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involves risk of loss and is offer to us customers through pord interactive Inc View legal disclosures at kraken.com legalises welcome back everybody we are here Round Up Edition to Ford guidance Trio is here how you guys doing what's up what up fellas it's good it's good we good good month little little fun action out there though so lots to talk about yeah kind of feels like it's a time to just like you know just settle down and reset and just like really rethink your your you know fundamental views on the economy right now that's how
I'm feeling What do you guys feel it weird things that have occurred in the markets I would say almost like imbalances because of this Trump trade that have defied if you will you know parts of the market have defied maybe that some of the macro factors right because let's talk just small caps have ripped on the Trump trade as have yields in the dollar which are usually not great for small caps and then you know nasdaq's legged like there's been a lot of things that have Been a bit funky uh that you know we're maybe
seeing it kind of unwind a bit Yeah I think it'll be really great to talk a bit about like what are some of these like more idiosyncratic factors cuz to me it felt like okay like the context of the last month was like all right you know this this certainty premium got baked into the market and and you know that whole thing happened we've been talking about this for the past month looking at vix and move and Then we had the the election result that was um basically you know like no no contesting for any
of that or anything so then we had this huge unwind of Vault this big unwinded positions this big reversal and we saw these euphoric candles and you know that's why I think all three of us were quite bullish in that respect and then now it's like okay that unwind has complete and then now it feels like the Market's sort of thinking okay now what you know today Specifically on the the volatility stuff I think the vix is up what 18% right now the nday vix is up 23% this today the options expert is one of
the biggest ever so I think what you're seeing is people sold yesterday and then they're buying you know month out protection uh which is why the Market's so weak today but I don't know you head into December not much really happens you know you have the FED but the the volumes are low you're in this seasonally really strong Period of buyback so I think after today we'll probably see the the V roll off because and I have a couple charts later to show you why yeah I agreed why don't we just start with talking about
the FED situation right now because you know yesterday we actually had an interesting um interview from Jerome Powell this is his first time talking since um the previous fomc meeting and I don't know I I read the I read the the main interview transcript of it and there's a couple Interesting points but the main thing that got headlines moving was this tweet from Nick timos just sums it up but we're moving policy over time to a more neutral setting but the path for getting there is not preset the economy is not sending any signals that
we need to be in a hurry to lower rates the strength we are currently seeing in the economy gives us the ability to approach our decisions carefully so I don't know I mean my first take when I read that was It felt like pretty in line with with where the FED is at as as a whole you know is like this yeah maybe we cut December maybe we don't um I'm curious like with with this with respect to you know how this changed the pricing of the FED funds Futures this is just looking like the
odds of of the December meeting um you know we're at nearly almost 90% odds of a cut in December and and we're down to you know sub 60 when I think we're even as low as like 50% now um Since I last took this screenshot so you know there's a bit of a shift going on it feels like and you know the shift is definitely not towards recession um but the complete opposite it's oh God did we just make a mistake of cutting too much into accelerating economy and it feels like that's what the Market's
trying to digest now I'm curious like what's your where's your guys's heads at in terms of this context I thought the yesterday's Powell's talk as you Pointed out was not that uh groundbreaking relative to the new information we received I mean we received two you know in line with expectations generally but but sticky and increasing inflation prints this week with CPI and PPI so obviously he's going to if if that's the primary only new source of or piece of data since he last spoke he's going to come in and have to acknowledge it right he
he said you know we we think inflation is still Coming down to our intended target but albeit on a bumpy path and with that he has to be more attentive to the inflationary risk and personally I still think they go in December um and I think the market today this move is basically the market saying you you have to go in December otherwise there's more pain here because the one thing that stands out right NASDAQ stocks are down uh even Gold's red uh the Dollar's weaker yields are sort of Weaker the thing that stands out
to me is oil being it it it held up held up and then started to crack and so I think that's a little bit of the market saying all right higher for longer you're going to you're going to be more maybe balanced than than just purely supporting labor market okay well that that inhibits our forward growth uh projections a bit and and if they don't cut in December I think you you arrive back into a you Know kind of Summer growthy scary type scenario I personally believe they will end up cutting in December I'm just
not sure what that path between now and then looks like there's there's data right there's NFP on the Friday of December and then there's another CPI and PPI the week before fomc so there's a lot of stuff it things could get even more precarious right what if NFP Friday December 6 is week but the next week on the 11th CPI is hot and then you got Fomc the following week so it's a it's an interesting interesting spot yeah it is it's very weird because I think if they just don't if they don't ease copper and
oil will just crumble and we're going to see the dollar Wrecking Ball come out here and probably get a little bit of credit stress but right now what's interesting is you're not really seeing you're seeing credit stress on The Sovereign with the tenure at 450 and that's coming in a little bit I think we're probably peeking out there to be honest um but if you look at the high yield Market spread's still super tight no problems there no problems at all and it's it's pretty incredible uh Divergence I think the market still very much expects
them to cut generally speaking I mean it's it says 6040 or whatever it is now right cut no cut in December if that goes to if that goes to zero for 100 to no cut that's when Wheels fall off I think but again uh the the one surprise actually I want to throw throw out a bit is uh potential unwinding of QT surprise in December is because we're seeing such pressures on the long end that uh I'm not it's not super high conviction and there's generally not really a play a way to play it it's
it's just you know something I'm thinking about yeah totally I mean I I almost thought that they're going to signal to that in this Previous meeting and they didn't so I know I might I might be a bit more confident in that fact that I feel like there will be some sort of guidance in December because I mean if you look at you know some of the the monetary Plumbing gigar brains um a lot of them think that you know QT needs to end in the first quarter of 2025 and and to make sure that
you know the FED gets their their little Ford guidance that they love to trickle in they pretty much Need to start talking about it in December you know what's interesting is is both after Powell's comments yesterday Collins said C's policy is restrictive favors normalizing and gouby said current fed policy is still restrictive in restrictive posture so they're both super doish and it's just this is such a classic game and then ghouls be also said the FED has to figure out why the tenure is rising and keep an eye on Long rates I think this Is
the the Vault controllers basically saying if duration spikes we're gonna we're gonna take control of it somehow and I think but yeah this is I'm trying to figure out like what here's just a chart of of the US tenure since the FED cut rates originally 50 basis points and yeah it's just been surging since so I don't know I'm trying to figure out like what's the biggest thing that's spooking markets right now so you know I I actually forgot that it's um options Expiration day that makes a lot more sense of why we're seeing this
sort of like volatility that you're mentioning Tyler but I'm also trying to figure out like what is what is it is it just the yield story because you know to me the way I think about yields in terms of how they reflect into risk markets it's it's the is the velocity of change that is more affected than the actual price level so the the economy and Market markets can can recalibrate into a 4.5% World on the on the long Bond it's just that aggressive move higher that's you know that's what upsets discount rates in my
opinion so it feels to me like if we can just you know chop around here you know to your point like I just don't like what would bring us even higher on the on the long Bond it would either be like some sort of actual like Crisis or the FED talking about maybe rate hikes again but this this is where it gets so confusing right is If the Fed starts Talking about rate hikes that would actually you know show the market that they have a control on inflation then maybe long bond yields go down you
know yes it's all reversed in a fiscal dominant world you're spot on so yeah what breaks the 10-year out or keeps it on its Ascent is another fed cut If the Fed remains hawkish and keeps the doubt in the market of of a December cut or any further easing you know as as being Being kind of locked in the 10 years Peak because look at oil and growth growth cannot sustain without that and uh I think the thing that probably many people aren't talking about uh there's too much Alpha being leaked here but the dollar
uh correlation with risk assets has been very positive over the last few weeks and in the case where the FED stays higher for longer keeps the front End higher knocks the back end down the dollar weakens then on worsening economy expectations because the FED tire for longer less us resil resilient and US risk assets face issues despite that dollar weakness unless it comes from more fed cting which also could weaken the dollar but if they don't do anything the dollar is very overextended for any outcome here for Both like If the Fed stays higher for
longer worse economy dollar Falls If the Fed Cuts more inflation dollar Falls like this is a peak for I'm calling a peak in the dollar today yeah I was also going to say how much of this is just a policy thing with Trump because the what's what's ironic about the whole thing is I think Trump wants a weak dollar policy generally speaking you want to reindustrialize the US you can't do that With a super strong dollar and just Crush every other country in the world and yeah we're definitely hitting some sort of extremes if you
look at the rsis and like the Yen and the Euro Etc it's not it's not like you have to still play the the the chess match you can't just completely dominate everybody else you have to give concessions I think yeah this is like just the point I want to reiterate super quick it's just like how convoluted and upside down things are Right now I feel like that's the theme you guys are kind of both getting at here yeah it's it's a little tricky because you don't know the True policies just yet and I think everyone's
getting ahead of themselves what I really think happened in the 10e was everyone's anticipating Trump's gonna cut taxes and you know less revenues means a higher deficit higher deficit means higher yields now David zervos had a great point he said uh deficit equals Government spending minus tax receipts and everyone is concentrated on uh the lower tax receipts from Trump tax cuts and not concentrated on Lower government spending which could really really get yields going lower meaning the deficit is goes lower because you can cut so much fat from you know the the government's spending can
you can you actually cut the fat though because I mean when you look at government like are you going to cut defense no probably Not are you going to cut Social Security no probably not are you going to cut interest no it's going to probably get worse they they spend like you should see some of these things the government gives money to it's like $26 million to see if rats can you can get them drunk and like you know get out of a maze and it's like who gets that money you know there's so much
overspending that I think Doge actually will help that yeah but okay so let's let's say we're being Generous and we're like okay okay you know they can cut out 300 billion like that just gets that just gets like you know swollen up by interest costs like I just no no no why why well if we're going into a world of secularly consed higher interest rates the interest payments are going to keep increasing but but in a vacuum it's like so my favorite comparison to this is uh when act activist shareholder buys it laot buys a
15% stake in a company and It uh it it share price goes up 10% on the expectations of cutting costs and optimizing the business because if if if Doge cuts the fiscal deficit but presumably doing it is just cutting say the like 500 billion of of dollars we spend and therefore print but it does there's zero result from those dollars then you're basically removing $500 billion from the deficit 500 billion of issu of Treasury issuance then your economy is better off for it because You're more productive while issuing less debt it's actually lowers your it's
dollar strengthening which is deflationary and it's uh brings yields down on your debt because you're printing less to mon you're issuing less so I actually think if done well for the same reason a share a company's stock price rise when you when you do these kind of corporate makeovers if if done well you're just cutting the fat and I think it's actually tremendously Positive but again like it's not just Elon and Vivic that get to go around doing it I mean there's tons of congressional things here what ready this's a good quiz what was the
department of education's budget in 20124 no idea for sure yeah but what you were this number shocking the one that shocks me is the feds is multi-billions and it's like 230 8 billion of the Department of Education if they went in And just shut that down like that's incredible just shut it down no more education talking about giving no no no give it to the states yeah the St okay okay okay okay okay I'm with you yeah I mean Malay did this they did you see that picture of Elon Trump and Malay last night yeah
so essentially like I don't know I feel like the whole world thinks oh you know they're G to spend so much money anyway what happens if they don't what happens if they actually cut Then rates come down again and you have this giant of innovation I don't know this is very first turning stuff we're talking about that has never happened before so it's really hard to to discount it but yeah yeah so I mean there's a lot of uncertainty baked into the long Bond like that we agree on for sure um and at the same
time that there's just like this economy that is you know like a lot of people are coming to the realization that a recession is Not actually happening and and that has led to significant unrine and reverse veral and like you've seen that and just like even economic forecast like the surprise economic surprise index is just completely reversed and is now just you know still surprising to the upside and you know we got like retail sales today that they revised quite a bit higher um like last month's retail sales Sprint went from like 0.4% to 8%
on an upward revision right so you know Suddenly It's Like oh [ __ ] we are completely off guard because we keep getting thrown off by you know noisy noisy employment data noisy curve inversion data that has just been like you know totally just like throwing people to the totally wrong side of things in terms of expecting recession so you have that at the same time that people are just trying to like game out what's going to happen on on the fiscal side so yeah I think I think I'm with you guys that it feels
like the Dollar's peing here it's just like when when you have positioning stretched like this it can you know I think I called the the dollar top like a week and a half ago and got humbled but you know these things can keep going for a little bit but it feels like fundamentally like yeah I don't really see the story to go and this is the Chinese tenure yield now everyone was expecting them to pull out this giant super huge fiscal thing a couple weeks ago the 10year yield is Back at the lows so something
is going on in China I don't know why they're holding back spending they have because of the dollar because they can't if they do more with the dollar where it's at it will smoke their currency yeah but I mean I think what's happening is their their growth is rolling over and you're seeing that like oil prices and copper Etc yeah they can't do enough because they're in a balance sheet recession and they're constrained by the dollar I Think that's the combination is that like I don't know they're like you even saw um David teer close
out some of his chongs like yeah so I think what maybe you're seeing is more geopolitical is is Trump saying you know we're gonna we're gonna use this dollar against you and put you in a place where you have a a credit crisis or something like that and then you give us concessions on some things that's possible that's really what's going on here um but I don't know I think if if you get a couple more days of weakness and the dollar gets too strong how just going to come in in lower rates we're still
going to be relatively better than anywhere else in the world and I think that's the end the end game is We're The Innovation engine for the entire world right now I think that's true um the only thing on the dollar that is the most important day in the next week is the Bank of Japan speech on Monday which will indicate whether they plan to do the hike in December or January I think if he's hawkish and he does a hike in in December guides to a hike in December I think the market comes apart like
a Yen like the Yen carry unwind if he's doish and pushes the hike to to January right that's dollar supportive Yen bearish but you kind of just Kick the Can I think it's a weird because what That does is it allows Powell to get the cut off in December but imagine a situation where where he boj's hawkish guides towards a December hike and pow like how does the FED cut while the boj is hiking in December that's that's such a good point I feel like yeah people you know like we're looking at Yan is at
54 now the the the carry trade kind of fears have been completely Unwound and now you're at a point where they have much more breathing room to hike at the Same time that the US is is coming out of as many Cuts as it had priced so the breathing room is there for them to hike I feel like and that's something I don't feel anybody's really talking about right now that's a really good point breathing room in the currency but TBD on the effects to other assets particularly risk assets like yeah I would not want
to be a Japanese Equity holder at this moment in time Would you be a US tech Equity holder at this time I I am a US tech Equity shorter at this time yeah yeah huh I think the NASDAQ might be peaked I kind of agree with you there I had a couple charts on that too yeah fire them up all right hit me slide 28 the the hard part about I I wouldn't say shorting it I just think relative underperformer this is If the Fed Cuts you're right if the FED Cuts that's liquidity positive NASDAQ
doesn't fall Apart if they don't see you but what if what if the FED Cuts in the 10 year goes to five that's then stock stay supported and small caps outperform large caps super growth kick so this is the the change in consensus DPS The Magnificent Seven obviously analysts are up 177% but everything else is getting waxed so if you go to the previous slide slide 27 this is small caps are trading at a 25% discount to large caps and so you You have and I've been seeing this under the the hood of everything I
I mention rocket Labs every single week and I'm just going to continue to mention it I don't own it disclosure but I watch it because it's a good risk proxy but like small caps are basically like relatively this is where you'd rotate if in a giant Global easing cycle out of like what's massively centralized and overcooked and probably in the crosshairs of of a trump Administration In a lot of a lot of things I think the easy call is to just rotate into small caps we're probably seeing the beginnings of that today um and then
if you go to slide 29 you know you always see record inflows into large caps at the end of the cycle which is kind of kind of interesting so that could that have been a blowoff top I don't know we'll see um I'm not going to make you know make that call by any means but I think it's Fascinating in Us in large cap Tech probably yeah in at a maximum I feel very very good or at a minimum I feel very very good about calling the peak in nasdaq's relative performance to value and yeah
probably small caps at worst it's the top the thought experiment on that is really fascinating because think about how much pass money and benchmarked money went into keeping up with the the magnific Magnificent 7 and today specifically is fascinating Because you actually see crypto equities up with the NASDAQ down two and a half percent so how could it be that that money is rotating from centralized you know Asset Management to decentralized like that's if if that's the beginning of this next rotation could be pretty incredible hey everyone this episode is sponsored by Ledger for the
past decade Ledger has been the global leader in digital asset security trusted to secure more than 20% of the world's crypto Assets celebrating 10 years of innovation Ledger is making digital ownership more secure and accessible with their latest products Ledger stacks and Ledger Flex these wallets feature the world's first secure touch screens simplifying your digital transactions while ensuring uncompromising security through this Ledger secure chip and proprietary OS plus with The Ledger security key app you can say goodbye to traditional passwords and step up your Digital protection your entire cryp crypto experience got a whole lot
easier ready to protect your assets choose the most trusted name in Hardware wallets Ledger and take control of your digital Security today at ledger.com all right back to the show meet your secure reliable institutional crypto partner Kraken institutional whether you're an asset allocator a trading firm or high net worth individual Kraken institutional unlocks the full Suite of Tools you and your organization need to trade and manage crypto at scale but it's more than just powerful products it's about enabling you to build and grow your crypto practice by Deep liquidity industry-leading security and white glove service
thank 24/7 support from an award-winning account management team and expert guidance through your institutional crypto Journey from onboarding to product demos and more experience it for yourself visit Crack.com institutions and get in touch today this is not investment advice Crypt trading involves risk of loss and is offered to us customers through payor interactive in VI legal disclosures at kraken.com legalises yeah I want to unpack obviously what's been happening with with crypto since the election because like just to set the context here is like for the past month I think all three of us have just
been like just Beating the bullets drum just like absolutely screaming about it and we've had this like what feels like a euphoric kind of unwind of Hedges at the same time of like a full euphor optimism moment um on risk and now we're sort of digesting it you know we've seen the major alltime High breakout of Bitcoin that we've just been like hammering about since the summer just waiting for it to happen it's happened and now okay you can tell from our conversation so Far it's becoming more nuanced where we're at right now um it
feels like so I just want to like talk a bit about how do we navigate that as as as Traders and investors and participants is that you know the different time frames that we're talking about but overall like as you say we we've seen these rotations um you know equities have been puking Bitcoin still up a bit today but it feels like you know there's a bit of a shift going on and and you know that the Smartest macro folks that I follow have been kind of on top of this and and starting the shift
they thinking a bit so I'm curious like how do you guys navigate this especially like mentally and psychologically like we've had this euphoric moment and we've just been banging the bullish drum and now we're getting a bit more nuanced here for crypto specifically I mean you gotta sell the rips buy the dips and you one of the psychological things that's Really fascinating about Bitcoin specifically is you always get retail Traders involved because it's easy money and and that but they always over leverage themselves or they buy calls so you see you know when bitcoin's not
volatile and it's just kind of putting along and accumulating like today I find that fascinating because no one's really chasing but when you see those big rips higher you have to sell some into it because that's really the Point where you know you get the the retail crowd overleveraging themselves dude the amount of text I got in the last week of like old friends that were in crypto in like 2020 and they're like oh like yeah should I buy back I'm like dude yeah they with the fascinating they they ask it they're like oh I
missed it and I was like I told you to buy you know 40% lower yeah and now you're getting the text but they still missed it you know so it still Feels like it's a bull market but they're just like people need to slowly accumulate here again there's a yeah like I don't know we need to either chop around maybe a couple flushes there's there's a bit too much going on for my taste and I'll be honest like when I got those textt I got a little spooked same well the best one I'm I mean
so let's start with your original question how do you manage this this period one of my uh all-time favorite Traders Tony Greer and Humans uh his he's always preaching and instilling anytime you're talking about a trade talking about a win talking about a position talking about a gain and and shaking hands K you know kissing babies uh with one hand you better be at making a sale with the other hand and it doesn't need to be your whole position if you're still bullish and the thesis still holds but the reason is for that is you
were right your thesis played out and it and it played out and you're Right and you're celebrating it being right but that was the thesis you laid out and the trade you put on and now if you're celebrating being right then that's not any longer forward-looking and so it's this classic it's like on Twitter when the bulls start dunking it's the top the Bears start dunking it's the bottom there's a reason for this because not just psychologically you feel rich when you are after you make good trades but also Fundamentally you're commenting on something that's
backward looking now and and versus forward-looking what we're talking about now and we try to talk about in the show a lot is is like giving people a forward forward looking aspect I would say that's always harder said than done because or easier said than done because greed and fear emotions and psychology in this market I think um you know with the election victory of trump and all the good Positive news uh there's an expectation that it's going to be so unbelievably bullish for alt and every crypto asset but then when you pop the hood
and like we're doing today talking about a macro environment that is still precarious you know it's not it's not 2020 it's not green lights go by anything and it goes up like you can't just sit in these you know 100x levered High beta alts and and take the bleeding That occurs particularly when you have this Bitcoin narrative uh about potentially us strategic Reserve right what's what is the value of a 1 to 10% chance of a Bitcoin of the US implementing a Bitcoin strategic Reserve there's 200 countries in the world if one of them or
two of them or three of them try and front run that or try and front run even the speculation of it occurring that's very Bitcoin positive not the rest of the Complex positive what is Michael sailor buying Bitcoin you know so I think people just I think it's the maturation of this Market uh which is is just what it is is like when you're bullish on stocks that doesn't mean energy Insurance you know solar and everything has to go up it means you know you got to have a thesis and you have to have asset
selection so that's I think that's the important thing in this market in my opinion yeah just dispersion is really Important because like to your point you know we're not in a realm anymore where where people are getting $2,000 stimmy checks that they can go throw at everything like we're in a world where actually like you know liquidity is probably pulling back for the next little bit we might get a little jump because of a December rate cut and just the psychological impact of that but overall you know like something that we haven't talked about yet
at all is that In a in a in a red sweep of Congress um any idea or hope for like a TGA draw down is out the window because they're just going to like like you know there's not going to be that like gridlock that means that the debt ceiling isn't getting P which means that you can draw down TGA so like I don't see that happening in 2025 so there's a lot of these like different facilities like that that you know they're they're kind of going in the opposite direction of What was happen happening
in 2021 so you need to be more selective you need to be a bit more Nimble it's not just um you know throw everything into Arc and just like sell it I know 10x or something like that you know you know what I have a hard time it sounds like just to recap we're all in the same boat where we've been super bullish this is kind of a period of consolidation till we get some some more cards see some more cards from the deck but I do always in agreement God damn it I do want
to show these three charts that may me a little bit more bullish at the year end which is just there this is the cross asset smash section of the the uh forward guidance let's go to slide 33 this is the US money market funds assets top seven trillion for the first time ever and I just think like never seen a bubble where you have 7 trillion dollar in cash where this keeps me somewhat bullish over the longer term Like people are just sitting in cash and and granted they are getting in and there there's a
lot of Boomers probably sitting in there and just fine with it but that money eventually has to go somewhere it you can't really have a credit crisis I'm gonna I'm gonna take the other side of this chart um because to me I view a lot of this cash is just it's an expression of money that's come from bank accounts into money market funds it's not from risk into money Market funds so it's just because you can actually get a yield now because rates aren't zero so they've people have moved their like non-risk taking money from
their bank accounts and just put it into a money market fund they're not like oh I'm going to be on the sideline from my like I sold my S&P 500 Longs and now I'm in a money market fund they're like no this is just my rainy day fund that was in my bank account and I just moved in to my money market fund like do You think it's really risk-seeking Capital no no I I think it's the largest it's ever been though that's fair if if you're in a bull market I mean we're we're within
spitting distance of alltime highs you wouldn't think there's trillion in cash and then go to this is the next chart slide 34 so then we'll head to high yield credit so the the red line is high yield bonds trading under a 350 basis point spread the blue line is high Yield bonds trading under 2 b50 basis point spread and how much of the high yield Market is trading under that there which basically means as these lines go up credit spreads are tight and you know high yield credit is is very secure uh and so where
it says and then if you look at the the supply of high yield no both high yield and Loan volumes this month are pce to be year-to-date lows both tracking roughly 80% below their year-to-date monthly Averages so there's no Supply in high yield and the spreads are super tight which is i that's another sign to me that how do you have a a market crash when when you have that granted you could say we're in January 07 and say but I don't I don't see any like real big credit issues on the corporate side so
then it's all just duration issues it's not credit yeah and then look at look at uh slide 35 this is kind of interesting Too so here's the if you just take historical real or you realized all for the past five days this is the white line the market really hasn't moved that much it's basically just putting along besides today I you know if you add in today it's probably a little bit higher but I did that this morning and uh so basically saying like the market is is barely moving on a day-to-day basis and then
if you look at the white line that's at the money implied Vault on a Rolling basis or sorry that was the the orange line is at the money implied Vault so this is forward-looking volatility and that's at uh 11669 so there's a there's still a widespread and if you look at the you want look at the percentile this is in the 19th percentile of implied verse verse realized so implied is still expensive relative to realized that makes sense yeah so heading into the next month if the Market's barely Trading there's not that many catalysts like
you could see realiz all really collapse here and the vixs come crashing down so we'll see if that happens next week that's what I'm I'm anticipating unless you get some wacky stuff in the end I agree with that I I I don't think the big Sparks uh are I don't even know if I think that there are big Sparks that like like you said this isn't some irrational credit driven bubble like in Uh you know mortgage like anything like we've seen before it's we've talked about it on the show it's a it's a sovereign debt
bubble that by definition unwinds differently and it unwinds via these stop starts of oh there's a bond market problem you know Vault controllers put it out and uh did I sh this I would I don't know if I said this last week but I went to lunch with this guy who's an old Volatility Trader he's traded all asset classes he was like one of these salty guys that traded in the pits of Chicago and he goes Tyler back in the day you you know when you had you know the G10 and different currencies you know
fxv was crazy and we could you could buy to the end and you could sell the dollar you could do all this stuff and and he's like basically fxv is is negligible now because all the policies revolve around the fed and it's it's globalized Central Banking at this point so there's no volatility in currency so when you get these moves you know the Yen goes one thing or other The Vault controllers have to come in and stifle the VA because if they [ __ ] up the the FX VA then that [ __ ] up
the the debt bubble and the debt bubble [ __ ] up the equity markets and then they can't pay out the Boomers on all their pensions so it's like that's they just stifled the all in the FX markets in the G10 the only thing That disrupts that really is war and I think you're just you're probably heading into and everyone will probably disagree with in the comments but Trump is actually you know better for Global Capital markets and relationships he'd much rather negotiate a trade deal than you know go to kinetic war and and I
think that pieace dividend is coming under you know the next year so we'll see um what happens man I love your like Old Mentor guide Trader voice I feel it's my favorite thing in the world yeah I mean until that point too is that like when you get into this world of stifled volatility for people to expect the same sort of returns they need to lever up and like so now you see like these high leverage carry trades and FX just because they have to chase that yield you know and then you see this too
like you're showing um credit spreads and you know when they're that low for like a Corporate credit Trader investor whatever they need to lever up significantly to try to chase those same gains or you just end up going to bitcoin and then you know doing that you know like I think that's what evitably what what's funny is like this guy's whole career was he just moved to different asset classes like first he did ethics then he did yeah fix one then you do Equity B and now all those volatilities because Everything's gotten more liquid and
everything and now you're out in the Frontiers and and doing volatility on on bitcoin which is kind of crazy yeah I totally agree you know this is what like Ralph H says that is that like you know crypto is macro now and that whole idea and I I totally agree with it um yeah I feel like this brings yeah this this brings up something I've been trying to think about is that like fundamentally you know I think we've obviously some of The most bullish crypto moments we've ever seen in the history of the asset class
in the last month um so you know I don't think any of us would would say that we're bearish on the asset class on a twoyear to five year to 10e time Horizon the issue is that if you're you know looking at the short-term horizon or like even the medium-term time frame is you have to think about where is price at versus what has been priced into in terms of like an event narrative So now we in this moment right now where we've had the most euphoric positive headlines we've ever seen in crypto but okay
now price is is is matching that but then what I'm thinking about is that okay we might be going into this this quiet moment where we have nothing that can actually happen in really until the inauguration and then even from there they need to focus on you know getting getting appoes through the Senate and confirmed they need to start to focus on Some of the like the key you know High fre like high policy executive orders like immigration Etc so there might be a bit of time before you know the idea of the Strategic Bitcoin
Reserve starts to get talked about but in terms of How It's reflected in price right now now it feels like it's happening at any moment like do you guys agree with that framework yeah I think like we just sprinted from sub 60 over 90 in like a week and a half or or whatever it was a Week and that's just not normal like I don't care like even if there's a Bitcoin strategic Reserve like you know governments just don't hold the market buy button until price is at Infinity right so like we're talking more sophisticated
markets than the lever degens uh perp trading and yeah I mean you have to you have to digest I mean the other thing too is like you know people trade relative valuations you know relative positioning and when Things get out of balance they always come back to the the true liquidity Zone over some time rizon I'm personally not bearish Bitcoin um from like a medium-term perspective and and most of the views I have expressed around caution are are generally centered ACR around other assets primarily NASDAQ and semiconductors um so I think yeah like I just
like we said it's just a little bit more nuanced and tactical um but the outperformance kind of speaks for itself On a day where everything's down pretty drastically and bitcoin's still green I don't think that's to be faded on a medium time Horizon it's just this is a macro show where we talk about every component and again that dispersion thing is very real and I think it's going to get more real you know it's an interesting thought experiment pomp brought up on his podcast this week was um he's like the first country to print their
currency and buy Bitcoin you know And sailor said this the first person to print or current by Bitcoin wins they yeah and I think when you run that through your head right if a third world country just prints you Nigeria prints like ungodly amount of money to buy Bitcoin and their currency sits next to bitcoin because they have this giant Bitcoin Reserve but their inflation rates go skyrocketing it kind of makes their entire country they have to adopt Bitcoin as as the the currency when you Think about that but the only country that can really
do it like if we were to do it and and print I don't know a couple hundred billion dollars to buy Bitcoin it would actually strengthen the dollar you know because it you you you would be having the dollar is the reserve currency anyway look we printed 10 trillion dollars and dollar is still the best performing thing imagine we had the dollar now sitting next to Innovation And this stort of value it's kind of a funky thought experiment and then you bring in stable coins too like man like it's kind of funny that like Bitcoin
was was created as this like oh you know the US dollar Reserve currency is is ending and we need something to protect against it but it might actually be the thing that like somewhat saves it too yeah what if Bitcoin was created by the FBI so this was all just planet and and this is a simulation this in the work you Give them too much credit yeah CIA C no I mean it's interesting it's a thought it's I feel like we're a long ways off because I mean let's just get Trump safely in office and
then we can take a side relief but I do think it's positive that the president vice president and every cabinet member is a massive Bitcoin bull so what's what's a scary thought though to me is like if Bitcoin goes up too far too fast you're and people are making too much money It's it's massively inflationary yeah and you're I mean you will devalue your I mean relative to if you if you have a whole new generation of wealth which the like if our generation start accumulating wealth we delever the the real estate market for the
Boomers who need to sell their houses that's that's very possible we could see like you know 10year yield at 10% everyone's money hand over fist and asking for payment in Bitcoin rather than dollars it's a great Point actually like I posted yesterday a chart of the Chicago fed Financial conditions index and Danny Dan who's a a friend of the show replying and he's like and that doesn't even include anything about crypto you know because that Financial condition index has like Leverage what's going on in credit markets what's going on in equities and FX but there's
nothing about crypto you know so you see you see an asset class that just flipped silver this week and That's not included in financial conditions like yeah there's some there you know that's actually you know what I was thinking about that line I saw that all over Twitter and things like Bitcoin market cap surpass silver and I was just thinking like it's kind of wild like what even is the market cap of silver like obviously I understand it's an estimation of above ground reserves plus below ground proven reserves and but like same with gold like
oh the market Cap of gold like no one has a [ __ ] clue no one has a clue how many dollars in circulation or any fiat currency like and it just got me thinking like we take this such for granted things on the blockchain of and how powerful it is to say like okay for Bitcoin yeah you don't know how many how much of the tokens have been lost or whatever or are dormant but you can see right if some if a coin hasn't moved for 10 years there's a x perent probability Of it
being non-existent and lost and you can spot trends like it's pretty remarkable actually that like just when you think about how Global accounting and recordkeeping is is done uh it's a lot of finger in the air hand waving versus on the blockchain like it kind of just brought me back to like wow this is is actually super powerful technology because I was just think laughing at everybody quoting this like Bitcoin pass the market cap of silver I was like Nobody has a clue what like this could have happened 10% ago right you know no one
has a clue what Silver's market cap actually is yeah obviously we we talked about at the start of the show is just about this inflation print that we came in and you know there was some meaningfully concerning outcomes from from that print but I just want to get like I want to get your guys' take on what you think is really driving the Fed and right now because I feel like this Idea of this inflation boogeyman is very large right now and people are very concerned about a re acceleration but you know I've talked about
this a few times that like you know I have a few guard rails in terms of like my bullishness versus the concern I have no concerns about a recession I have some concerns about you know inflation re acceleration but you know as we talked about like with oil where it's at you know like sub 70 versus like you know we We've alluded to a few things that are quite similar to what's occurring right now to like say something like 20 2 but at that time you know oil was at 115 and now we're at like
sub 70 so you know you look at that and then you look at like what that 6685 it's crumbling right here oh my God yeah so okay how do you get inflation really accelerating when you have that going on and then the second big one is wage pressures so one of the big reasons for the major wage pressures That was going on was looking at just like job openings and job vacancy rates and just the ability for people to quit their job and go shop around for a new job and get a 30% pay rise
or something like that we're in a completely different situation right now you just you cannot get those spiraling wage pressures when you have like a one toone ratio of like you know job Seekers to job openings um when you have quit rates being very very low like you just don't See those same pressures so it's like yes I understand the argument for some stickiness and shelter inflation but when you have oil on the floor like that when you have wage pressures on the floor like this and just like pretty CA like I don't know why
like why are we that worried about inflation other than some stickiness due to Dynamics like shelter everyone's on the wrong foot on this stuff I I really I think there's too many inflation EAS out there right Now and we might surprise lower on a on a print here I think what the problem is is the deficit is huge and the supply of longer term duration on Treasury bonds is is a lot and that's why yields are spiking not because inflation's coming I think that's the and so we I know I'm guessing that yields are come
smashing down here with with the dollar to be honest and that's probably the next narrative for the the up leg but you know I'm not highly but here's the thing Is that doesn't get catalyzed by a hawkish boj leading to dxy lower which would lead to potentially lower at the same time I guess is the the issue yeah I would make I would make it a bit more nuanced Felix and that I I wouldn't write off the recession risks because I think it's it's an if then statement in both directions if we go if if
there's no recession then inflation likely becomes a problem and how do you get no Recession is the Fed continuing to ease and provide ample liquidity other direction is if there is a recession then inflation certainly is unlikely to be a problem and how do we get no recession how do we get a recession is is fed higher for longer so yeah that's what I think the Market's trying to wrestle with because oil right now is certainly a growth scare move as is vix a global a global growth scare move mostly right as is vix as
is stocks as Is Chinese bond yields hitting you know cratering um as is really truly the Yen strengthening you know Yen has always been a global risk off currency so today the market is more scared about a growth thing I think yeah but okay so yeah maybe I'll retract the recession yeah yeah okay I I'll attract the no recession maybe put it at 10% odds because and to our Point like the one of the what what's one of the big reasons why we haven't seen a recession Is because the long bond has been artificially low
which has led to nothing really happening in the economy if we're seeing this like stubbornly high move in yields like that has a that has a tightening effect effect on the economy more than the FED cutting the or sorry hiking the FED funds so there's an argument there you know you look at like mortgage rates like they're they've rebounded very significantly so maybe there's an argument there that you can See a Slowdown coming from this recent move in yields which is funny because it's happened because the FED has been dobish and this is why macro
is such a mind [ __ ] right now right is that like from the FED cutting we've seen the tightening and if they if they tighten then we might see long bond yields potentially go lower which should be positive so it's it's a weird world let's step back and just analyze that for a Second when when you think about that doesn't that that that's like the screaming call for why you'd want to own Bitcoin they're pulling out all sorts of crazy stuff it's not working like it should work right they don't even know what they're
doing in a lot of Senses until there's VA and they're just like oh we're gonna suppress it or create a new acronym and so I don't know this is the Dan M of Central Banking before our eyes at least like the modern forward Guidance type of Central Banking like that go I don't know I think the other big one that people need to delineate and I specifically remember talking about it on this show as well is financial markets and financial asset prices on a screen and the real economy because Trump is probably massively bullish for
Main Street and deregulation and Innovation and labor but it remains to be seen I think those are true and at this Stage you know it it's not necessarily Zero Sum where if he's bullish for those categories it means he has to be bearish for Wall Street you know uh capital and other things I think that's where the macro comes into play and you can only swing the pendulum so far in One Direction and to your guys' point it's like that is literally the bull case for Bitcoin we we talked about this back I think it
was early summer Midsummer that bitcoin's coming out moment is when it Like the people who don't know anything about it and just constantly compare it to the chart of the NASDAQ finally stop doing that because it's just fundamentally wrong and I suspect that's 2025 in a nutshell because remember Bitcoin remember all throughout this year first half of this year or summer it's like oh my God Bitcoin can't you know it's supposed to be this lever NASDAQ and it can't even keep up with Nvidia and it's Like no it's because they're completely different assets and they're
completely different drivers behind them and uh you have to understand that so yeah there's a world where like small caps start outperforming large caps value starts outperforming growth rest of world starts outperforming us and that's a emerging market and Bitcoin positive environment that doesn't mean it goes straight up from here to 200k in the next month but I think that makes the 2025 Outlook still quite positive even if it's not positive for the NASDAQ well guys we have a bit more of a mature conversation this week compared to last week where we took our Victory
lap so you know at least at least we're being a bit more measured this week but you know you had to take a moment we had to enjoy the Euphoria but you know it's it's to come back to to Earth a little bit because we've seen some like yeah I can't I don't think we can understate That that we moved from like 60k to 90k on Bitcoin in like a week and a half you know so like probably want to take some trips off the table in that respect so you know bit more measured in
in how we're looking at things from here on we've had the euphoric move and you know I think we can all Pat ourselves on the back there for for for being positioned for that but well let's just let's just look at the chart all all the Bears in the the comment section being these Young kids don't never seen a a often Market I can't you just wait you just wait hey guess what guys we took some profits let the let the record show let the record show last Friday when we recorded price would have been
around 75 to 76k right okay and it's at 89 90 today and we're we're we're exercising what's that tweet exercising a touch of caution uh yeah yeah let let the record show we're we're uh we're Taking our own advice of of uh you know making sales with one hand when we're when we're parading with the other go Tyler Tyler finish us off here with your favorite quote never let a win go to your head or a loss to your heart fellas that's it baby that's it we're out all right have a good weekend guys
