So I do think that stable coins there, there's a value there. But then of course you have the other consideration of you know, cryptos are truly decentralized stablecoin. You have somebody managing them with assets. So we. That I don't want to go down that rabbit. No, I understand. To answer your question, I do think stablecoins have, have taken a lot of that luster. Yeah.
- [23:35]
Steve Ehrlich
And one thing worth paying attention to as well, tokenized gold is still such a small percentage of the overall gold market. Obviously in bitcoins too. I know that a trading volume for tokenized gold overall aum is going up. But that is something also to worth to consider moving into the future because that can also perhaps siphon off some demand from.
- [23:57]
Steve Sosnick
From.
- [23:57]
Steve Ehrlich
From bitcoin to get the benefits of gold without necessarily with. With the the benefits of gold and the benefits of blockchain reals together. Anyway, I promised you some breaking news so let's, let's get to it. Curious what what you think it might be so But I'm not gonna, I'm not gonna put you on the spot. So. A new truth from Donald Trump outlined framework for future Greenland deal after NATO meeting with Mark Root Tariffs postponed VP JD Vance Secretary of State Marco Rubio to lead negotiations and if you'll indulge me, I'll just read it really quickly based upon a very productive meeting that I have had with the Secretary General of NATO, Mark Root. I hope I'm pronouncing that Correctly, we have formed the framework of a future deal with respect to Greenland and in fact the entire Arctic region. This solution, if consummated, will be a great one for the United States of America and all NATO nations. Based upon this understanding, I will not be imposing the tariffs that were scheduled to go into effect on February 1st. I believe those were 10% with 25% by June. Additional discussions are being held concerning the Golden Dome, that's a missile defense system, as it pertains to Greenland. Further information will be made available as discussions Progress. Vice President J.D. vance, Secretary of State Marco Rubio, Special Envoy Steve Witkoff and various others as needed, will be responsible for the negotiations. They will report directly to me. Thank you for your attention to this matter. Before I ask you for a response, as far as I can tell right now, I know that the Unchained team is looking into this. I don't see any comment from NATO, any representative of Denmark or other European nations. So we'll have to kind of see what happens with that. But just at first glance, Bitcoin has already shot up from about 88% to 89%. I imagine if we look at a chart, other risk assets are also going to perk up at least temporarily. And then depending on what happens the rest of the day and after additional commentary, things could change. But we were going to get to this anyway. So I think this is a great launching off point to just kind of. I want to get your reactions to this.
- [26:08]
Steve Sosnick
Well, I mean this is, this news, you know, it, it, it's obviously, you know, a one sided post. We have not heard back from the Europeans, but.
- [26:18]
Steve Ehrlich
Right. And that's, here's there have been two.
- [26:20]
Steve Sosnick
Premises and again this dovetails in with what I published earlier today, which now to some extent is obsolete because of breaking news. But number one is, you know, geopolitics don't really affect stock markets per se. And the reason being is for the most part they don't really have any direct effect on the things that really directly affect stock prices. So if you tell me that something's going on between the US and, you know, and Venezuela, you know, US and Venezuela, US and Greenland, etc. Etc. I'll ask, I'll, I'll give you the counter argument of how does this, what does that mean for Microsoft? For argument's sake, it doesn't because Venezuela has not really been part of the world economy. The only US Company really operating there in size was, was Chevron. And, and it's clear that the other companies didn't really have much of an interest in terms of Greenland. It's, it's 55 or 60,000 people that has, you know, with the exception of a couple of, like, critical mineral stocks and things of that nature, it doesn't have an, there's no real impact there. But when it became, what it became a stock market event when the president threatened tariffs, because all of a sudden, 10% tariffs with some of our biggest trading partners, that's, that, that does, you know, there, there is a very, very distinct answer to how does that affect any number of companies. And so the key to the element here was not so much that there may or may not be the framework of a deal, because honestly, we don't, there's no details there. But if he's backing off the tariff threats, well, then that takes away a lot of the concerns that markets have about the whole Greenland affair. I think you're not seeing the markets rally all the way back to yesterday's levels because we've seen him change his mind. You know, this will also raise questions about a phrase I've heard a lot today and various people have asked me about today is the Taco train, which I don't like really using that, you know, the. Let me, let me, let me state it more apolitically because that's, you know, I'm not a political analyst. So let me, you know, I just want to say here, you know, the Trump put. Speaking as a former options trade off.
- [28:56]
Steve Ehrlich
For many years, and that may, I mean, before you continue, I mean, that may not necessarily be applicable here. I know there was a, I know, like the market dropped maybe like 2% or something yesterday, but that's still far cry from the big crashes that we saw back in April before it recovered. So, so taco probably isn't the right analogy in this case, even though that is the parallel that everyone's drawing right now.
- [29:21]
Steve Sosnick
It's not. And it's not. And I agree with you for that reason, because he even said it in his speech this morning. He basically dismissed yesterday's decline as no, as no big news. So, you know, this will probably get interpreted as he always chickens out. I'm sure he's gotten an earful from a lot of people at Davos who are not fond of the tariff idea. You know, I think it's, you know, we can argue that it's a terrible, you know, it's, in many ways it's, it's a policy that's completely not at all productive toward either, you know, to anybody's goals and so taking it off the table is fine. Again, you know, you alluded to the reaction. I mean, I see I'm, I'm turning my head to look at, because to look at my other screen, you know, we got Bitcoin back up to like 90k which is sort of to me this line in the sand between risk, true risk on, risk off. You know, money's flowing into small cap stocks. Russell 2000 zooming. But I think that's again just largely momentum as much as anything else. We are seeing more than a percent rally in, in, in most major stock indices. But we should, if there are tariffs coming, if the, if there was a tariff threat that got the markets nervous and then there's, and then the threat of tariffs is being withdrawn, we should cut back a lot of it. Now I don't think we're necessarily going to race to get back everything because there are other things going on in the world. Much stronger Chinese yuan, a much, much weaker Japanese government bond market. There's other things affecting stocks and other asset classes and US Bond bond yields. But you know, certainly, you know, I understand why there's a bit of a risk on bump on this news. We should have one.
- [31:07]
Steve Ehrlich
Yeah. So let's talk about bonds because I, I was meaning to bring that up earlier today. I mean the tenure is up, longer dated bonds are up and then there's a lot of fear about what this means for the, the Japanese put with their bonds going up too. So I know, I'm sure you had some thoughts on this this morning. May. Has that changed at all with this kind of recent news or, or not? I mean how, how big of a force is that vis a vis what we just heard?
- [31:36]
Steve Sosnick
I think actually that's, that it's sep. It's a separate category here. Just, I just saw, you know, I see now US bond the 10 years, about 426. I know I noted on Friday that I was concerned that the yield popped up through 420 on Friday. That's been sort of a line in the sand. But it did it on light volume. So I was a little bit dismissive of it. I think with the, with the further rise in Japanese yields over the weekend that really, that really put a, that put a damper on, on global bonds overall. US Bonds as well. You know, I think a key element when we look at what goes on in Japan is the carry trade where people borrow money in yen. You know, people borrow money in yen and then use the yen to, you know, to move elsewhere. Now you're Losing a lot of the yield advantage because there was a good yield advantage to borrowing in yen as opposed to the US Dollar that's not fully evaporated is at the long end, but in the short end it's still, there's still a little bit of an advantage. And the lack of confidence in the Japanese bond market has caused the yen to weaken relative to the dollar. So you're not seeing people unwind their carry trades, whether those, and, and also I think after the shakeout last year, the carry trades are not as big as they were. But that does have an effect on risk assets. And again, as I stipulate, Bitcoin is it Bitcoin. Other cryptos are a risk asset still. And so, you know, that's something that bears watching. I do think it had a lot, you know, I don't think it's a, necessarily a coincidence that part of the, you know, that a lot of the reaction that we saw in bitcoin over the weekend, you know, could have been a bit of a front running of the Japanese bond market. It's very, this is where it becomes difficult to disentangle things. I can't fully disentangle all the pieces of spaghetti here, but they all do have a big influence on people's risk tolerance.
- [33:44]
Steve Ehrlich
Gotcha. And just going back to Europe briefly, I'm curious what you think this means for the US EU Trade Agreement because it still has to be ratified by the eu. I know there were statements that it was pretty much being put on hold because of this, this new drama over Greenland. We're talking right now and don't know exactly what the reaction is going to be from, from European counterparties to whatever these negotiations were in Davos, but how big of an overhang is, is that on, on markets? And if, because of this issue, which I would imagine even if the US is somehow able to acquire Greenland, which I don't even know how that process would work, it would be months or years before that would probably happen. I'd imagine that kicks out the deadline for any trade agreement between the EU and US Ratification of it, implementation of it much further along, much further down the line. What do you think the market impact is going to be on that, from that?
- [34:51]
Steve Sosnick
Well, I mean, literally the headline hit that they were declined, the headline hit about, you know, declining to ratify the deal while the President was speaking. So I, I don't think that timing was a coincidence. You know, I, I, I, I think that, you know, it's, we have to remember other countries, other, you know, have cards to play. And that is one of the cards that they have to play. And again, we don't know what's going on behind the scenes at Davos. We don't know. We don't, I don't know what conversations the President's been having. You know, you know, for example, the President was supposed to speak on cnbc. When I got on the call, they were teasing that he with you. They were teasing that he was going to come on any minute. I have, you know, have it on and silent in the background. He still hasn't come on yet. Probably because he was, you know, probably because he was doing whatever he was doing that led to this truth social post. So the, these are all very moving targets. But again, I think, you know, and, and, and when you step back, you know, I mean, if we wanted to exercise a bigger presence in Greenland, it, it, it's doable. There are treaties that say we can go open bases pretty much all around the country if we wanted to do so. But, you know, as Scott Besson put it as basically, we'd rather, we'd rather own than lease. I guess speaking in terms of the real estate, you know, idea that the president, you know, that president's background in real estate, it's a fluid situation. And, and, but, and I guess the problem is whenever it comes to tariffs, these are situations of our own making. You know, they, they, they come up as a problem. They come up as a problem because the president chooses to use them as a tool. Now, the other thing that we still have to hear about, we haven't, we didn't, we could have heard as early as yesterday. We certainly didn't hear today how the, how the Supreme Court's going to rule on the tariffs and what the remedies may or may not be if they rule that the tariffs are, you know, were not done with the proper authority and what, and what other. And, and, and even if they, even if they knock down the tariffs, there's other, there's other measures that they can put them back in and do they have to repay the money? There's a, there's a, there's so many moving parts when it comes to it. But ultimately, as we learned last April, you know, the tariffs sort of exist at the President's whim to some extent, at least in their current form. And so, you know, there, at this point, he chooses to threaten or implement them and he also chooses to renegotiate or withdraw them. That to me, as someone who spent his life trading volatility, that adds Volatility because. Because you never quite know where you stand. And I, I think the president views that his personal volatility as a. As an asset makes him harder to pin down in his mind. But from a market point of view, it's actually sort of remarkable that the stock market's just rolled with this, you know, his personal volatility and his policy volatility.
- [38:08]
Steve Ehrlich
Yeah. And I think that comes down to just this whole idea of. I mean, like, my background, as I think, you know, before I even got into crypto, is in geopolitics.
- [38:18]
Steve Sosnick
Yeah.
- [38:18]
Steve Ehrlich
I mean, I've. I've been thinking a lot today about, about NATO, because I've been there. Like, I've. I've toured. I've met soldiers from the Baltic states. And I mean, for them, and this is more than 10 years ago. I mean, after Russia started making entreaties into Crimea, but before, like, the big invasion in 2014 and stuff like, this is a life or death situation for them. Like, they see NATO membership and the existence of NATO as existential to their future, as independent, like sovereign nations. Like, you talk to people from Estonia and they still remember the, the cyber attacks on, on Tallinn and all those types of things. And it's. The reason I'm bringing all this up is because it sort of reminds me of how much goodwill the United States has created for itself, like, ever since the end, I mean, World War I, when we became like the global financial superpower. And then especially after World War II and then even more so after the collapse of the Berlin Wall and the whole idea of Pax Americana and sort of like the predominance of liberal democracy and our sort of role as the benign hegemon, and the, the fact that, I mean, with all of, like, all this, like, I guess, whiplash, for lack of a better term from policy creates all this doubt, all this volatility. As you said, a lot of markets are taking it largely in stride because I think of the power of the US and, and the belief in just overall policy stability over decades, like, notwithstanding this particular blip, regardless of where people stand on the President personally and the efficacy of these policies. So it's really kind of fascinating, and I think that's important perspective to keep in mind. I mean, geopolitics, as you said, I used to work for a political risk firm, and it's very easy to say politics affects everything, and that's an oversimplification, but it is still relevant. And there's times when it's acute, there's times when it's more in the background, but it's still relevant. And, and it's something that it's always kind of interesting to, to remember. So it's really interesting to see what's, what's going to happen with, with all of this. And, and I mean the future of NATO, like that'll have huge impacts on markets and, and so on and so forth. Go ahead. And then I was going to.
- [40:43]
Steve Sosnick
Yes. No, I, I again, I think that I'm incur, I think I'm encouraged by the idea that it seems like the discussions were with NATO today because, you know, maybe somebody reminded him and you know, I don't know if it's a feature or bug in his mind, but that, you know, weakening NATO, that is like literally Putin's wet dream. Yeah. You know, I mean you're playing right, you're playing right into his hands by antagonizing the, you know, the other NATO members, you know, and the idea of actually almost outright think threatening other NATO members is, is, is insanity from a geopolitical point of view, at least as I perceive it, believe it or not.
- [41:27]
Steve Ehrlich
Russian, it might have been either the main Russian spokesperson, Peskov, or, or the Foreign Minister Lavrov actually put out statements praising the US's policy towards Greenland and, and like clearly, I mean their whole, Russia's. The goal of the last, I don't know how decade plus has been to delegitimize and break up NATO. So this is like exactly what they're hoping for. And, and it's going to sort of bind the US's hands, I believe, from negotiating an end to Ukraine and the war too, if the US is pursuing its own territorial expansion. But any, anyway, yeah, no, no, we.
- [42:08]
Steve Sosnick
We could go, we could go on but you know, again, I don't, I don't want to make it too political. I want to, you and I can talk offline about politics, but I'm from our public thing. I got to stick to, I got to stick to markets.
- [42:19]
Steve Ehrlich
Fair enough. All right, so let's, let's go to one more big market story before we start to wrap up Today, the Supreme Court held hearings on whether or not Donald Trump could fire Lisa Cook. And I mean the Supreme Court has upheld his ability to fire heads of, or commissioners from other regulatory agencies. But the Federal Reserve by statute is independent and it has always kind of, even in the eyes of this conservative leaning Supreme Court has sort of had a special type of status. From what I've read about the hearing, it seems like the justices are not disposed to letting Trump fire cook. And this comes on the back of the, a number of Republicans standing up to I guess the Jeanine Pirro's investigation into Jerome Powell. So what do you think that's going to mean for the dollar? I mean there's obviously a lot of things are in flux right now, but it certainly seems like there is some resistance and there's an, and there's bipartisan, there's bipartisan desire for, for sort of an independent Fed and sort of continuing to ensure the domination of the US Dollar. But I'm curious your thoughts on that and how that plays into everything else that we discussed here today.
- [43:45]
Steve Sosnick
Oh, I think that there's a broad consensus, bipartisan consensus that Fed independence, central bank independence is of paramount importance important part importance for markets. You know what, what was one of the examples of a currency that I gave you if you know, if you live was Turkey, if you lived in that country. I mean their, their central bank has been essentially a pawn of, of the political wing and, and, and their currency has suffered mightily as a result of it. When you think about it this way, who else really in a position to fight inflation from a, from a monetary point of view? Right? I mean, you know, you could, there's all kind, there's things you could do, price controls, whatever else, but realistically the best, you know, the, the, the, the tried and true method for fighting inflation is for better or worse through, through the, the central bank interest rate policy lever. And it, you know, the, you know, I always joke around that there's the third leg of the dual mandate. You know, there's, there's stable prices, there's maximum sustainable employment and then there's don't be Arthur Burns. And you know, for those who don't aren't familiar with.
- [45:03]
Steve Ehrlich
We actually discussed Dr. Burns last week on, on, on the show. But yeah, please, please.
- [45:07]
Steve Sosnick
Did you really?
- [45:08]
Steve Ehrlich
Yeah, I mean it's sort of the, the eponymy of what not to do and, and, but, but please go ahead and explain it for, for anyone.
- [45:16]
Steve Sosnick
Yeah. So you know, Arthur Burns was, was a crony of Richard Nixon's and Nixon wanted, you know, lower interest rates and, and Arthur Burns kept the rates too low for too long, which fed in mightily to the, to the inflation of the 70s. I know the President said, oh the inflation under Biden was the worst ever. That that's not even close to what we had in the 70s. A lot of that was, was made worse by various oil shocks and Arab oil embargoes which were not the Fed's problem, but at that point you'd already baked inflation into the system. So when those hit, you know, that was basically like throwing, you know, throwing gasoline on the fire, even though gas was embargoed, but throwing, you know, throwing fuel onto the, onto the inflationary disinflationary embers. And, you know, and it took a lot of hard work and a lot of pain from Paul Volcker to bring that into play. And I think people who have studied economic history understand that, which is why it's one of the places you've actually seen, you know, wiggle room between Scott Besant and the President because Besant taught economic history actually among other things, you know, sort of post hedge funding. And, you know, I think everybody realizes that central bank independence is paramount. I think that's why you had such a swift condemnation of Janine Pirro's run at, at Powell. I don't know that we know or will ever know to what extent she did it on her own just because she thought she was appeasing the boss vis a vis, you know, getting a nod and a wink from people in the administration to do this. We'll never know. And, and you know, clearly they're, they're leaning toward the side of plausible deniability. The Lisa Cook thing. Obviously, I was not listening into the Supreme Court debate, but I have read up, up on it since it seems to me very, that, that justices from both sides of the aisle were, were, were pretty clear about, not about, you know, the Fed's sort of special circumstances. And you know, again, here I, I, it was either Kavanaugh or maybe even Alito who brought up the idea of she hadn't, this hasn't even come up in court. You know, how can you, how can you, you know, if, if Alito is questioning, if Justice Alito is questioning whether or not there's justification for, for doing so, regardless of whether you know, what the, regardless of whether this is legal or extralegal. But, you know, if this is, if even he's raising questions about what are your grounds for doing this, you do have to wonder that, that, that it seems that they beat this one back. But again, like, how much of this was Bill Pulte himself taking this on because he thought the President wanted it? How much of it was the President doing it himself? Again, they're, I'm sure they're going to lean toward, toward plausible deniability, especially if this is adjudicated in a way that they don't like. But, you know, you do have to wonder, you know, these contin. This. I. I think this is one where the market has spoken very clearly. I'd like to think that maybe they've learned their lesson about maintaining central bank independence. But, you know, as we discussed earlier, any. Things change very quickly.