D (3:01)

I think you opened it up. Well, there's this quote about sometimes we get 10 years happening in 10 weeks. Make that one week or. Right. We got a lot of change, a lot of transformation happening. So much where to, where to begin? You've got, I think Davos was the, the highlight last week. Probably one of the most productive Davos ever. I, I can't imagine any other Davos having Elon Musk in attendance, for example. So you, you had real debate and real battle of ideas out there. Let me just highlight a few quotes for everyone. So this is Mark Carney. He said, quote, middle powers must act together because we're not at the table, we're on the menu. Middle powers reminded me of some Lord of the Rings metaphor. Of course he cut a deal with China. And then Besson said, no, you can't do that. Then he walked that back. And then the German Chancellor Mertz said, quote, both Germany and Europe have wasted incredible potential for growth in recent years by dragging feet on reforms and excessive regulation. This is where this come from, right? This is. I think he's right. So yay. I thought it was quite something. And then you have in armada rolling up to Iran. You know, Trump stated that there was some communication Iran, they said, look, if you kill these protesters, you will see more violence than done what was in the summertime. And you know, he reported that they stopped then the reports from Iran saying they, they did not acknowledge such a request. So we'll see what happens there. You know, from a markets perspective, we started the year with Beta coming in strong and hot. High Beta especially. It's what's weakening now. It's weak. I'd say, like you mentioned, Bitcoin is a good example. The old guard of Beta, I put Bitcoin in that and Palantir and Robinhood. It's very weak. It was down today in a day the markets were up and you're starting to see insurance stocks start to move. So I think you're getting rotations in the market and a bit more defensive positioning on our side. We actually, we took down our risk this morning. We sold into strength and brought our beta down to kind of a below average risk exposure. Still think it's a, it's a, it's a bull market, but sometimes you just got to Take some risk off and felt that this is one of those times.

B (5:38)

Yeah. So Rob, I think you, I think Rob got most of it, but I think you, you missed a few as well. There's a purge in China with the high command of its military completely annihilated. Xi Jinping is left with one really sycophant, the guy who, you know, led the anti graph, which I think is good and bad. We can get into what's happening there. You have Minnesota blowing up. So you got domestic unrest as well. So we didn't. Greenland is still in play. It's on again, off again. There's a deal. There's no deal. We talked about the Japan economic crisis going on there where the yen was really out of control until we had a bit of an intervention. So the fundamental thesis that I have is, is that coming out of Davos, I think it was, you know, we reached a culmination point. It's new world order. You know, this post World War II order is over. Everything is coming apart. Every single alliance is being rethought and we've really arrived at this realpolitik moment. Realpolitik is the norm now. If you think about international relations, you have idealism and realpolitik. The realists are in control. They're going to be in control for a while. You're seeing power consolidating wherever it can. And when you have this ripping apart of the order, there's leads to a lot of uncertainty. So it's no surprise that you're seeing precious metals take off. Why is that? It's because a lot of the big sovereigns that are the buyers, they haven't quite figured out bitcoin yet and crypto. They're starting to. So let's talk about what happened at Davos. You had an incredible dialogue between Brian Armstrong and one of the French ministers. I think it's Villeroy or something like that. And he's just like, I don't trust your private, I trust central bankers, not your private bitcoin issued money. Something like that. They don't understand it yet. And they don't understand that it's a much purer play digital gold than the current gold that they have. Really interesting. You see Larry Fink coming out of this, talking about one central blockchain that the whole world's going to tokenize. And so you have this. I guess my conclusion is that in a world dominated by realpolitik, where everyone's acting in their own interest, a trustless, permissionless blockchain Centric economic environment is inevitable. It's absolutely inevitable. And I don't think the market's figured it out yet. I think we're going to look back on this error and be like, oh my God, Bitcoin was so obvious. And I know, you know, we're gonna probably talk about quantum and things like that, but, but I do think crypto is so obvious in this environment.

A (8:18)

Is pretty obvious.

C (8:19)

Charles yeah, my view on that's changed a lot. I mean I was 100% in that camp five years ago. I was basically all in on bitcoin and for me it was the most obvious, better. Gold deeply, deeply undervalued it. You know, call it 50, 100, 200 billion, that sort of those sort of market caps. Now I think the risk profile is, is the highest. And you mentioned trustless. I think gold is trustless. Bitcoin isn't anymore because of the quantum threat that can all be solved and I hope it is and I'm optimistic it will be. And valuation wise, I think bitcoin does look quite good here. But we're just seeing this huge diversion and runaway, you know, gold just added like the whole bitcoin market cap one day. I think it's just on a completely different playing field. I think there'll be a massive repricing upwards as soon as there's any kind of tangible closure on the quantum risk. But right now it's capping price and I think it will until it's solved on. So hopefully that's this year, but it could be many years. So that's my take on that. But I think yeah, it's super interesting macro playing field we have. I probably lean a bit more positive on it then some thoughts here like especially you know, things like the Green Lantern situation. You know, Trump as we all know, has a habit of really overplaying his, his hand and going really aggressive on something and then the question is how far it takes it. And typically he walks a lot of it back and it's a negotiation play. So I'm hopeful. There's obviously a lot of uncertainty in the end, I'm for myself included, but I'm hopeful that that's what we've just seen, given that they're talking about some kind of deal for shared resources and development of the Golden Dome. So I think that's generally a positive outcome from that whole discussion point and you know, elimination of the all those taxes that were proposed on Europe and which is crazy, like no one, you know, people can buy into, myself included as an Australian combined to that US should have some tariffs to support their economy on, you know, onshore manufacturing and you know, build strength in the, in the industry and employment base that way. Like I thought that made sense, to be honest. I know a lot of people were against it, but I thought that kind of made sense as long as it's a reasonable amount. But when you start saying we're going to tariff you 100% because we want to conquer a country, obviously no one's going to buy in on that. And that was a pretty scary direction. And I'm hopeful and optimistic now that that was just a negotiation tactic. And we'll see probably lots of ups and downs in that journey, but towards something more of an economic partnership arrangement in the future. But yeah, all these points are playing into global isolationism. Everyone wants to protect their own country, their own rights. They want onshore manufacturing, they want to build up their defense base. And in that environment, as well as in the background of massive debt globally, people don't trust other people's money or their fiat money. And the US dollar is, is in that, in that boat. And so that's why we're seeing massive repricing of metals. Basically it's gold and everything else just following but gold, because a lot of the central banks are just stacking a huge amount of gold. Like China itself has 10x its gold supply in the last two years, so 10 times and they're still, their federal reserves are only 10% in gold versus the US is 80. So there's a massive difference there still in gold holdings between the US and China, which would suggest a ton of more upside just on China alone given its economy is two thirds the size of the US So very interesting dynamics playing out globally and as you say, a bit of a change in world order happening.

A (12:15)

So I want to pick up on the theme on the commodities and money side because I think before we get into asset pricing, like sometimes people spent not enough time thinking about the other side of the equation, which is what are you buying the asset with? And to your point, Charles, one of the things I've been paying a lot of attention to is as we have sort of this breakdown of the previous like US led, call it rules based order of what was going on. Whether you fully believe that or it was kind of always an approximation. Fine. Like I think that's a fair argument. But in general we could agree that say the 1990s were more politically stable on a global basis that today appears to be from a like durability of alignments perspective. And so gold is one possible outcome of where people are going to scramble. I think we're seeing that in the price action for gold. I think there's a lot going on that would demonstrate that the move into gold is not that people like gold so much as they dislike everything else, if that makes sense. I don't want to be holding somebody else's fiat currency and ending up in a world where everybody's in their local currency into gold and then into somebody else's currency to trade the way the dollar is used now. Fine. But let me also ask the slightly different question, which is, are we going to end up in a world where gold is like this temporary holding pin, but we have a realignment of like, call it regional currencies, AKA what is the future of like the euro? What is going to go on with China? What is going to go on with the dollar? Are we seeing all of them just essentially fading in favor of things like gold and bitcoin, or is this merely a realignment and rebalancing?

C (14:01)

I mean, this is a huge question. We could probably spend the whole podcast just on that. It's a tough one. I think, like we see every hundred years or so, give or take a couple decades, that the global reserve currency resets. The US is around 100 years or 90 years or so. We've had the Dutch, some before that Florentine, various different reserves. And every time they've kind of gone into a fiat or some kind of paperbacked denomination and then it's reset, gone back to a hard money, which has always been gold, basically in the last 500 years. So. And then something else has come up and then it's gone to a Fiat. So the U.S. dollar became a fiat, give or take, in 1971.

B (14:50)

Right.

C (14:50)

We all know this stuff as bitcoiners. The question mark is what happens in the next reset? Is it gold or is it a digital money? I'm open minded to both outcomes. It really depends on timing and how developed the solutions are. I think right now it's pretty clear that central banks globally are positioning in gold to manage that risk. Not in bitcoin. That could change. It doesn't have to reset now. I'm not saying this is the end of the dollar or anything. It could go for many more years. So I think a lot depends on how geopolitical things play out over the coming years. You know, do we go towards some isolationism and tariffs, but in a more peaceful way, or do we kind of explode? I think there's A lot of open ended ways this could go but I think it just makes sense that we'll see continued repricing of especially gold. And if bitcoin can solve on its risks, then Bitcoin too. But there's a lot that needs to play out.

B (15:53)

I agree that sovereigns are accumulating gold, but I think that we're at the very beginning of the era of dollarization. And the reason for that is that it's not easy for ordinary people to accumulate gold in a pure form. It's hard to, it's hard to store. There's a reason why, you know, it's not a medium of exchange. And so now we're faced with this interesting technology called stablecoins. And if you're in the developing world, the thesis hasn't changed. In fact the world's got even more dangerous. And if you get through a real politic lens, the US is very excited to export the dollar everywhere it can because it forces buying of its debt. So I think we're at the, I guess, I think the dollarization that we've seen and the fact that the dollar is a reserve currency for the last hundred years as you state, I think it's only getting started and it's going to become even more concentrated around the world. It's in the US interest to do so. I think if you look around the world, people need a store of value. It's hard to find. And yeah, maybe the dollar is debasing for sure, but gosh, it's certainly better than the local currency or any other currency that's available. So I think we're at the beginning, not the middle of the end.

C (17:05)

I agree. Well, I agree that of all the currencies I'd want to be holding the dollar. Like me as an Australian, I prefer the US dollar over the Australian dollar. Right. I wouldn't want the Euro either. So I'm not saying we're near the end necessarily. I think we're in a tumultuous period and it remains uncertain and it could go for a long time. I think on that topic of one of us mentioned earlier that people don't necessarily want to hold gold, but now might be a good time to do so for these risks. But gold is really a really boring asset for typically decades. So it just does nothing. Goes down a lot or it goes sideways for volatile, but then it has these periods of five or ten years where it just shoots the lights out. And that's happened 1930s, 1940s, 1970s, 2000s and in all of those decades you would want to have held gold in hindsight and not equities, which sometimes they went up a tiny bit but often they had the, well they had their biggest bear markets, 1930s minus sort of 80%, 2000s minus 50. And in all those windows gold went up. So even though gold's gone bananas recently and it might be due for a pullback, there might be some volatility to come. Generally speaking, if you've got a five year horizon, it's probably going to outperform a lot of things as long as that trend holds about performance to equities. And it could go way higher than we can imagine. If you compare to prior cycles where it's done that those same decade periods, it wouldn't be unheard of to go up 150 plus percent from here. That would be the average. So that would put it over 12,000 as kind of the average case over sort of a three to eight year window. So it's good to be open minded about where these things can go and how long these trends can last with an asset like gold.

D (19:01)

Can I show my screen here? Is that straight or no? All right, look, I'll take and I'll take the contrarian view here. So whenever I see gold blasted on the front page of the Wall Street Journal and Bloomberg like it is today, it's on everyone's mind and everyone's already positioned around it and it's already priced in. That's one second. Gold just hit $5,000. 10. 5,000 is a nice round number. Markets like to reassess things at these nice round numbers. Example Nvidia get a 5 trillion valuation, that was the top. Then it sold down to 4.5 trillion. I would actually sell gold today from an intermediate basis and that could be a month by the way, or could be three months. You just have to reassess. It's very hard to make a five year forecast. This world's very dynamic. Third thing I would say is Besson and Trump are seeing reactions, right? Besson's watching the 10 year go up to 4.3% and they're saying, gee, that's not part of the plan. Let me call Carney, let me walk him back down. And you know the pitch to Carney wasn't hey, back down or else this is a private phone call. It was something like hey, work with me on this. Bring, bring off, bring off this deal from China. We'll come back in three to four months and they want to win. So already you're seeing headlines around maybe a pullback from ice, from Minnesota. The main point is the White House is sensitive to this kind of stuff. And when everyone thinks that, hey, the world order is falling apart and all the rest, it is, you know, that pendulum is gone quite a bit and you can start to see a shift the other way. So I, I think, I think gold is, is probably overpriced literally to where we'll add one other point on, on go share screen for you here. This is a more technical point, but when you see this phenomena in gold, this is a little ta. You see here is gold again hit 5011. And this pattern up there when the buyers run up, run it up high on Monday morning and they fail and it closes near the lows of the day is not a good pattern. Not a good pattern. They can often proceed pullback. So I would expect more of that to happen. And the thing that no one would expect is a rally in Mag 7 tech stocks. No one is expecting that right now. It's fashionable to sell the dollar. We have tech stocks reporting this week like Meta. I think those names can actually do well. They're oversold.

B (21:43)

I think that, yeah, there's a. Gold is such a shiny object that people focus on it. And if you look back to the end of 22, remember FTX went down in November of 21. And after that we saw a massive gap in crypto. It took a long time to recover. But from the, from the end of 22, I'm sorry, that that was November 2020. From the end of 22nd until recent, Bitcoin has actually outperformed gold. And, and people don't realize that. So I, I, I'm with you, Rahm. I think, I think, I think there's going to be a pivot back to crypto and, and bitcoins tend to lag gold.

A (22:23)

So one thing that I've been watching on that front as we think about the bitcoin thing is also, and everybody gets mad with me when I say this in central banking circles, but it's true. How much of this is an age story? And what I mean by that is this, Chris, you were talking about a lot of people in the central banking space still don't fully have their arms around bitcoin or what it is. Would the reserve balances at most places still be massively pumping gold and at zero for bitcoin? If there was genuine deep understanding at every single central bank about bitcoin, that my guess is that's probably a function of age. Like real talk, I've met not zero, but few people call it 60 plus who have a real strong handle on blockchain technology. So I wonder how much of this is just a transformation through time. I know that's not useful for investing in the next month, but as we think about long term macro trends, this is part of what I've got my eye on with central banks.

B (23:24)

Well, it's also a boomer versus a millennial Gen Z story, right, where all the wealth is accumulated amongst the boomers who's making the decisions. Right now it's 70 whatever year old, you know, at the central bank of whatever. And yeah, they're, they're not there, but that's pretty huge.

C (23:40)

Let me push back on a couple of these points. So at 5k, totally agree. This could is the technical round number resistance level I'm open to. It could be a sizable pullback, right? It could be 30, 40% totally open to that. At the same time we could just consolidate here and push higher. I think the main thing, it depends on your horizon, right? I'm not saying go all in or buy now necessarily. If you want to time it around technicals, then that probably definitely makes sense. But if you look at historically where we are from a scale point of view, this is just gold. To the S&P 500, we're at a multiple of 0.66 today. It often goes up to three or four, even higher sometimes. So if we just go to three, a multiple of three and a half gold, that's like a 5x here against equities, which is kind of hard to comprehend given it's the amount that gold's gone up recently. But again it depends on time horizon. You can see there's a lot of volatility in these trends, but this, this trend tends to stick. So this is when gold red is above equities on a 200 week moving average and cut it a few ways. But these trends tend to last multiple years and you see huge appreciation coming back to what you mentioned on the generational side. I think there's an element of that. But at the same time, if you look at what are long term holders doing in the space they're selling today, massive amounts of crypto and the aggregate of that the last year is more than the last cycle. And we can see also if you cut it on the Hodler growth rates, supply held more than six months a year or two years, it's trending down, promising. In the last couple months there's been a bit of a shift. This could turn things around for the good. So I'm definitely open minded that. But we have to acknowledge that you know, Gen X or Zed or what do you want to call it, the last one or two years has been massively selling bitcoin and crypto. So I don't think it's just a generational thing.

B (25:40)

Why do you think it's Gen X and Gen Z? I mean we're seeing definitely lots of.

C (25:47)

These are held for many years.

B (25:49)

Yes, we're seeing a lot of the whales cashing out and a lot of them have gotten older and they're looking for various, you know, they want to buy a house, want to put the kids through college, whatever. Like that's definitely been a trend. And they also trade the four year cycle. We, we know that but I think my point is that you're seeing, you're going to see an entire new generation, you know, coming into the space that weren't these original, you know, libertarian folks, normal people and I think that this is going to be much more appealing to them as they're looking for a store of value.

C (26:18)

I mean it can be, it depends on your time horizon.

B (26:20)

Right.

C (26:20)

I mean right now that's not in the data and we're seeing just massive underperformance from crypto and technicals look pretty bad, could change in a month, could change in six months. But right now I'm not seeing that.

D (26:37)

Yeah, I think it's a difficult buy right here. I mean it's just, it's lagged other momentum assets. You know, it's like I'd rather own bitcoin on strength. So it's, it's just a, it's a difficult spot to be in. It's difficult. I mean on the one hand it does look like I have some value here, you know but you know, the other thing is like they're easier, easier ponds to fish in.

B (27:06)

So where do you go ram, do you double down on metals like you go back to tech? Where do you go from here today?

D (27:12)

Well, so there's like a one year view and then like a one month view on a one year view. I've never owned so many international stocks before. Just throw a dart at even like Chile is running circles around the United States so I own quite a few international stocks and banks in different markets. You know that's one, I think the AI trade is still, it's more mature but that plane on capex receiver is still I think a good idea. I think that'll still work. Number two, I think some of the miners of gold are interesting. I think the miners of gold might have more potential than gold itself. Actually I like that idea. And not just gold miners, but copper miners are also quite interesting. And also copper itself and of other commodities. This sounds very boring, but I think insurance stocks, they've been oversold. Like all states got seven times earnings. I think that's pretty interesting. They got earnings growth. It's a nice boomer play. So there's still, you know, there's still a good amount to do, you know, out there. But I do think that like high beta needs to reset now. It's had one heck of a run. Whether it's drone stocks or space stocks like rocket Lab or whatever else, they all have to cool off and reset now. And today we saw a lot of weakness in that. Including end of last week, you're entering entering a period of weaker seasonality and you got more tech earnings coming up soon. So that can start to take the attention. We're going to learn a lot this week, right? If Meta and Google don't react well on tech earnings is bad, it's going to be terrible. Not saying that'll happen, but we're going to learn a bunch this week. And so far those tech stocks have been rallying into earnings. That's good. So my guess is you rotate back and I think overall you still, it's still bull market equities I think will finish up double digit this year, International will outperform and miners will do well. So there's still a lot to do out there. But things that I've worked on the last two years, I think that is over. I think people are just looking for new fresh ideas.

A (29:20)

I'll hop in here and say I want to pick on a thread that Ram just said previously which is as we look at the Mag 7 and we look at them reporting results and we look at some of the AI build out stuff. I think the narrative there has been maybe OpenAI has a problem, but it actually looks like Google and maybe to a lesser extent by XAI and some of the others continue anthropic continue to push forward. Right. So like sectoral shifting to me and call it reallocation between buckets does not necessarily change the overall narrative, right? Like oh, it's not pets.com, it's Amazon. Does not mean the tech was not a real thing for Internet commerce. And so one of the things that we've started to see circulate on social media and I want to get some opinions on this one is this idea that Actually, maybe the undervalued commodity is copper. Because if people are going to keep building so much and mine capacity is what it is and there's going to be long term structural demand. Rahm, I know you were talking about this with Infidio a while back and that played out well, which is why I want to bring this up is to mining stocks in particular in addition to gold miners because like they exist as gold goes up in price, they're going to get more interesting. But is copper really where the leverage is? If we continue to believe some of the other macro themes that have worked.

D (30:44)

I think it's a neat idea. The funny thing about copper, it's correlated with gold and everything else. I'm looking at copper right now also. I'm looking at freeport maximum on my screen. They're all just correlated. So when gold tops these probably top 2 fre poor macaron is down 1 1/2% in the pre market. Gold is down a point in the pre market or in the aftermarket. I should say so.

B (31:05)

Yeah.

D (31:05)

But I agree. I mean it's a good story. It's a good fundamental demand story. You know, just timing matters. You had a massive rally in about a month and a half.

B (31:15)

If you're looking for help with crypto taxes, Crypto tax girl is offering $100 off for Unchained listeners. They provide personalized crypto tax reports and returns and spots before April 15th are limited. Go to cryptotaxgirl.com/ Unchained to save $100. Once again, the link is cryptotaxgirl.com Unchained. One thing that I don't think people are looking at is the race trajectory. And if you look at the market data right now it's only predicting two cuts through the rest of the year. I don't know. With Powell getting replaced by May. Not sure that that's something that people are really. I don't know if the market's pricing that right and if they're wrong, could be a good thing for risk assets. Thoughts?

A (32:12)

All right, I'm going to say something really controversial here.

D (32:15)

That I think that'll be a first time lockdown, right?

A (32:17)

Maybe we'll bend some bread. Yeah. No, these are things that I never say on this show. I think rates cuts are bad for risk assets sense. We have a large enough amount of debt outstanding currently that rate cuts strictly reduce income available to people. If we're talking about short duration treasuries, this is one of those weird monetary theory things where depending on the duration of Your treasury holdings, the amount of debt outstanding already and then the level of rates. Rate cuts are not necessarily inflation, inflationary or deflationary at any like absolute sense, but when you have a lot of short dated rolling debt and a lot of debt outstanding, that if you lower rates, you're reducing income. Right. So I'm just going to say I'm not so sure that rate cuts are like going to speed things up.

D (33:10)

Yeah, I agree. Look what happened when the Fed cut rates in December. The long end went up. What happened when the Fed cut rates in September of last year? The long end went up. That has never happened historically. The bond market saying no more and commodities, when gold went up, sort of bottom advantages route, then you're right, baby boomers own T bills. And Rick Reeder made this point last year, which I think which is really insightful. It's like, hey, you lower T bill income for boomers, they have less consumer discretionary spending. So yeah, no, I agree, I agree that, you know, the world's shifted. You gotta, you gotta look at the hand today as opposed to assume the same mechanics apply.

C (33:52)

I think we have to look at the kind of marginal holder of the debt though. So like the biggest, I suppose relatively to GDP is the federal debt, right, as in the ratios compared to the past. And so when the debt ratios comes down, that means that it's cheaper for entrepreneurs, small businesses, other businesses to fund growth acquisitions. Those kind of classic investment opportunities become more cost effective. At the same time, people who hold a lot of debt decide to rotate out of it because they're getting a less of a yield and it's more attractive to allocate to risk assets. So that's kind of like the more classic interpretation of interest rate changes and how they drive asset prices. And I kind of think that will continue to hold. We've seen it like Even recently in 2021 when rates started going up, ratcheting up, all the asset prices came down. When the Fed gave some notice, they're going to pivot to cutting rates, went, sorry, risk assets went right back up again. So it's kind of continued to play out, I would say, as it would, you'd expect it to. And if interest rates are low relatively, then it's just not attractive to be in that asset. And it incentivizes risk assets like equities, gold, crypto, et cetera.

A (35:04)

But, but let me push back on that one, right? As somebody who's actually traded a decent amount of US fixed income assets, this is where Rahm said about the long Bond going up when front end rates go down becomes important because if you look at like prime for mortgages, that's a spread to the tenure. Right. That's not the front end of the United States. Yeah, that's a US Market structure thing. Like for all those people listening internationally, let's draw a very important distinction here in market markets, which is the United States has 30 year fixed rate mortgages and they're priced off a rate that's called prime, which typically is keyed to like the 10 year rate. It's not like that in a lot of other countries. So like the housing and rates dynamics in the United States work a little different. But what that means is if you cut rates and the long bond goes up, mortgages have gotten more expensive because of a rate cut. Right. Like there is the base rate component. The second part, as I think Rom was alluding to earlier, is credit spreads. Right. If you cut rates and people don't love the lending conditions or think some of these things are risky, then what you watch banks do is either they kind of monetize that by keeping spreads where they were, or they just stop lending and shrink their balance sheets. Like both of those are possible. It's, it's in the modern era with how we do bank capital now, it's kind of impossible to get banks to like make loans they don't think are going to be good. They just kind of choose to stop.

B (36:29)

Right. But Austin, I don't know if you saw last week it looked like the OCC dropped regulatory capital for banks to try to encourage a transition out of private credit. So that's another toggle that they're super focused on. Besant wants to hammer that 10 year down. He's made that very clear from a public, public policy perspective. So, you know, I just don't see. The other thing is like as we're going into midterms, this administration is going to want some wins, they're going to want some stimulus. And that's something that I continue to think about because there's a lot at stake as we come up upon these elections in November.

C (37:07)

Can I agree. Can I just share a chart very quickly while we're talking about rights? So I just pulled this up right now, so it's a bit rough probably, but this is the s and P500 and interest rates us so at a monthly level. So it might be a bit out of date, but give or take. So the Fed funds rates are blue line and then it's been coming down. Black line is a 10 year treasury kind of flat up if you will and there's this gap we're all talking about. But this is not something new. It's happened every cycle.

D (37:41)

So.

C (37:43)

I don't think the argument that it's something new or different comes. It doesn't land for me because basically they can deviate in the short term but typically they will mean revert to each other at some point. So it could remain elevated for some time and then come down and meet real Fed target rates or short term rates. But yeah, I just thought it'd be worth visualizing this month.

D (38:05)

So Charles, let me challenge you on this. So since 1982 to 2021 we had a bull market in rates, we exited stagflation and we had an incredible multi decade run. But now rates are shifting to a new regime. So those historical correlations and patterns, I think they get tossed out the window. We have a new higher for longer regime, in part driven by the rail politic, in part driven by reshoring or onshoring, which is inflationary. We're taking manufacturing from lowcost China to anywhere else. It's, it's more expensive. So I, I don't think that these historical patterns will apply as much.

B (38:50)

Well, AI is going to help address some of that. And Charles, I think you're missing the other rate, the ethereum staking rate, which is going to be the next one here. I'm just joking about that. That's my baby.

C (39:01)

We'll do that.

A (39:03)

Always be seizuring. That's right. All right, so before we go too far down this particular rabbit hole, I want to pull back momentarily to our other like lens here as we're looking at the geopolitical risk and what's driving gold. Right. Let's start with instability in other places and what might be forcing people into gold or as Chris was saying, over a medium to long term, the dollar, China. So rumors around the coup were basically that there was an altercation between Xi and some of the generals who there may have been like a live fire exercise with five guards killed. It's unclear.

D (39:44)

Right?

A (39:44)

Yeah, it is a rumor.

C (39:47)

I will never know.

A (39:49)

Yeah, yeah. I'm just giving credence to the amount of things that are in the air. I'm not saying any of them specifically are true. The thing we do know is true is that it appears that the majority of military commanders in China that have been appointed by Xi are now out. So what the heck is going on over in China and how should people be interpreting this from the outside? I know we risk a little bit of like Kremlin ology by doing that, but certainly it's going to be driving split. Certainly.

B (40:20)

Yeah, for sure. So. So the guy who was ousted was a guy named Zhang Yu Xiao and he was actually a combat veteran from the war with Vietnam. And what you've seen is that the apparatus that was annihilated and wiped out by Xi Jinping, they were the war fighters and the one guy that remains was the anti graft guy. And so as I speak and I spoke with a couple of people really in the know over the last couple of days. I think in the short term it could impede their ability to move on someone like Taiwan because he's kind of lost his senior war fighters, the guys who were responsible. But in the medium term he's absolutely consolidated power and decision making and that could mean much more aggressive and abrupt action. Now there's a couple of big things happening in China right now. 2027 is a big year for them. It's the 100th anniversary of the PLA, the People's Liberation Army. Xi Jinping has publicly stated that he wants to have the capability to take back Taiwan by 27. Can he get it now that he's eliminated, you know, his, his warfighters? I don't know. But again, you know, you're seeing consolidation of power in many, many places and this is part of the real politic now. These guys are going to act in their own interests as they perceive them. Which again, you know, leads me to believe that people are gonna. I just think the trustless, permissionless environment is one that, that's gonna, it's gonna win in this era.

A (41:55)

Right.

D (41:55)

China weapon.

C (41:56)

You were eliminated. So I missed the. How many?

B (42:00)

Oh gosh.

A (42:01)

So rumors are nothing like of. What is it?

C (42:04)

Eight?

A (42:04)

It's like six, Chris.

B (42:05)

I think. Six of eight. Yes. Yeah, there's one guy left. Um. Yeah, yeah, the one who's left is a guy named General Zhu Zhuming and, and I think he's the anti graft head. So, you know. Yeah, I think we've seen this, you know, around the world. A lot of these very powerful folks are not surrounding themselves by people that are going to question them and maybe make them better. Yeah, but they're surrounded by people that tell that are helping them do what they want to do.

C (42:35)

Yeah, I'm definitely no expert on this topic. I would just. The only consideration maybe would be to play the counter side. Would be if you get rid of the people who are experienced in war and you know, later in their age and maybe have that experience and knowledge of the consequences and risks, then maybe you get some more young bucks coming in who are looking to make a name for themselves and could be more aggressive. And point aspect about.

B (43:01)

Yeah, I have no this area thousand percent right. 100% accurate. A lot of guys who have been in combat, they are more concerned because they know the cost. And so that I think that's an absolute real challenge. The question is, is like how long does it take, you know, when you've, when you've changed, you know, your, your decision making apparatus to reconstitute. So I think you're right. I think medium term it could be a more dangerous world.

A (43:31)

One of the things you see historically with that, I think in particular is this idea and we've seen this play out repeatedly like it happened. If you look at some of the justifications for war, the French Revolution, or like how the British thought they would put down the American revolt, is people who have not been there done that thinking, oh, this will be easy, right. Like we have overwhelming force, force, we're going to get this done. And it's usually an underestimation of the potential of the enemy to fight back that you see. And like a lot of people make this mistake and over and over get trucked, get themselves stuck in conflicts they can't win. See like Germany trying to invade Russia in the winter. Like even Napoleon who like probably the greatest general ever to live. Right. Certainly on the list, along with like Suvarov, Alexander the Great, etc. Went into Russia in the winter, couldn't help himself. And so people make these kinds of mistakes. Like one of the things that actually could be a very negative event for China is this idea that, oh, we're going to invade Taiwan and it's going to go well and instead they invade Taiwan and it goes very poorly. See like Russia and Ukraine right now.

B (44:44)

Yeah, they can't afford for it to be their Ukraine. That could undermine. One of the challenges with China from the beginning is it's such a diverse country. Holding it all together internally has always been a challenge. So yeah, there's, man, there's so many rumors going on that he's the guy who was ousted, was giving nuclear secrets to the US we're not going to know the truth probably ever.

C (45:04)

Yeah, yeah.

B (45:05)

But we do know that there's been a massive consolidation there. Probably medium term will lead to more uncertainty.

D (45:14)

Say a few things. One is Xi Jinping has departed from his predecessors by consolidating power and eliminating any succession. So It's a continuation of that. China went from one party rule to one man rule. You almost wonder whether he's going to put all of China into a family dynasty trust and pass it to his kids or something at this point.

C (45:32)

Right?

D (45:32)

The guy just runs China like a wheat them like Putin runs Russia. I think it's risk reducing that. You can't lose your general staff and then next day say, okay, we're gonna take out Taiwan. The other thing is it's risk reducing vis a vis China, Taiwan. It's risk increasing within China. Right. So if you're, if you're removed from your general staff now, we don't know what's going to happen to these generals.

A (45:54)

But if they have potential loss of.

D (45:55)

Life and they control the military, they have force. That's when you start to say, gee, hey buddy, I think you're next. Do you want to just call up the Praetorian Guard over there and let's, let's assemble and round up. Right, Praetorian Guard, obviously reference to Rome, where you know that you got to make sure you got the right guardians. The guardians were guarding the emperor, and the guardians woke up one day and said, we don't like you, emperor. We're going to put our own guy in there. You know, that's a risk for China internally. If you're the United States, you're looking at this. China is distracted. You do something on Iran now?

B (46:33)

Well, the China thinks the United States is distracted. Right. With Venezuela and Iran. And the don Row doctrine is done and dusted.

D (46:41)

They're exporting LNG now.

A (46:46)

So speaking of Iran, though, and the potential of instability and regime change, because, Rahm, I think you're right, by the way, on China, that as Xi Jinping consolidates power around himself, it probably over time increases the odds that somebody kicks the leg out for under that thing and there's greater chaos. Right? Because if you have a robust pool of succession where everybody feels like they have a cut, you don't have that kind of instability. Whereas as you narrow it, it elevates you, but also you topple over faster.

D (47:18)

It'S going to look like North Korea. I mean, this is institutional fragility. The strength of the American republic, notwithstanding all the warts and deficiencies and all the rest, is that you have a clear chain of succession, which is incredibly important to predictability and operations. And you don't have that in China, like to your point. So, yeah, it's quite interesting. I think this is a weaker story for China going forward. Hard to have confidence to invest in China.

A (47:50)

So I want to flip over to the Iran point, too, which is it seems like there's a very significant, what's the right way to say this informational uncertainty problem there. President Trump has been pretty clear that if they're killing protesters at scale, he intends to take action, or at least he certainly publicly threatened that. Whether he follows through or not, who knows? And there seem to be a lot of conflicting reports over how bad some of the actions of the government in terms of putting out the protests have been. What do we see as the forward path out of Iran? And if that becomes increasingly unstable, is there a knockout effect?

D (48:31)

What's the connection between the two?

A (48:34)

So back to the point of, one, everybody is distracted, and two, where are the trade flows? Like Iran, for lack of a better way to put it, coming back online with a more Western friendly government will change energy markets, change trade flows, change the way that things can be potentially go, because we're talking about a world where they're heavily sanctioned and it's changing the shape of where oil can be traded. And imagine that gets reversed. Right. You could have, like, foreign investment into Iran in that industry. Again, I'm looking at that as one layer. The other layer is just the axis of conflict in the Middle east that's been driving the contest of powers has been Saudi Arabia versus Iran. And if Iran goes down or changes that dramatically reshapes that entire region, which is going to reshape the corridor from the west through the region, from Europe to China, from China back through, like, that is a very big, like, I think almost in some ways, people have forgotten how internally fractured the Middle east is about what it does if Iran's government goes away.

D (49:37)

Yep. I wouldn't be surprised if Trump takes some action in Iran. I mean, you know, you don't move an entire armada on a whim, you know, to safeguard protesters, which they're not. But they're using it as a means to coerce, not hurting protesters or using it as pretext to maneuver. You know, Trump is aggressive. He wants to get stuff done. And, you know, it's like you said, it's real politic. I think that's the right lens to look at it.

B (50:05)

What was this critique of Iraq? We didn't get the oil. What did he do in Ukraine? He did a massive minerals deal. What did he do in Venezuela? He secured oil. If he goes in, he's not going to come out of there without oil. And I think that's going to play right into what he's trying to do, which is keep inflation down, keep gas prices down, put money in the pockets of his citizens. There's a through line here, there's a story. I kind of see what he's trying to do. I don't think he's looking to do this for the benefit of again, idealism would say, oh, I'm going to try to put democracy in Iran. I don't think he cares to do that. You know, he didn't care to, you know, in Venezuela change the regime. It's about securing natural resources, you know, for the benefit of security and the economy.

C (50:52)

So. So just time in that poly market saying there's about a 50% chance US striking Iran in the next couple months.

D (51:00)

One thing I'll add, hasn't that even.

A (51:03)

Gone down a little bit from where it was?

C (51:06)

I'll show you. It's actually gone up. Last day at slow.

B (51:10)

What's the general view in Australia, man? Like, what are they thinking about all this?

C (51:17)

I mean, speak for your continent. This is a. This is. Yeah, it's a way to start. I mean, there's. I think people have a lot of concern about where things are going in the world in Australia. We've got our own issues probably at the moment. Like, we have been pretty peaceful internally for basically my whole life. I think the last mass shooting was like 1990 or something, so over 30 years ago. But then we just had one last month which is pretty bad. And there's a lot of groups rising up against either pro Israel or anti Israel, pro immigration, anti immigration, all these sort of things kind of becoming more and more themes which you just didn't see 5 years ago pre corona. So there's a, like, people are aware of it and I think people are taking sides and influenced by media and social media and, you know, it's probably similar to what's happening in the US as well. Right. Like the news and dynamic is changing so quickly. It's a pretty fluid situation.

B (52:24)

Yeah, we have incredible strife at home in Minnesota. We didn't even talk about that much. But I don't know, amongst the high strength.

A (52:31)

Back to your point on what could be driving some of the geopolitical actions, like for those who are not Americans, without, shall we say, overstating this too much, there has been a lot of drama in Minnesota recently and it has not been pulled polling well for President Trump. If you look at the polls, right. Like not making a judgment, just talking about like factual analysis of what reactions are, which is to say ice, not the people who own the new York Stock Exchange. This is actually the government agency deporting people have been very active there and have gotten into conflicts with a number of protesters. Two different Americans have been shot in apparently pretty different circumstances for each of them. And regardless of like what side you're on with the facts, it's polling very badly for Trump today. You saw the start of a little bit of a pullback in his comments, Chris, where he was saying, I don't know what I support over there in terms of these specific agent actions. It appears that Tom Homan may be put back in charge of some of these operations. He's opening up dialogue with walls. But one thing that Trump understands from a press standpoint is if you have a problem over here, you can create a distraction over there and suck all the oxygen out of the room. So to me, in a weird way, Minnesota probably drives up the probability of something happening with Iran or Greenland to move the spotlight.

D (53:56)

Interesting. Well, add a few quick points here. One is, you know, Waltz didn't cooperate when Bessant visited Minnesota. Investigate fraud, waste and abuse. You did not provide a security detail. There's a lot of complexity. The other is you wonder to what extent are protests funded by foreign operatives? You know, that's a consideration. I'm sure there's a legitimate component. There are for sure. But what's the other side of this? You know, social media is used by foreign adversaries. We know that going back to Cambridge Analytica too. It's a consideration there on motivations for Iran and Russia. Interestingly, if you listen to what Trump says in almost each and every time, his starting point is, he says there's needless bloodshed, it's actually not national security. He'll weave that in later. It'll say there's too many Ukrainians and Russians dying. There's way too many and same thing with a protester. So I don't think the way to look at Trump's utility function is solely as a national security security perspective. I, I do think it's more instinctual, multi dimensional. You know, you have protesters seeking out and appealing for Trump's help directly. This is kind of mind blowing stuff in the history of the United States and for this is very usually the other way around. It's like, please don't intervene and whatever. But now it's, it's complex. I, I do think also you make a really interesting point. It's like, hey, take focus here, focus there. That's interesting.

A (55:27)

Like what? Look, whatever criticisms you have of Donald Trump, if you're on the left in the United States or you're somebody who doesn't like Trump, you have to understand the guy understands, right? And like, he gets media cycles. Like, nobody is like, quote, unquote, monitoring the situation with regard to how people react to things better than Donald Trump. And so you can have whatever substantive critique of him you want. It's important to understand what people are good at, what people are bad at. And he's had a history of like, when there's a problem here being like, look over here, look over here. So I just.

D (56:01)

The China, right on Russia, they're all connected, of course. I mean, they're running trilateral Navy drills. They all want to shift away from the US Dollar. They all have either direct or indirect sanctions and tariffs. So they have a common interest. So. And Trump is aggressive. He takes risks that that bombing run over Iran, no president would have done in the last five decades. So if he's down in the polls, you can take an action that can change the board and let him advance an objective to end a Russia Ukraine war, which is way behind his deadline. I think he might take that.

A (56:42)

I don't disagree with that. All right, I want to circle all the way back around to one final point to bring us back to where we started on the topic of bitcoin. All right. Because we've danced around it a couple of times, and I'm going to directly put the question to Charles Quantum. Real risk in the short to medium term, simply perceived risk in the short to medium term. So it needs to be addressed anyways for the market to go up. Or is this a bunch of hard sense?

C (57:10)

Well, I guess again, depends on definition of short domain term. But like, yeah, it's definitely a risk. The, the real factor right now and from 2025 is that we're now in a period where there's a non zero chance of quantum breaking Bitcoin's encryption.

B (57:32)

In.

C (57:32)

The same within the period of time we take to upgrade the network. So that's the main factor. I call it kind of the. We're in the quantum event horizon, if you will. So if you poll, you know, all the top half dozen quantum companies where they're expected to be, in terms of logical qubits, it's all sort of one to 2,000 plus within four or five years. We know you need about 2,300 to break Bitcoin. No one knows the exact time this is going to happen, but that's what they're trending towards. They've been beating their forecast historically. If you Survey. Then like all the thought leaders in Quantum, US Department of War, Ethereum, sorry, Vitalik, Buterin himself are saying it's going to be before the next US election, that's 2028, that we could have a quantum capable machine. So there's different time horizons, but they kind of range from two to two and a half to three years from now to sort of ten years within that range. So you put probability distribution on that and it's about 50% in sort of four or five years, maybe 20, 30% in three to three years. Right. And then it goes up obviously. So it's a low chance, right, that it will happen in two to three years, but it's a non zero chance. So that's the real risk factor. It means that it probably won't happen in two or three years, but there is some chance. And the fact that there is some chance means that we need to solve it because it now becomes a discounting factor. If you're going to value bitcoin, it's within that time rise and you have to discount some risk for that. So that's where it's, it's significant, it needs to be addressed and it's capping upside and we've seen that across all other assets outperforming it for that reason.

B (59:11)

I know the quantum narrative is leading to some short term pain, particularly with bitcoin. And as bitcoin goes, goes the rest of crypto, I think. But the good news here is that people are talking about it and this issue is rising to the surface and it's being addressed. The EF has started a task force, they're addressing it. The bitcoin community, though, it takes a little bit of time for them to figure it out. Guys like Nick Carter were early and often raising this as an issue and I think the network will address it and the community will address it. And so I think this was necessary pain. Though it may have hurt asset prices, it got this risk to the forefront, so now it can be addressed. I, I full heartedly believe that it will be addressed. I don't, I don't think this is a Y2K moment. I think it's probably something more profound. I think Quantum's going to change the world as we know it. But I do think that based on the visibility that has come to the surface, our bags are going to be okay.

C (60:07)

Yeah, I think I'm, I'm leaning towards optimistic, but I would like to see more happen. I think it's, like I said, it's been great that A lot of people like Nick Carter has joined the scene in the last six months. Ethereum just sent up some foundation recently as well. We've had BIP360 for Bitcoin, but there's still some significant misalignment or considerations to address. Right. And it's worth bearing in mind that it's easy to be bearish and stuff like that. Like on problems in tech, like everyone does it, you look at Tesla, any major tech company, if you go back five, 10 years, you could have so many bearish arguments. I want scale, it's too expensive, blah blah, blah. Even with AI, right. Five years ago. So I don't want to be in that boat because people are creative and we solve problems and I think that we will solve this at some point. The question is like when we'll solve it and how much discounting will have happened before that. So I really would love to see 2026 be the year that we get kind of. It doesn't have to be the perfect solution, but broad consensus among bitcoin core devs or major players of major Bitcoin institutions in agreement on a pathway towards some form of code to upgrade the network. And I think once there is that, it doesn't even have to be solid, but a robust roadmap that in itself will discount the risk factor by a significant amount. It could be 50% overnight. Right. Because you've got the pathway, you've got timelines, more or less, and people will work towards that. So I'm optimistic that hopefully this will be year, we'll see some significant traction. I just like to see a lot more than where we are now because right now we don't even know how we'll address the signature method because it's big. We don't know if that means we should talk about block size. We haven't really had a proper discussion yet. And what do we do with the 30 to, sorry, 20 to 30% of coins that are publicly exposed, like Satoshi's coins, do we just let them get taken or not? So a few things that need to be discussed and fleshed out. But yeah, it's good to see some traction, especially last few months and hopefully this is a year that that gets solved. And regardless for today, even if you put the quantum risk at say 20%, right. Everyone will have a different number. But if you put a 20%, I would argue we're discounted beyond that. So we're probably priced in most, if not all of that risk already. So that gives some opportunity definitely for the upside, and we, whenever we do get traction on a roadmap or code, what have you for solving on this, I think there'll be a significant repricing upwards which would be an awesome opportunity as well when that comes. So I'm not like ultra bearish, but I just think that it is a major issue and it definitely has to be addressed.

B (62:45)

It's certainly an institutional adoption issue because people are taking enough risk by saying hey, pension fund come into this new asset class. And they're like oh, now I got to deal with this quantity quantum thing, total unknown. So I do think it is slowing the, you know, this, this period is a period of institutional adoption and I think it's slowing that, that accelerated adoption. But again, probably not a bad thing in the long term if it gets addressed.

A (63:08)

The, the known unknowns are the biggest blockers to institutional adoption because people will talk about them and use it as a justification not to do something that's hard, even if it's a thing that they are supposed to do do. Now on the other hand, like given that the NSA created bitcoin, we crack at quantum and just stealing them from ourselves. Who really cares about the Satoshi coins right now just now that'll definitely get clipped and put on the Internet. But joking aside, I, I'm very much on like the train of. It seems to me to be obvious that if you can find a solution that does not fundamentally disrupt what, what bitcoin is, you just adopt it because the cost of doing that is much lower than the potential problems if you don't. Right. Like do you agree or disagree on that decision making framework?

B (63:56)

Definitely.

C (63:57)

And that's why I basically went really public on this, you know, mid last year. I'd you know, occasionally pop my head up, but I'd be like, oh, we got time. And then now I've started realizing we don't really have that much time. And I, you know, I, I want bitcoin to be a huge success into the future. And, and I think a lot of people have been against this movement especially last year because they wanted bitcoin to get to 150, 180k. And this is just like FUD, but it's not, it's like about solving a problem so that we can have the best pathway possible the next decade. Right. So yeah, I think it's this can we can make some good progress this year hopefully. And this can actually be a real benefit because once we do have a pathway to solving it, the there's going to be very few assets that can say they're as robust as bitcoin, especially in the quantum space. And then we really kind of shoot the lights out of everything. So hopefully that can be this year, but we'll. We'll see how it goes.

A (64:52)

All right, well, on that note, we've already gone a little bit over time, so, Charles, thank you for showing up today. Really enjoyed the discussion here. And remember, everybody, bitcoin quantum risk is real, and we should probably. Probably solve it. So the price could continue to go up. Just kidding. All right, so that I was gonna say, all joking aside, though, I. I very much agree that it is a risk that people who I trust have been bringing up right at. I'm gonna outsource this one to people smarter than me and say, I buy what you just said. I think, one, the price trend would improve if this were fixed. And two, if enough people think the risk is real, it almost doesn't matter whether it is or not. You've got to fix it.

C (65:34)

Yeah. Kind of like the bitcoin cycle, right? Like, I would argue it's not real anymore in terms of fundamentals, but enough people think it's real. It has an impact on price. So psychological impact is important.

A (65:45)

Behavioral psychology is 100% a real thing. Like, Rahm is all over this with sentiment indicators as well. So. All right, on that note, thank you, everyone, for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. Until then, everyone stay safe out there. Have a great.

B (66:06)

Thanks. Yeah, thanks for coming, Charles. Really appreciate it, man.

C (66:09)

So thanks for having me.

D (66:11)

Always a pleasure. Take care, guys.