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People kind of get in their mindset where they're owed a bull market, which no one's owed a bull

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market. Some percentage of people bought Bitcoin for maybe the wrong reason. They bought it because

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they think Uncle Sam's going to buy it, rather than buying it for its own qualities and kind

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of the longer term story of what it is and what it changes. A lot of people are either too heavily

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in treasury companies, too heavily in altcoins, or they are too heavily in Bitcoin in the sense

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that their expectations don't match reality. I do expect that, you know, in 2026, we'll be back

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into the six figures. And whether it's 2026 or 2027, I think we'll be seeing new all-time highs,

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most likely. There's no particular reason to believe that there's a four-year cycle intact.

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We haven't hit euphoric levels this cycle. Therefore, there's less of a reason to expect

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kind of a major capitulation. The cycle could go on for longer than people expect because it's not

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driven by the having. It's driven by broader macro and interest in the asset itself.

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Lynn Olden, great to see you. Always one of my favorite people to have on the show. How are you?

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Good. Happy to chat. How have you been?

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Yeah, really good. It's been quite a while since we've done a show talking about macro stuff. We

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We obviously did the one with Andy Constant about three months ago, but that was all about

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micro strategy, which we might talk a little bit about today.

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But there's so much happening that I almost don't know where to start.

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We've got Bitcoin at just under 92K.

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Gold's had an insane year, just a 12-month bull run.

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We've got repo market crisis.

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There's liquidity drying up potentially, maybe a liquidity injection coming.

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I don't know if this is like recency bias or just the stuff you see on Twitter, but does it feel like the macro world is at a really pivotal point right now?

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So good question. I do think it's at a pivotal point.

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I think the magnitude is probably less than you'll see in a lot of sensationalist tweets or podcasts and things like that.

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But I do think that it's at a pretty pivotal point and kind of to the literal extent, which is that we're getting to the end of a multi-year reduction in the Fed's balance sheet.

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We're pivoting toward a more flat balance sheet and then probably eventually and not that long, eventually a more upward tilting balance sheet.

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And that does mark a multi-year change, even though it's not always what the sensationalist headlines will say about it.

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So this is quantitative tightening coming to an end.

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I do want to get into that, but I want to start on Bitcoin because we're down quite a lot just under 92K.

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Lou Groman talks about Bitcoin as sort of the last functioning smoke alarm of liquidity.

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Do you view it the same way?

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I do.

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I think it's one of the many hats that it wears.

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Right.

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So I still think it's a small enough and volatile enough asset that that's not the only thing

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it is.

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That basically that's and I've seen him describe that before, that that's because it's still

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a rather free market compared to other markets that are somewhat more controlled, that that

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one is able to kind of show things before they happen.

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And then Sam Callahan and I did research to kind of correlate Bitcoin to liquidity and

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show that while you can't do the thing you'll see on Twitter where you overlay the global

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liquidity chart, the Bitcoin chart, and try to make like three-month projections about

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Bitcoin, that there still is a general causal and interesting correlation there over a longer

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timeframe. And it generally gives you a pretty good insight into direction. Of course, the other

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variables is that because Bitcoin is this new and emerging asset, and compared to other assets,

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even though it's been around for a while, it's still new and small, that it's subject to

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idiosyncratic things. And so, for example, the election in November of last year, almost exactly

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a year ago, that gave a really big boost because it kind of changes the forward estimates, what's

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going to happen with regulation, what's going to happen with different things like that.

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And that has nothing to do with liquidity when something like that happens.

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And same thing with the ETF launch, same thing with some of the accounting changes for Bitcoin

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treasury companies.

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These are things that have nothing to do with macro liquidity that can really shift the

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asset around.

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But then, of course, I think liquidity is a really big variable.

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And I think that Bitcoin is more correlated with liquidity than most other assets.

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and and how much of a part do you think that's playing in this drawdown now because i would say

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2025 is probably in the time i've been in bitcoin the year that almost no one's been right on on

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bitcoin like i don't think it's gone up nearly as much as people thought there was a lot of calls

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for this being like the cycles being over potentially they still are but um how do you

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like take this in like why do you think bitcoin's crashing now uh so i think it's actually the more

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interesting factor is why it's been flat for so long because the crash itself like even in the

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2017 bull run that was a fairly smooth and and kind of parabolic bull run but it still had

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multiple sharp 30 corrections along the way like several yeah uh and it would just have these v

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corrections and shoot back up so it's not necessarily that this one's had really big

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magnitude i mean we were but we touched like 75k back in april uh for example um it's not the it's

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not really the size of the corrections. It's more of the length of time of lasting in the state. So

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the fact that we were 100K in November of last year, and after a year, we're basically flat,

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and now we're down to some extent. That's, I think, the more noteworthy item. So I don't really view

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Bitcoin as crashing. I view it as basically stagnating at this time. I think that's the

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more noteworthy event. There's a lot of factors that can go into that. I think that

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liquidity is a factor. So we do have tighter liquidity now. But when you look at kind of

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broader measures of liquidity, they're really not that bad. And I don't expect them to get that bad.

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I think we're kind of in the bottoming phase for domestic-based liquidity at the current time.

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And broader liquidity is mostly fine. So I think that liquidity is doing it no favors this

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particular month, I think there's a broader issue. It's AI potentially sucking some kind of capital

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enthusiasm away from Bitcoin as kind of the fastest horse narrative. Obviously, gold has had

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a really good year. And then there's also, to some extent, the disillusionment with the other

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catalysts for Bitcoin. And so, for example, one of the most popular questions I got on Bitcoin

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podcasts in early this year was, what do you think about a sovereign Bitcoin reserve?

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And I found that the most boring question.

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I mean, people had to ask it, but I found it, and I even said it a couple of times,

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that it was like the most boring question.

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Because one, as far as kind of the ethos of Bitcoin, I find the decentralized aspects

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way more interesting than what is the nation state going to do with it?

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And two, I'd said I'd rather kind of have a price estimate that doesn't include, you

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know, Uncle Sam buying a half a million coins, I'd rather be surprised at the upside if that

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does happen than to factor that all in and then be surprised when it doesn't.

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Because my view at the time was that, sure, they're going to ring fence the coins they

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already have, that they don't owe back to someone else.

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But that any accumulation from there, I think, would probably be marginal at best.

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And I'd be happy to be proven wrong, but that was kind of my base case, and I would just

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plan for that.

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I think a decent chunk of Bitcoiners were kind of really bullish on that outcome, really bullish on a lot of things.

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And then when those expectations don't really align, even though it's otherwise a pretty good environment for Bitcoin, especially looking over two, three years rather than just the 12-month period, you start to get deflated expectations.

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And then lastly, because it's had this pretty small sample size of this four-year cycle behavior, so it peaked in quarter four of 2021, it peaked in quarter four of 2017, there are a lot of people saying, well, it's probably going to peak here in quarter four of 2025, and therefore they sell it preemptively and kind of create a self-fulfilling prophecy.

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I think that the halving cycles no longer are particularly relevant.

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I don't think even last cycle they were particularly relevant.

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I think they happen to correlate with the liquidity cycle.

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I think they certainly were relevant the first, say, three halvings periods, I think, were pretty relevant.

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I think they've diminished to the point where it's no longer a factor I particularly concern myself with at all.

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It's more about those other factors.

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And so I think there's a bunch of disillusionment that's being kind of washed out.

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And you can have an asset that is a good asset that's sometimes held for the wrong reasons.

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And so I think the coins are kind of rotating away from people that held for the wrong reasons or the wrong expectations and back toward the hands of those that, you know, have, I think, you know, more conservative expectations while still, of course, being bullish, which is why they hold it in the first place.

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So this has been like a bit of a growing narrative in Bitcoin that it's the long term holder selling Bitcoin here.

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Checkmates talks a lot about this.

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Jordy Visser wrote that piece about Bitcoin's IPO moment.

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Do you think that that is what's happening and that's what's causing this drop in price?

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Well, I think yes, but not uniquely.

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So, so far in every major bull cycle, there has been distribution from longer term holders.

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That's true for kind of any emerging asset.

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So if you have a startup company that at first starts with like three co-founders, and then

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it's got a few dozen early employees, and then it's got hundreds, and then it goes public,

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and then it trades public for a long time.

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And you get that distribution by people that either want to rebalance or want to upgrade their lifestyles that have been holding for five, 10 plus years into the newer buyers.

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So that part, Bitcoin is going through a similar distribution cycle.

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It happened in 2013.

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It happened in 2017.

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It happened in 2021.

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And it happened over the past two years, really, of this kind of like OGs selling into the strength.

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um what's a little different is of course now that it's more integrated with the financial system

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it's a little more complex because you have some saying okay i can actually own bitcoin

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in and some of them want a more regulated regulated environment to own it in they'd

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rather not have a billion dollars on a on a wallet somewhere they you know they of course

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they're more sophisticated as a whole with multi-sig and stuff but there's something to say

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i'd rather bring some of it back into the system um even though it might not be the kind of the

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Bitcoin ethos. You're some of them that funded treasury companies to some extent, some of them

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converting into ETFs. And so that is generally happening. But that's actually pretty overall,

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aside from those specific reasons, the overall distribution of older coins is pretty much in

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line with other bull markets. That's not particularly new. What is new, there's been

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obviously more selling pressure from five to seven year plus holders. But one thing I pointed

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out on Noster with a post is that there's a higher ratio of people that have held for five to seven

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years in the cycle. The older Bitcoin gets, the more of these kind of older cohorts unlock,

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because five to seven years isn't even that old in Bitcoin terms anymore. So you get people from

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two cycles ago, of course, selling into some of this. So I generally discount that it's uniquely

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associated with this cycle, even though that is the number one selling pressure. So it's not about

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new coins and the halving. It's about what price will unlock existing tightly held coins into the

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market. I think another factor is that while most of the demand has been treasury companies and ETFs

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and by extension, all of their investors, there's been pretty weak, kind of just broad retail

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demand. The narrative has been elsewhere. And so the combination of pretty concentrated demand side

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stuff, kind of moderate liquidity situation.

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And then the ongoing pressure of OGs or semi-OGs selling into the strength is giving some weakness.

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The bullish part, I would say, is that there's no particular reason to believe that there's

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a four-year cycle intact.

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We haven't hit euphoric levels this cycle compared to prior cycles.

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Therefore, there's less of a reason to expect kind of a major capitulation of sorts.

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I mean, that's, I guess, famous last words, but basically you hit less euphoric highs.

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There's kind of less to potentially wash out.

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And I think as we return to a more pro-liquidity environment and as some of the coins that were maybe held for the wrong reasons are already kind of evacuated,

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I think the cycle could go on for longer than people expect because it's not driven by the having.

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It's driven by broader macro and interest in the asset itself.

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purchased. So do you think a lot of people are going to be caught offside by this sort of self

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fulfilling prophecy narrative like i've seen again huge amounts of respect for luke groman i i really

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enjoy talking to him i love having on the show but he in his recent newsletter said that he was

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recommending people sort of trim bitcoin positions um do you think there's people that think the

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four-year cycle is still alive and well and might get caught really offside with this uh i mean i

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think to some extent it's already happened i think i mean a lot of people are either too heavily in

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treasury companies too heavily in altcoins or um they are too heavily in bitcoin in the sense that

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their expectations don't match reality so what too heavy in bitcoin means can of course vary

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depending on the person but it's either having too much exposure compared to your like your

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volatility tolerance yeah or x or holding it because you expect a 10x gain in a very short

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period of time, even though it's a $2 trillion asset, as though it's a prior cycle. And they're

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rather than holding it as something that maybe you expect to outperform significantly, but not

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in that explosive time. I think that people kind of get into a mindset where they're owed a bull

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market, which no one's owed a bull market. But then, I mean, the emotional kind of rollercoaster

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is pretty palpable if you watch twitter back back when you know whenever like micrategies at three

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times mnav the whole twitter feed turns into like well i could actually go to five times mnav it could

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go to 10 times mnav we're going to the moon now guys and then as soon as everything rolls over it's

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like oh the cycle's dead uh that's a ponzi this whole thing it's just like the the roller coaster

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is pretty palpable if you have your if you're just like watching it regularly it's kind of like

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like a cartoon almost how these kind of roller coasters come and go it's usually not as good as

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people expect and it's usually not as bad as people expect as often how these things play out

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so you can basically just counter trade twitter and we should talk about the treasury companies

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a bit though because the last show we did was with andy constant and this was pretty much solely

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focused on micro strategy strategy of like the share prices drops a lot i think they're at 1.2

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MNAV or something like that at the moment, a lot of these other sort of pure play treasury

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companies are now below 1XMNAV. Do you see that as a buying opportunity, maybe specifically to

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strategy? Or do you think part of that trade is kind of unwinding? Well, I'd round back in 2022

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and then restart again. So I think the question is having unwound, will it have another positive

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cycle? My base case is yes. I mean, so far, like for example, in that discussion, one thing that

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Andy and I agreed on is that you don't want a particularly high MNAV. That's where you run into

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pretty significant risks. I think the number I gave in that one was, obviously, there's a lot

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of flexibility. I think something like a 1.5 is reasonable. And I put the 1.2 to 1.8 band around it

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for something like them. So now we're on the lower end, but still within, roughly speaking,

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that band. I'm not that interested in the long tail of these pure play treasury companies,

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because there's a self-reinforcing liquidity network effect.

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And so basically, if you're the fifth biggest one

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and you're not differentiated in any meaningful way,

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there's not a lot of demand for that.

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Now, obviously, if you're the biggest in your own capital market,

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if you're the biggest in country XYZ,

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that's interesting because that's a differentiated separate thing.

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So I think the handful of ones that are leaders in their market,

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I still think the structure can make sense.

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Um, I'm more interested in the rise of ones that are cashflow positive personally.

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Um, that's actually where I think my, I think that'll be kind of a next interesting, uh,

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narrative, but in terms of the pure play ones, uh, my only focus is on the highest quality

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ones, kind of the leading one in a given jurisdiction.

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Um, whereas the other ones are more, could be anyone's guess.

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Um, and, uh, so we're kind of in that scenario where it's obviously it's, it's de-risiton

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the whole like treasury thing got really overstretched this summer.

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I think what surprised a lot of people, including myself, is how quickly these things turn.

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So for example, I'm on a record in the tweet saying, I like MetaPlanet.

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It was back in June.

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I was like, I like MetaPlanet, but I don't like it at a 6MNAV.

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And so I was like, I viewed it as overvalued.

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But if you were to ask me at that time, do you think it'll be at a 1MNAV in a handful

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of months?

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I'd say, well, probably not.

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Something big would have to happen.

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But the fact that it go from six to like sub one that quickly you know these things can kind of move around so fast So the direction of a lot of this cooling off was not surprising but that it just kind of happens all at once is pretty surprising

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And we'll see, I think that it'll be a test to the biggest, most reliable one to see how they

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handle it from here. I think if you do get another bull cycle in Bitcoin,

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the ones that survive the bearishness with their leverage intact, you know, there'll be demand for

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Because once kind of momentum shifts back again, there will be people saying, well, if I'm bullish on Bitcoin, why am I not bullish on Bitcoin with a little bit of kind of intelligent leverage attached to it?

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So the question is, how can they manage their downside to get through these types of environments?

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And we did see like almost all the treasury companies try and sort of de-lever over the last 12 months, I guess, for a situation exactly like this.

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So you would look at something like MetaPlanet and strategy as being good value right now?

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Overall, yes.

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I think, I mean, obviously, you potentially face regulatory challenges.

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That's been some of the news out of Japan a little bit, a little bit of regulatory and kind of exchange pushback, potentially.

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With strategy, I think the big question is obviously the ongoing interest expense that they now deal with.

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So I think you still have to approach even the best ones with caution.

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but I think that once Bitcoin action itself kind of settles,

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I still, at pretty low MNAV multiples,

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find the top names interesting.

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And I think it's a matter of position sizing.

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I think when someone over-allocates a portfolio

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to levered Bitcoin, that's going to be a challenge.

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At the end of the day, you want to own the core thing

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and the extent that you use the others,

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That's kind of the accelerator rather than a core position.

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Yeah, it'll be interesting if Bitcoin price remains, you know, flat going down.

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It'll be interesting to see who does survive and who keeps going for, you know, who's still here in four years time.

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That's the big question, especially when it gets to that long tail.

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But a little bit earlier, you talked about global liquidity and you're saying it's not actually that bad.

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You see the chart of almost like the sine wave of liquidity.

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And where on that sine wave do you think we are at the moment?

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So I think it's messier than normal. So global liquidity is still pretty good. I mean, basically, there's been liquidity out of China, especially the first half of the year when the dollar was weakening. That was pretty good for global liquidity. Now that we've had the dollar kind of firming up a little bit, and as you have kind of some of the stock stuff rolling over a little bit, it's more middling now.

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The part where the pressure has been has been onshore U.S. kind of base liquidity.

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That's where there's tightness.

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It's pretty similar to the September 2019 repo spike environment, which is to say it's one of those things that takes over macro Twitter for a few weeks, but then never reaches the scale where the average person knows about it because it's not that big of a macro fire.

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And so far, it's actually in line roughly with what the Fed expected.

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They thought that by around, and they've been publishing reports in the New York Fed, like these annual reports they do on their balance sheet.

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They've been kind of anticipating that sometime in 2025, 2026, they're going to reach a level of QT where they kind of run into liquidity constraints.

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And that their plan after that was to go back toward expanding the balance sheet in line with nominal GDP.

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And so I think that we're kind of in that inflection point where we're not at the expansion phase yet, but we're at the point where they've already signaled that they're going to end quantitative tightening.

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And then some of the members are talking about potential expansion.

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So you talked about something there that was going to be one of my questions, which is like, why does macro Twitter care so much about the repo market?

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Because obviously in 2019, this was a big story.

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A couple, I don't know, about a month ago, there was an issue in the repo market.

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Again, it became big news on Twitter.

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Why is the watch so closely?

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So I would separate it into two buckets.

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I do think it's worth watching.

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For example, in my research reports, it's often something I touch on.

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We've been kind of anticipating something like this happening for a while.

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Because when it does happen, it marks a pretty big shift.

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It goes from kind of structural multi-year balance sheet decreases to increases.

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It's also the first time potentially you're going to have an expanding balance sheet in

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this era without zero interest rates.

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A lot of people have it in their mind that the balance sheet won't expand until they

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cut rates all the way to zero.

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But if it's expanding for a different reason, not for the purpose of economic stimulus,

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but the purpose of facilitating liquidity, it absolutely can expand without zero interest

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rates.

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And that's what happened before 2008.

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That was kind of a general tendency.

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Now it'll be happening at a much higher reserve level.

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So one is it just kind of represents a structural shift.

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The part that I would generally disagree with is where the sensationalism comes into play.

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So when you have something that's happening, you have people coming out of the woodwork to say, oh, like there's a major crash going to happen or the Fed's going to have to print a trillion dollars or a major bank is failing or, you know, like a liquidity tsunami is coming.

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You get that kind of excitement.

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Sometimes it's genuine in the sense that people want a reason to be bullish or bearish.

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And so they do that.

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If you're bearish, you say, look, it's all going to be a problem.

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if you're if you're so that's if you're bearish if you're bullish you say look it's a problem now

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but they're going to come with all this liquidity so the assets i'd like you're going to do great

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so you get that kind of like genuine emotionalism but then you also sometimes of course you know

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there are people that want clicks uh and will lean into uh these sensationalism because i know

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there are other people that want to know what's going on and they'll watch that episode or read

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that tweet or read that sub stack uh that kind of leans into sensationalism so i think that again

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And the underlying pivot is real and substantial, but it's like less emphatic, I would say.

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And it's the numbers, I think, are almost certainly going to be more mild than a lot of people think.

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So when this happened, obviously, the people calling this like the repo crisis, comparing it to 2019, you think it's more mild than that?

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And it's not like a huge systemic issue.

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Even the 2019 repo crisis was basically a Twitter crisis.

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like it wasn't so it happened then the fed came in and did repo then there are people like myself

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and luke groman that were saying okay it's actually not really a repo problem it's a t-bill

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oversupply problem they're going to go back to structurally buying t-bills they did a few weeks

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later uh then you had kind of a mildly positive liquidity environment they still weren't trying

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to stimulate with their balance sheet they were just trying to put out the liquidity fire and they

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did. And that was kind of, it was good for asset prices until COVID hit a few months later. And

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then of course, everyone forgot about the repo spike and that became the multi-year thing.

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This is very similar to that, which is you have problems in repo. The difference is that now the

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Fed has a standing facility, so they're already ready for it. So it's even a more mild issue back

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then, which wasn't even a giant issue. It's one of those things that's like, it freaks people out

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because if unresolved, it is a massive issue.

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If overnight lending rates spike like that,

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it's a disaster.

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But basically anyone that's in the markets

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knows that the Fed's going to put out that fire.

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They have the facility specifically to put out that fire.

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And it doesn't take big numbers to put out that fire.

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So that's where you get that kind of disconnect

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where you can theorycraft why it's a catastrophe.

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In practice, it's this little thing

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that gets talked about on Twitter and Substack and YouTube.

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and you'll see Bloomberg headlines around it,

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but it's not like the regional bank crisis of 2023.

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It's not these kind of the bigger things.

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And instead it's more of a pivot

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where they have the tools to fix the problem

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that all involve money printing

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because that's how these things go.

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And then the question is,

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how judicious are they going to be with their tools?

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How are they going to frame the use of their tools?

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And basically,

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we're gradually going to go back toward a structural environment of rising base liquidity

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rather than we've been in an environment of kind of flat base liquidity in the US.

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So we've had a falling Fed balance sheet, which has been offset by money coming out of the

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reverse repo facility. This is like all this plumbing stuff that I think we've talked about

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before. But the point is that the outcome is that it's been almost perfectly flat base liquidity,

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but we've had rising broad liquidity.

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So broad money supply,

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all the IOUs that are built

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on top of that base liquidity,

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that's been in a pretty good shape

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ever since 2023.

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And now we're kind of entering a period

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where base liquidity is going to start

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kind of rising as well.

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Maybe early next year, for example,

361
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maybe mid next year,

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I would say probably the latest,

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but we'll see.

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And that does mark a transition.

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00:28:42,618 --> 00:28:43,778
It just, I think the numbers

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are going to be mild. I'm interested to know what that means, because you say like quantitative

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tightening coming to an end, it'll go back to some form of QE and that might be in line with GDP

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growth. But that's the first time that's happened with higher interest rates or first time in recent

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history, at least. What does that actually mean for the market? Like what does that, what will

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be different? At first, not a ton. It basically, it means banks kind of have less anxiety on their

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liquidity. It potentially frees up lending. It's more about managing what won't happen.

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So for example, if the regulators say, okay, there's this much, you have to have these liquidity

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requirements. And then they don't expand the base layer, the balance sheet. What happens is you kind

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of reach like a limit of how much lending you can do as a banking system. And then you got to stop

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making loans. Kind of like how if you had a gold or a Bitcoin based system, if you're over your

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skis in terms of fractional reserve banking, there's no bailout on the way. You have to actually

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manage risk and liquidity. And so you would have basically banks saying, hey, we're at our

378
00:29:50,678 --> 00:29:56,558
liquidity constraints. We can't make loans. Or we can only make loans as you replace other loans.

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But instead, because they're going to go back to increasing the balance sheet,

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it allows that type of lending to continue. So it's more about being anti-deflationary

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than it is like some sort of inflationary stimulatory jolt.

382
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On average, the expanding balance sheet

383
00:30:14,538 --> 00:30:17,258
does have positive correlations with asset prices.

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Doesn't mean it's always like that.

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I mean, if you have an AI CapEx-fueled market,

386
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that's disconnected from the balance sheet.

387
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But it is one variable that has historically been pretty positive

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for asset prices broadly, including Bitcoin.

389
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and basically it just goes back to that kind of rising structural period

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00:30:37,498 --> 00:30:41,818
it also is generally good for banks because then they'll have

391
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more reserves that are also paying them interest

392
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and it's just generally kind of pro-liquidity

393
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slightly anti-dollar and a slight upward tilt on other assets

394
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but then it's just a question of magnitude it's not the same thing as the fed

395
00:30:59,718 --> 00:31:04,538
coming in in like 2020 and printing trillions of dollars,

396
00:31:05,058 --> 00:31:08,058
their estimates for how much they're likely going to increase the balance sheet

397
00:31:08,058 --> 00:31:10,998
when they get to that point are pretty mild in line with nominal GDP.

398
00:31:11,698 --> 00:31:16,098
In addition, they are specifically trying to only buy treasuries.

399
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So they're still going to continue letting mortgage-backed securities

400
00:31:20,358 --> 00:31:22,298
mature off their balance sheet,

401
00:31:22,938 --> 00:31:26,018
which means they're not really coming to help with the housing market.

402
00:31:26,018 --> 00:31:32,978
and part of a really dovish cycle is they they cut rates and they also buy mortgage-backed

403
00:31:32,978 --> 00:31:38,638
securities in an effort to try to lower mortgage rates and if you get really low mortgage rates

404
00:31:38,638 --> 00:31:43,678
you can have a big refinancing cycle people can take their money out of their home equity especially

405
00:31:43,678 --> 00:31:46,998
in the u.s because we have all these like long fixed rate mortgages that are not super common

406
00:31:46,998 --> 00:31:52,278
in other parts of the world and it's kind of a free lunch for consumer spending when that happens

407
00:31:52,278 --> 00:31:57,578
Of course, it shows up elsewhere, but from the refinance consumer's perspective, it's all upside.

408
00:31:58,618 --> 00:32:07,138
And basically, because I don't think we're going to get to a lower low in mortgage rates, partially because of the Fed, partially because of other factors, that whole thing's off the table.

409
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So I think that the stimulus is just generally going to be weaker going forward, but instead what will be notable about it is the persistence of it.

410
00:32:16,058 --> 00:32:22,058
So it goes back to the nothing stops his train thesis, which is more about duration than magnitude.

411
00:32:22,278 --> 00:32:32,258
So I think that basically we're going to get to appear with some more grinding higher Fed balance sheet, but not really in that explosive sense, most likely.

412
00:32:32,398 --> 00:32:38,818
Of course, certain wars or certain totally unpredictable outcomes could always trigger an extra liquidity boost.

413
00:32:39,118 --> 00:32:48,498
But the structural backdrop is toward a more kind of gradually inclining Fed balance sheet rather than these kind of multi-trillion short-term injections.

414
00:32:48,498 --> 00:32:59,818
So when I talk to people about this, one of the common things is that once the Fed start doing QE again, it's going to have to be a scale much bigger than we've ever seen before.

415
00:33:00,138 --> 00:33:05,438
It sounds like you're kind of fading that narrative and saying they're going to be able to do this at 3%, 4% a year or whatever it is.

416
00:33:05,858 --> 00:33:09,838
Will they be able to keep that going at a low rate for a long time, do you think?

417
00:33:10,858 --> 00:33:11,518
Potentially, yeah.

418
00:33:11,518 --> 00:33:14,658
So my base case is that it will be generally slower.

419
00:33:14,658 --> 00:33:16,878
where you're starting from a higher...

420
00:33:16,878 --> 00:33:19,998
When they started QE back in the 2008-2009 period,

421
00:33:20,898 --> 00:33:26,198
bank cash was something like 3% of total bank assets in the US.

422
00:33:26,198 --> 00:33:32,858
It was the most highly levered the system was since literally 1929 in the US.

423
00:33:33,798 --> 00:33:37,418
We're starting this period, much like September 2019,

424
00:33:37,878 --> 00:33:41,218
we're starting this period from a higher liquidity threshold.

425
00:33:41,218 --> 00:33:47,298
um now in 2019 of course what was coming was covid right so you lock down the economy and

426
00:33:47,298 --> 00:33:55,098
then giga stimulus everything uh assuming we don't have a crazy war a crazy like economic

427
00:33:55,098 --> 00:33:59,838
so taking those just things off the table because that's you know out of the scope

428
00:33:59,838 --> 00:34:05,358
just normal macro stuff there's no particular reason to expect that this next one's going to

429
00:34:05,358 --> 00:34:08,498
be bigger than the one we had in the prior kind of extreme cycle.

430
00:34:09,518 --> 00:34:15,798
2019 and this time are more liquidity-driven reasons for the balance sheet to go up rather

431
00:34:15,798 --> 00:34:17,138
than intentional stimulus.

432
00:34:17,878 --> 00:34:22,578
And sometimes 2019 gets lost in the noise of COVID because it was so kind of close to

433
00:34:22,578 --> 00:34:22,938
that.

434
00:34:24,198 --> 00:34:28,478
But this, I mean, assuming again, something like a COVID-level thing doesn't happen, which

435
00:34:28,478 --> 00:34:33,598
is external, it's likely to be far more gradual this time.

436
00:34:33,598 --> 00:34:39,118
And it's different than QE1, QE2, QE3, or kind of COVID QE.

437
00:34:39,738 --> 00:34:45,218
It's more like what was happening in late 2019 alone before these other big variables hit.

438
00:34:46,098 --> 00:34:46,138
Okay.

439
00:34:46,338 --> 00:34:50,118
And so what does this mean for things like inflation and markets?

440
00:34:50,138 --> 00:34:53,858
Because you've been talking for a long, long time now about the fact that we're in like

441
00:34:53,858 --> 00:34:59,118
a fiscal dominance era and monetary policy has less of an impact on the economy during

442
00:34:59,118 --> 00:34:59,358
that.

443
00:34:59,478 --> 00:35:02,758
So what does this mean for maybe particularly inflation?

444
00:35:03,598 --> 00:35:25,398
The short answer is not a ton because the fiscal side is way more impactful. What this mainly does is it keeps enabling the fiscal, which was always part of the nothing stops is train thesis is that, for example, when the fiscal authorities keep running these deficits, when eventually banks get kind of tight on how much treasuries they can hold.

445
00:35:25,698 --> 00:35:32,518
And as you start getting strains in either the treasury market or the repo market, that's when the Fed comes in and they keep the party going.

446
00:35:32,518 --> 00:35:40,498
So back in the global financial crisis, a lot of people thought that the balance sheet expansion they were going to do would be inflationary, or some even said hyperinflationary.

447
00:35:41,098 --> 00:35:42,758
And for the most part, it wasn't.

448
00:35:43,138 --> 00:35:46,198
And the reason was that money didn't really get out to the public.

449
00:35:46,678 --> 00:35:47,978
It wasn't helicopter money.

450
00:35:48,078 --> 00:35:55,178
It was recapitalizing the banking system, which is why I've described it as anti-deflationary rather than outright inflationary.

451
00:35:55,178 --> 00:36:01,758
and during 2020 when they were doing this like latest round of like the massive balance sheet

452
00:36:01,758 --> 00:36:06,358
increases some of the people were saying look all people said it'd be inflationary last time

453
00:36:06,358 --> 00:36:11,638
it's not going to be inflationary this time either uh whereas like one thing i was focusing on is

454
00:36:11,638 --> 00:36:16,578
this isn't like last time this was literally helicopter money this was massive fiscal spending

455
00:36:16,578 --> 00:36:21,538
that was then supported by all this qe and that's why we had that really big inflationary impulse

456
00:36:21,538 --> 00:36:24,838
It was a huge increase in the broad money supply, all this.

457
00:36:25,678 --> 00:36:31,698
The type of QE that we're likely to see going forward is more like older QE, which is that

458
00:36:31,698 --> 00:36:35,598
it's not combined with necessarily any new fiscal stimulus.

459
00:36:36,938 --> 00:36:39,478
Now, those could be separate decisions by the administration.

460
00:36:39,838 --> 00:36:46,038
They could send out a check that they call, say, a tariff dividend, or they could do another

461
00:36:46,038 --> 00:36:46,518
tax cut.

462
00:36:46,518 --> 00:36:48,998
They could separately decide to do something fiscally.

463
00:36:48,998 --> 00:36:55,198
but they already have this kind of structural large fiscal deficit and mostly what this change

464
00:36:55,198 --> 00:37:00,758
with the fed does is it just keeps that train going that that part's already there so i do think that

465
00:37:00,758 --> 00:37:06,578
part of the reason we have above target inflation right now based on most ways that they measure it

466
00:37:06,578 --> 00:37:13,058
is is large because of the fiscal side and it just keeps that going so is this really entering

467
00:37:13,058 --> 00:37:19,678
a period of much healthier economic and balance sheet growth i would say no not particularly

468
00:37:19,678 --> 00:37:26,878
because but it's not emanating from the fed the fiscal side is is sickly in the sense that

469
00:37:26,878 --> 00:37:32,318
we have basically a two-speed economy right now in the u.s and certain other parts of the world

470
00:37:32,318 --> 00:37:39,458
which is the deficits are largely like if you're on the right side of fiscal deficits or ai capex

471
00:37:39,458 --> 00:37:42,678
you're doing great. If you're not on the right side of those two things,

472
00:37:43,158 --> 00:37:46,418
you're pretty much in a world of hurt. And so there's very, like right now,

473
00:37:46,478 --> 00:37:48,898
consumer sentiment in the U S is near record lows,

474
00:37:48,898 --> 00:37:51,538
even as the stock market is near record highs,

475
00:37:51,538 --> 00:37:54,558
which is a pretty unusual environment.

476
00:37:54,558 --> 00:37:57,498
It's something you tend to see in like fiscal dominance.

477
00:37:58,718 --> 00:38:02,578
And, and so basically what this means is that state continues,

478
00:38:02,578 --> 00:38:08,118
which is right now the fiscal deficits are flowing towards social security,

479
00:38:08,118 --> 00:38:12,238
Medicare, defense, and interest expense primarily. Those are the four biggest buckets.

480
00:38:13,358 --> 00:38:18,498
And then to some extent, it then trickles out from there. All the DOD and defense contract

481
00:38:18,498 --> 00:38:23,118
employees, of course, they spend their income into the broader economy. And healthcare workers spend

482
00:38:23,118 --> 00:38:27,158
them into the broader economy. And social security recipients spend that into the broader economy.

483
00:38:27,278 --> 00:38:31,738
So that's who gets it kind of first. And then the Cantillon effect, it kind of gets out there.

484
00:38:32,078 --> 00:38:36,118
That's a stimulus for certain parts that are either directly or indirectly in the line of

485
00:38:36,118 --> 00:38:42,278
sight of it. But if someone is, say, a young family, not really on the right side of deficits,

486
00:38:42,878 --> 00:38:47,178
homes are expensive right now because mortgage rates are pretty high while also home prices are

487
00:38:47,178 --> 00:38:53,218
elevated. They're getting all the inflationary effects from the fiscal stimulus and in some

488
00:38:53,218 --> 00:39:00,658
limited pockets tariffs. They're doing pretty bad right now on average, unless they just happen to

489
00:39:00,658 --> 00:39:05,958
get a great new job or something. So the average there is pretty weak. So instead of being like a

490
00:39:05,958 --> 00:39:11,138
big macro crash or anything like that, it tends to manifest in just growing dissatisfaction

491
00:39:11,138 --> 00:39:15,098
where people are like, well, I see the stock market's all the time high, but I'm struggling.

492
00:39:15,778 --> 00:39:22,558
And you get more of that is, in my opinion, set to continue. Now, the extent that AI CapEx

493
00:39:22,558 --> 00:39:27,438
eventually runs into kind of constraint, that could be a rollover period for the market.

494
00:39:27,878 --> 00:39:39,596
But the actual fiscal and monetary situation is mostly maintaining the status quo with the exception that the Fed balance sheet has to kind of gradually pivot in order to keep that fiscal train doing what it doing

495
00:39:39,996 --> 00:39:41,496
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533
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this fiscal dominance era sort of drives greater and greater wealth inequality um i know you say

534
00:42:41,536 --> 00:42:45,536
nothing stops this train but does something have to stop it eventually like do they have to move

535
00:42:45,536 --> 00:42:50,536
from a fiscal dominance era into, I guess, the opposite as a monetary dominant era?

536
00:42:51,416 --> 00:42:57,956
So the short answer is that if they eventually stop it, it's because they accelerate it so much

537
00:42:57,956 --> 00:43:07,136
that it gets the next 10 years done in one year. It's death by fire rather than death by ice,

538
00:43:07,676 --> 00:43:13,556
which is that they can't really stop it until there's a pretty big reset in terms of the debt

539
00:43:13,556 --> 00:43:21,196
values and in terms of global trade flows. And as things get worse, that actually tends to

540
00:43:21,196 --> 00:43:27,636
accelerate the train. And when I use the nothing stops this train kind of approach, it's basically

541
00:43:27,636 --> 00:43:33,816
the time horizon from an investment standpoint is like 10 years, right? So it's not talking

542
00:43:33,816 --> 00:43:38,736
about what's going to happen in 2070. It's talking from now to like the mid 2030s where you have some

543
00:43:38,736 --> 00:43:46,296
degree of visibility. Beyond things like that, or just total political nonlinear moments,

544
00:43:47,056 --> 00:43:51,576
that type of thing is a separate matter. But basically, it's that because of demographics,

545
00:43:52,436 --> 00:43:58,016
because of voting patterns, because of polarized Congress, because of the nature of the fiat

546
00:43:58,016 --> 00:44:03,456
system that has to grow or die, and then now it's more funded by the fiscal side rather than the

547
00:44:03,456 --> 00:44:09,196
bank lending side, you get into this pretty persistent state of running it hot, but only

548
00:44:09,196 --> 00:44:10,456
for part of the economy.

549
00:44:10,956 --> 00:44:14,696
And the other part kind of gets dragged along with the inflation and kind of some of the

550
00:44:14,696 --> 00:44:15,376
fiscal boost.

551
00:44:15,976 --> 00:44:19,796
And people keep wondering, well, manufacturing activity is flat.

552
00:44:21,136 --> 00:44:22,156
Inflation is hot.

553
00:44:23,516 --> 00:44:28,216
Obviously, both commercial and residential real estate are struggling.

554
00:44:29,016 --> 00:44:30,576
And it's like, well, who's winning?

555
00:44:30,576 --> 00:44:32,916
because they see hot GDP numbers,

556
00:44:33,016 --> 00:44:35,296
but they're like, well, it's not here, here, here, here.

557
00:44:35,496 --> 00:44:36,776
And the answer is it's primarily

558
00:44:36,776 --> 00:44:40,456
those on the right side of fiscal deficits and AI.

559
00:44:41,816 --> 00:44:43,316
So I guess that kind of brings it back

560
00:44:43,316 --> 00:44:44,416
to the balance sheet expansion.

561
00:44:44,556 --> 00:44:46,876
You said that it's going to be all treasuries,

562
00:44:47,036 --> 00:44:48,456
not these mortgage-backed securities.

563
00:44:48,976 --> 00:44:50,636
And Trump's recently come out

564
00:44:50,636 --> 00:44:52,416
talking about like a 50-year mortgage.

565
00:44:52,856 --> 00:44:55,776
Do you think that is all part of the same picture there?

566
00:44:55,776 --> 00:44:58,316
And it's really like a way of attempting

567
00:44:58,316 --> 00:44:59,536
to help the housing market

568
00:44:59,536 --> 00:45:05,176
without directly cutting rates and buying these mortgage-backed securities?

569
00:45:06,376 --> 00:45:11,296
I do, because I think left to its own devices, the housing market has ended like a generational

570
00:45:11,296 --> 00:45:16,096
cycle, which is to say you've had lower and lower interest rates, both in the short term

571
00:45:16,096 --> 00:45:18,936
and the long term for 40-ish years.

572
00:45:19,856 --> 00:45:21,876
And I think that's structurally behind us.

573
00:45:21,956 --> 00:45:23,216
We kind of bounced off zero.

574
00:45:24,096 --> 00:45:27,036
Now we're, let's call it sideways interest rates, let alone up.

575
00:45:27,036 --> 00:45:29,776
but let's just say we're in a sideways band now,

576
00:45:30,336 --> 00:45:31,896
you don't get lower lows,

577
00:45:32,096 --> 00:45:34,496
which means that any sort of refinancing cycle,

578
00:45:34,996 --> 00:45:37,516
like anytime we get moderately lower mortgage rates,

579
00:45:38,076 --> 00:45:39,796
the only people that are going to refinance

580
00:45:39,796 --> 00:45:42,376
are like those who took out a mortgage fairly recently

581
00:45:42,376 --> 00:45:44,476
and volumes have been low there.

582
00:45:44,796 --> 00:45:47,476
So any sort of refinancing cycle is very weak.

583
00:45:48,016 --> 00:45:49,536
So normally when the Fed cuts rates

584
00:45:49,536 --> 00:45:52,096
and when the market pushes down longer term rates,

585
00:45:52,116 --> 00:45:53,316
and sometimes the Fed helps with that

586
00:45:53,316 --> 00:45:55,496
by buying longer term, longer duration securities,

587
00:45:55,496 --> 00:46:00,516
when you get that lower rate cycle it does a couple things obviously um you know businesses

588
00:46:00,516 --> 00:46:04,736
can take out kind of cheaper loans now and invest in things they might not have done to higher rates

589
00:46:04,736 --> 00:46:10,936
um but the biggest one of the biggest things is the consumer kind of homeowner market can refinance

590
00:46:10,936 --> 00:46:16,556
their homes and spend more without really sacrificing anywhere else uh and that's done

591
00:46:16,556 --> 00:46:22,516
uh that to the extent that that happens it's only that kind of smaller tiny like refinancing cycle

592
00:46:22,516 --> 00:46:29,776
rather than a big one, which means when they cut and as things stagnate, it doesn't fix the problem

593
00:46:29,776 --> 00:46:34,856
like it did in prior cycles. You kind of have a longer term stagnation. We've already seen,

594
00:46:34,956 --> 00:46:40,796
for example, like usually manufacturing PI, it looks like a sine wave where activity is soaring

595
00:46:40,796 --> 00:46:45,496
for maybe 18 months, and then it's kind of contracting for 18 months, and then it's soaring

596
00:46:45,496 --> 00:46:49,396
for 18 months, and it's kind of, it keeps going through the cycles. It kind of mirrors the liquidity

597
00:46:49,396 --> 00:46:54,896
cycle. And this has been like the longest stretch. We had the longest inverted yield curve

598
00:46:54,896 --> 00:47:00,896
in US history, combined with like manufacturing kind of like stagnated and just stayed down.

599
00:47:00,996 --> 00:47:08,736
It didn't collapse, but it just stayed weak for like three years. And obviously, housing has kind

600
00:47:08,736 --> 00:47:14,236
of been in a similar boat, commercial real estate, a lot of private equity ran into headwinds in this

601
00:47:14,236 --> 00:47:20,956
environment. And on one hand, it's held up by the fiscal spending. It's stimulatory. It's run it

602
00:47:20,956 --> 00:47:26,676
hot. It's like pre-stimulus before recession. So it kind of prevents the bottom from falling out,

603
00:47:26,856 --> 00:47:31,456
at least for the economy as a whole. But there's also this tight lid on the top too.

604
00:47:31,956 --> 00:47:39,456
So you get that more stagflationary feeling where you have F-tier consumer sentiment,

605
00:47:39,456 --> 00:47:56,756
But you still have inflation above target, even though a lot of areas are kind of grinding to a halt. And you have a few pillars holding up the whole thing. And that's the fiscally dominant era. And so it feels sickly to a lot of people because it is sickly.

606
00:47:56,756 --> 00:48:01,976
and you're more likely to obviously get rising social discontent

607
00:48:01,976 --> 00:48:04,476
in those types of environments, not just in the US but globally.

608
00:48:05,456 --> 00:48:08,956
And I think that's probably the biggest story we'll be facing

609
00:48:08,956 --> 00:48:10,276
over the next several years,

610
00:48:10,436 --> 00:48:15,576
how both policymakers and the public deal with this situation

611
00:48:15,576 --> 00:48:17,876
that is kind of structurally different than prior cycles.

612
00:48:18,856 --> 00:48:20,656
Could you actually argue that the 50-year mortgages

613
00:48:20,656 --> 00:48:22,516
are another driver of wealth inequality

614
00:48:22,516 --> 00:48:27,716
in the sense that if you own scarce assets, gold, Bitcoin, equities, whatever,

615
00:48:28,316 --> 00:48:33,296
and you're essentially shorting the dollar over a longer time period with a 50-year mortgage,

616
00:48:33,776 --> 00:48:35,436
you'll potentially do quite well.

617
00:48:36,036 --> 00:48:39,556
On the other side, if you are low income and you would take out a 50-year mortgage,

618
00:48:39,596 --> 00:48:42,576
you just have longer paying off interest and all that part of it.

619
00:48:43,276 --> 00:48:48,496
To some extent, I think that on average, I mean, the whole modern system,

620
00:48:48,496 --> 00:48:55,076
It's really rewarded those who have taken out, like have good access to long-term debt and use it to buy scarcer assets.

621
00:48:56,396 --> 00:48:59,076
And the 50-year mortgage in some sense is no different.

622
00:48:59,576 --> 00:49:03,256
I generally, like the 50-year mortgage concept is making a lot of headlines.

623
00:49:03,876 --> 00:49:07,776
I generally view it as less impactful than what other people seem to think.

624
00:49:08,076 --> 00:49:17,476
If you kind of do the calculations for how much it can lower a monthly payment on the same house, it's not, I mean, it's not immaterial, but it's not like a game changer.

625
00:49:18,496 --> 00:49:23,476
Um, and it's kind of like an artificial extension of what I just talked about, which is they,

626
00:49:23,476 --> 00:49:27,536
they basically run, ran out of runway with the 30 year mortgage.

627
00:49:27,996 --> 00:49:33,156
Uh, it's like, we're not getting almost certainly not getting lower lows, uh, in that doesn't

628
00:49:33,156 --> 00:49:35,856
mean we, doesn't mean we'll get lower, you know, we could get lower than we are now,

629
00:49:35,856 --> 00:49:40,216
but it's like not like the series of ever lower lows for 40 years, which is, you know,

630
00:49:40,216 --> 00:49:41,576
lower highs and lower lows.

631
00:49:41,876 --> 00:49:47,736
And because of that, it really kind of puts a cap on real estate appreciation also puts

632
00:49:47,736 --> 00:49:53,936
a cap on housing affordability and all this. And so this is like a way of saying, well, we can't

633
00:49:53,936 --> 00:49:59,916
fix that. So let's try this like Band-Aid. We don't even know if that's going to fully get into

634
00:49:59,916 --> 00:50:05,176
effect. But even assuming it does, I think that at most that gives you like another half cycle.

635
00:50:06,236 --> 00:50:11,016
And maybe not even that. It's just like it's not as big of a factor as a structurally falling

636
00:50:11,016 --> 00:50:18,316
interest rates and that kind of perpetual refinancing cycle. And so it benefits those

637
00:50:18,316 --> 00:50:24,476
who take out as long and low of a mortgage as they can buy a property in a place that ends up

638
00:50:24,476 --> 00:50:29,576
being better than average. Like it's a rising environment, for example, like a city that's

639
00:50:29,576 --> 00:50:33,956
going from a tertiary city to a secondary city, for example, kind of a booming area.

640
00:50:34,616 --> 00:50:40,096
But I don't think outside of kind of more limited contexts that it'll have kind of macro scale

641
00:50:40,096 --> 00:50:46,736
significance. The other part I wanted to touch on was the Fed. So they've obviously were tipped to

642
00:50:46,736 --> 00:50:51,036
be doing rate cuts going into the end of the year. I know that the next one in December is sort of

643
00:50:51,036 --> 00:50:57,536
called into question now. What do you think will happen with interest rates? So first answer is,

644
00:50:57,596 --> 00:51:01,416
I think that that's one of the kind of the minor catalysts for why Bitcoin might have sold off

645
00:51:01,416 --> 00:51:07,656
recently, is that the market had to kind of readjust to slightly less dovish Fed, potentially,

646
00:51:07,656 --> 00:51:09,136
for the remainder of this year.

647
00:51:09,716 --> 00:51:13,036
Now, one rate cut is not like a giant story,

648
00:51:13,156 --> 00:51:14,696
but when the market was expecting A

649
00:51:14,696 --> 00:51:15,636
and then they get B,

650
00:51:15,716 --> 00:51:16,876
even if B is not that different,

651
00:51:16,936 --> 00:51:18,456
it does have to kind of reprice things.

652
00:51:19,056 --> 00:51:20,596
And when you already have a spooked market

653
00:51:20,596 --> 00:51:21,356
for other reasons

654
00:51:21,356 --> 00:51:23,196
and you get these repo issues and stuff like that,

655
00:51:23,376 --> 00:51:25,696
it's not that surprising to see frictions

656
00:51:25,696 --> 00:51:28,336
in especially the most volatile parts of the market.

657
00:51:29,836 --> 00:51:30,776
So there's that.

658
00:51:31,856 --> 00:51:33,576
You know, I generally don't have great insight

659
00:51:33,576 --> 00:51:34,396
in what they're going to do

660
00:51:34,396 --> 00:51:36,056
in a given FOMC meeting.

661
00:51:36,056 --> 00:51:40,796
mostly whatever the market says is almost always what happens. And then the problem is it's

662
00:51:40,796 --> 00:51:46,476
recursive. Like the Fed governors do look at what the market is expecting. And if the market is way

663
00:51:46,476 --> 00:51:50,896
off course of what they're intending to say, that's when Fed speakers usually come out.

664
00:51:51,556 --> 00:51:56,036
And if the market's too hawkish, then they'll come and say some dovish things. If the market's

665
00:51:56,036 --> 00:51:59,776
too dovish, they'll come in and say some hawkish things. And they try to get it a little bit closer

666
00:51:59,776 --> 00:52:04,576
to what they kind of are already anticipating what they're going to do. So rather than try to play

667
00:52:04,576 --> 00:52:10,396
that game, I kind of focus on the longer term. I do think that within 2026, we will see a handful

668
00:52:10,396 --> 00:52:14,856
of rate cuts. Whether or not we have one in December or not, for me, is like a coin flip

669
00:52:14,856 --> 00:52:20,076
right now. And it's more about what happens next year. And so, yeah, I think we'll see mildly lower

670
00:52:20,076 --> 00:52:25,896
interest rates while we're also going back toward balance sheet increases. But I think that they're

671
00:52:25,896 --> 00:52:28,716
largely separate variables. You don't have to have one to have the other.

672
00:52:29,476 --> 00:52:32,776
I think you're right in that whatever happens next year is going to be the most interesting

673
00:52:32,776 --> 00:52:37,196
thing with the Fed. Jerome Powell's going to be done. I don't think we know who's going to step in

674
00:52:37,196 --> 00:52:42,696
yet. I know there's people sort of guessing who that's going to be. But if it does become someone

675
00:52:42,696 --> 00:52:49,456
who is essentially like a Trump stooge and is just going to do whatever he wants, what does that mean

676
00:52:49,456 --> 00:52:54,696
both in terms of like fiscal dominance and just Fed independence? So obviously be a reduction in

677
00:52:54,696 --> 00:53:01,076
Fed independence if that were to happen. Fiscal dominance in general chips away at Fed independence.

678
00:53:01,076 --> 00:53:06,376
like the fact that the Fed is going to go back to increasing their balance sheet in line with

679
00:53:06,376 --> 00:53:11,916
nominal GDP one of the challenges there is that the fiscal deficits the size of them contribute to

680
00:53:11,916 --> 00:53:17,456
nominal GDP it's one of the inputs into that so basically the Fed is kind of indirectly saying

681
00:53:17,456 --> 00:53:21,916
our rate of balance sheet increases will be partially dependent on how big the fiscal deficit

682
00:53:21,916 --> 00:53:28,496
is and so you're that's already at least a minor reduction and a kind of a persistent reduction in

683
00:53:28,496 --> 00:53:33,416
Fed independence, I would argue. Now, what they mean generally by Fed independence at the root

684
00:53:33,416 --> 00:53:40,736
layer is that there's at least some separation between near-term rate decisions and the election

685
00:53:40,736 --> 00:53:46,256
cycle. So it'd be very bad if an incumbent administration could say, okay, cut interest

686
00:53:46,256 --> 00:53:51,316
rates right now a ton because they've got an election coming up, and then go back and maybe

687
00:53:51,316 --> 00:53:57,236
raise them. That's kind of the cycle they try to avoid. There's no such thing as pure Fed

688
00:53:57,236 --> 00:54:02,236
independence. More like how acutely can the Fed kind of operate on their own terms. Now that,

689
00:54:02,616 --> 00:54:06,696
again, you can call on the question the entire purpose of the Fed. Should a central board of

690
00:54:06,696 --> 00:54:12,296
12 people be setting interest rates? I would argue no, but it's still the case that you have

691
00:54:12,296 --> 00:54:17,616
a somewhat independent board doing it. Even if they replace a couple of governors at a time,

692
00:54:17,676 --> 00:54:21,656
you still generally are likely to have some degree of independence where they don't want to look like

693
00:54:21,656 --> 00:54:24,436
a total sham, especially because it can backfire.

694
00:54:24,616 --> 00:54:29,536
If they look super dovish, the bond market could freak out and say, well, I don't want

695
00:54:29,536 --> 00:54:30,896
to own any duration yet.

696
00:54:31,456 --> 00:54:37,636
So if they perceive the Fed as acting too political, they could sell off mortgages, the

697
00:54:37,636 --> 00:54:42,616
market, and you could get higher mortgage rates even if you have short-term rates, which

698
00:54:42,616 --> 00:54:48,076
is not what even, let's say, a hypothetical like Trump, Stooge, Fed, they wouldn't want

699
00:54:48,076 --> 00:54:48,316
that.

700
00:54:48,316 --> 00:54:54,996
So they always have to project some degree of kind of pseudo credibility to say, here's what we're doing now.

701
00:54:55,536 --> 00:55:00,196
So I wouldn't expect like just a 180 degree change in what they're doing.

702
00:55:00,416 --> 00:55:11,176
But that's separate from the fact that because they're in fiscal dominance, like they're going to go back to increasing their balance sheet, even if inflation is above target, because it's just it's keeping the treasury market kind of liquid.

703
00:55:12,616 --> 00:55:15,636
And I mean, they can also they have other variables they could tweak.

704
00:55:15,636 --> 00:55:22,716
I mean, they can tweak the supplemental leverage ratio, which sounds really wonkish, but it's almost like a shadow QE for banks.

705
00:55:22,916 --> 00:55:28,656
It just kind of frees up some of their liquidity constraints that they have and allows them, it kind of, for them, acts like QE.

706
00:55:30,376 --> 00:55:40,836
And so there's various levers they can pull, but all those levers have in common is that they allow kind of the existing thing to keep going without causing acute liquidity constraints.

707
00:55:40,836 --> 00:55:52,256
So the trains keeps going, the fiscal deficits stay high, the Fed doesn't go out of their way to stimulate, but they do keep a lid on little fires that pop up.

708
00:55:52,556 --> 00:55:56,676
And it just keeps running at this kind of stagflationary pace.

709
00:55:57,616 --> 00:56:00,216
And Lynn, is there anything else on the macro side that you want to touch on?

710
00:56:00,256 --> 00:56:02,416
I just have a few questions on goal before we close out.

711
00:56:02,416 --> 00:56:17,796
Right. The other one would, I guess the final touch would be AI in the sense that if you get like a rollover in really big asset prices, whether it's NVIDIA, Apple, Microsoft, things like that, I'm not predicting it.

712
00:56:17,796 --> 00:56:24,896
But that's where you can get kind of a disconnect where the Fed could be stimulating, the fiscal could be stimulating.

713
00:56:24,896 --> 00:56:34,736
But if you've got a multi-trillion dollar destruction in just kind of capital, that wealth effect can reduce then consumer spending.

714
00:56:35,476 --> 00:56:47,776
You can have things like Bitcoin get caught up in it, which is why when I say nothing stops his train, I'm talking about the fiscal deficits and the liquidity to keep fueling the fiscal deficits.

715
00:56:47,796 --> 00:56:51,936
which over the long run does have an implication for asset prices,

716
00:56:52,576 --> 00:56:55,816
but it doesn't have implications for asset prices on a year-by-year basis

717
00:56:55,816 --> 00:56:57,096
or a quarter-by-quarter basis.

718
00:56:57,476 --> 00:56:59,296
You can get all these crazy fluctuations.

719
00:56:59,616 --> 00:57:01,836
Valuations do matter in the longer run.

720
00:57:02,516 --> 00:57:04,956
And instead, it's more of like that macro backdrop

721
00:57:04,956 --> 00:57:09,676
that gives you a foundation that other analysis can then be done on top of.

722
00:57:10,356 --> 00:57:13,076
On the AI side, there's a lot of talk of like AI bubbles.

723
00:57:13,076 --> 00:57:16,436
There's these sort of circular deals between NVIDIA and Oracle

724
00:57:16,436 --> 00:57:18,076
and all these major companies.

725
00:57:18,316 --> 00:57:21,036
Do you think we are potentially in a bubble in the AI side?

726
00:57:21,816 --> 00:57:24,696
I think we're kind of in this like euphoric

727
00:57:24,696 --> 00:57:26,736
kind of local bubble phase most likely,

728
00:57:27,396 --> 00:57:28,996
but that I think the underlying trend

729
00:57:28,996 --> 00:57:30,256
for the most part is real,

730
00:57:30,496 --> 00:57:32,756
which is that this is a pretty big transformation

731
00:57:32,756 --> 00:57:34,956
and especially white collar types of work.

732
00:57:36,176 --> 00:57:38,416
Kind of like how if someone asks,

733
00:57:38,636 --> 00:57:40,116
was Bitcoin in a bubble in 2017?

734
00:57:40,936 --> 00:57:41,796
It's yes and no.

735
00:57:41,896 --> 00:57:45,156
It's like a local bubble built on a structural thing.

736
00:57:45,156 --> 00:57:49,556
that's kind of how I view AI right now, maybe less extreme, but it's kind of saying,

737
00:57:50,036 --> 00:57:55,316
sure, I think certain things are overdone. Sure, I think euphoria is high, it's crowded.

738
00:57:56,296 --> 00:58:01,256
Some of the deals have become somewhat incestuous in that sense. And you get that kind of circular

739
00:58:01,256 --> 00:58:06,496
aspect, which can be frightening. But then I do think that when that kind of washes out,

740
00:58:07,076 --> 00:58:12,616
I think that still sets the stage for growth. So I do think that when we look back 10 years from now,

741
00:58:12,616 --> 00:58:18,696
you know will there be quite a lot of data center activity running ai that's that's doing all sorts

742
00:58:18,696 --> 00:58:24,956
of stuff for us yes uh and i mean bigger numbers than they are now uh but that occasionally you

743
00:58:24,956 --> 00:58:29,976
front run and kind of pull too much forward and have to cool off for a period yeah that makes sense

744
00:58:29,976 --> 00:58:34,076
and when i had luke groman on the show a couple months ago we talked a lot about ai and the

745
00:58:34,076 --> 00:58:38,136
impacts that that might have on the economy um and i don't actually know what the term is for this

746
00:58:38,136 --> 00:58:40,656
It's almost like a black swan that you can see coming at some point.

747
00:58:40,656 --> 00:58:48,536
Like if AI does start replacing a meaningful number of jobs, how does the economy sort of cope with that?

748
00:58:49,776 --> 00:59:04,536
Well, on one hand, it's just like prior kind of productivity cycles, which is like when hydrocarbons started to become used at scale and we made like the tractor, like one farmer could do the work of like 10 farmers.

749
00:59:04,536 --> 00:59:09,656
Right. So what that does that freed up the other nine farmers to go work in other areas.

750
00:59:09,656 --> 00:59:27,754
Right So instead of like you know 80 percent of the society running our agriculture and 20 percent doing other things over time we would have it so that like 2 percent of people can feed everyone The other 98 percent of people can do other stuff like build technology or take care of things or do healthcare And what this does is it kind of is like another version of that

751
00:59:27,814 --> 00:59:30,274
It's saying some percentage of human labor

752
00:59:30,274 --> 00:59:32,594
can be replaced by basically pure energy

753
00:59:32,594 --> 00:59:34,794
combined with hardware.

754
00:59:34,934 --> 00:59:37,354
So you say, okay, well, we can take electricity and GPUs

755
00:59:37,354 --> 00:59:39,714
and that can replace some percentage of,

756
00:59:39,834 --> 00:59:41,434
especially our white collar labor force,

757
00:59:41,674 --> 00:59:44,114
which is disruptive when it happens.

758
00:59:44,114 --> 00:59:50,454
but then it frees up people to do other things in general we want machines to do a lot of the

759
00:59:50,454 --> 00:59:56,594
routine stuff for us so we can do other things where people get spooked is when you have machines

760
00:59:56,594 --> 01:00:01,954
so good that like a lot of people can't find any work that they can do that is better than a machine

761
01:00:01,954 --> 01:00:07,254
so even though tractors replaced farmers at farming or at least allowed one farmer to do

762
01:00:07,254 --> 01:00:11,874
the work at 10 those people could still say okay well the tractor is doing that so i'll go

763
01:00:11,874 --> 01:00:16,994
research medicine or something right you had you had other types of work the the where that game

764
01:00:16,994 --> 01:00:22,094
could change is if you have machines that are so good that that people meaningful percentage

765
01:00:22,094 --> 01:00:27,734
population um not just you know certain say at the current stage there are disabled people that

766
01:00:27,734 --> 01:00:34,174
have trouble being economically kind of uh functioning in any capacity but if that if the

767
01:00:34,174 --> 01:00:38,694
kind of the percentage of population has that happen to them and it becomes a very meaningful

768
01:00:38,694 --> 01:00:44,814
percent that's when you get kind of a unforeseen territory what does that look like um people have

769
01:00:44,814 --> 01:00:49,694
talked about ubi people have talked about revolution that i that's where it's it's a

770
01:00:49,694 --> 01:00:56,474
hard to predict outcome uh but in general there's that difference between what happens in the kind

771
01:00:56,474 --> 01:01:00,874
of disruptive near term versus structurally what we want which is we do want machines and energy

772
01:01:00,874 --> 01:01:05,934
to replace as much work as possible to to free people up and that there's that kind of

773
01:01:05,934 --> 01:01:11,194
march toward that end wherever possible. Yeah. I think the scary part of this is that

774
01:01:11,194 --> 01:01:16,094
it's not only going to replace sort of manual labor. It's, you know, it's almost everything,

775
01:01:16,234 --> 01:01:21,394
like accountants, teachers, finance people, people working in medicine. Like it seems like

776
01:01:21,394 --> 01:01:28,134
across the board, it's going to replace a pretty decent number of jobs. And what's left, I guess,

777
01:01:28,134 --> 01:01:32,654
is the question. And this is why like UBI at this point, I don't know if I'm being doomed here,

778
01:01:32,654 --> 01:01:36,594
but just seems baked in a cake like i don't i don't know what other outcome there could be

779
01:01:36,594 --> 01:01:40,954
yeah i think there are pockets that will end up demanding and i think i think the silver lining

780
01:01:40,954 --> 01:01:46,374
is that basically there's a huge difference between data center ai and portable ai

781
01:01:46,374 --> 01:01:54,634
aka robots um i mean the human brain runs on 20 watts of power uh in order to do that in a data

782
01:01:54,634 --> 01:01:58,934
center you need megawatts of power like this same amount of processing power now obviously certain

783
01:01:58,934 --> 01:02:02,654
things a computer can do really cheaply, like a calculator. We've had that for like a century.

784
01:02:03,154 --> 01:02:07,254
But in terms of all the things a human brain does, the amount of bandwidth it takes in from the

785
01:02:07,254 --> 01:02:12,274
environment, all the automatic processes that are running, and then on top of that, a conscious

786
01:02:12,274 --> 01:02:18,254
decision-making process that can help handle edge cases. And then it's a self-healing robot

787
01:02:18,254 --> 01:02:25,934
as well. That's super advanced technology. And so I'm actually kind of like, especially in timelines,

788
01:02:25,934 --> 01:02:32,094
like i robotics certainly will play a bigger role in our life we already see if you go to japan i

789
01:02:32,094 --> 01:02:37,034
mean robots play a bigger role in in their a lot of their functions than here so first they just

790
01:02:37,034 --> 01:02:41,654
get to japan and then you'll get further than that so we are going to get more robotified

791
01:02:41,654 --> 01:02:47,854
um but for example the idea of a robot coming out to your house and like uh fixing your hvac system

792
01:02:47,854 --> 01:02:51,414
right and basically going out into the field dealing with all the edge cases

793
01:02:51,414 --> 01:02:54,714
that I think is an extraordinarily long way off.

794
01:02:55,634 --> 01:02:59,114
It's data center AI that I think is the star of the show right now,

795
01:02:59,154 --> 01:03:01,994
which is basically displacing a lot of white collar work.

796
01:03:03,314 --> 01:03:08,034
The bonus is that it allows each remaining white collar person

797
01:03:08,034 --> 01:03:10,494
to kind of do more because rather than just all those tools

798
01:03:10,494 --> 01:03:12,054
running completely autonomously,

799
01:03:12,474 --> 01:03:15,714
it's basically extensions of a person

800
01:03:15,714 --> 01:03:18,934
where they can have some data collection do something for them.

801
01:03:18,934 --> 01:03:23,594
They can have this thing edit their thing better, you know, faster and cheaper than a human could and all that stuff.

802
01:03:23,634 --> 01:03:27,334
But there's still there's still decision makers and governors in that whole process.

803
01:03:28,434 --> 01:03:31,734
And so, yeah, I think we get disruption of white collar stuff a lot quicker.

804
01:03:32,354 --> 01:03:37,214
And ironically, I think you can get kind of a boom in some, especially in the field, blue collar stuff.

805
01:03:37,334 --> 01:03:41,874
So it's easier to automate things in a very controlled environment like a manufacturing floor.

806
01:03:42,754 --> 01:03:49,594
It's much harder to automate things out in the broader world where all those edge cases come into play.

807
01:03:50,494 --> 01:03:56,154
And then when you have, say, a massive number of robots, a massive amount of data center, all of that has really high turnover.

808
01:03:56,554 --> 01:03:57,694
GPUs have to be replaced.

809
01:03:57,834 --> 01:03:58,854
None of this is self-healing.

810
01:03:59,374 --> 01:04:01,754
This is like literally a constant replacement cost.

811
01:04:01,834 --> 01:04:07,634
A lot of it relies on, you know, kind of semi-rare materials that can run into shortages and get expensive.

812
01:04:07,634 --> 01:04:19,134
You can have environments where a society starts pushing back on robots and vandalizes robots if they find them kind of out in public and almost like kind of forced keeping human in the loop.

813
01:04:19,294 --> 01:04:20,634
So I think that will happen too.

814
01:04:20,634 --> 01:04:40,514
I think there are kind of basically self-correcting loops, both positive ones and some negative ones, that especially in terms of like all work across all fields, I generally fade that sort of hyper bullish thing, at least in any sort of investment or kind of planning time horizon.

815
01:04:40,514 --> 01:04:54,854
I'm not talking about what happens in the 50 years or next century, but what happens in, say, a 10 to 20 year period, data center AI is a much bigger deal, in my opinion, than portable AI and basically in the field.

816
01:04:54,854 --> 01:05:05,334
So I think that there's kind of a potentially a forced shift toward people kind of doing more physical work and also communities somewhat being more self-sufficient.

817
01:05:05,334 --> 01:05:10,434
If a whole kind of area gets kind of disfranchised by AI, that's a lot of people out of work.

818
01:05:11,094 --> 01:05:13,954
Well, that's a lot of people that together are out of work.

819
01:05:14,254 --> 01:05:15,714
So it's like someone's got to build the home.

820
01:05:15,854 --> 01:05:17,754
Someone's got to do all this.

821
01:05:18,054 --> 01:05:18,874
And they don't have enough.

822
01:05:19,114 --> 01:05:22,074
I guess if there's robots, they can't afford the robots to come in and do it.

823
01:05:22,454 --> 01:05:24,234
So they got to work with each other.

824
01:05:24,354 --> 01:05:27,794
And you kind of almost restart the whole what an economy is.

825
01:05:28,714 --> 01:05:32,514
And of course, the challenge there is the path dependence along the way.

826
01:05:32,514 --> 01:05:35,994
as you have societal breakdown, as you have deterioration of the social contract,

827
01:05:36,514 --> 01:05:41,354
and then more extremism or whatever based on that, that's where I think the real issue is,

828
01:05:41,734 --> 01:05:49,374
rather than that, say, AI replaces 99% of jobs in sort of a generation. That's not what I'm

829
01:05:49,374 --> 01:05:54,654
concerned about. It's more like what happens when it replaces 10% of jobs and those 10% of people

830
01:05:54,654 --> 01:05:59,894
are really angry. That's, I think, the actual thing I worry about rather than that kind of

831
01:05:59,894 --> 01:06:04,314
more extreme scenario. Yeah, that's a scary scenario anyway. But I mean, it's good to hear

832
01:06:04,314 --> 01:06:08,014
that you're bullish on humanity, at least for the short term. I needed to hear that, Lynn.

833
01:06:08,914 --> 01:06:13,374
Before we close out, can we just very quickly touch on gold? Because if you'd have asked me a

834
01:06:13,374 --> 01:06:20,434
year ago, if gold would have this insane bull market while Bitcoin was flat, I would have put

835
01:06:20,434 --> 01:06:24,814
that at a pretty low probability. Why do you think that's happened? What's going on there?

836
01:06:25,494 --> 01:06:29,474
Well, it's funny because I've been a gold bull, but I'm surprised as well that it hit

837
01:06:29,474 --> 01:06:37,434
4,000 this year. When it still had a 2,000 handle on it, I was eventually looking forward to the

838
01:06:37,434 --> 01:06:45,254
3,000, but I didn't think you'd just race right to 4,000. So I'm happy it did, but wouldn't put

839
01:06:45,254 --> 01:06:50,554
it as my base case, especially given the size of the market. It's a huge multi-trillion dollar

840
01:06:50,554 --> 01:06:57,434
market cap increase in it. There's multiple shifts happening. One is ever since 2009,

841
01:06:57,434 --> 01:07:00,874
you've had a gradual shift towards sovereign reaccumulation of gold.

842
01:07:01,514 --> 01:07:04,594
So prior to then, you had a multi-decade kind of

843
01:07:04,594 --> 01:07:08,374
divestment of gold among sovereigns and toward treasuries.

844
01:07:08,934 --> 01:07:12,994
Starting in 2009, that gradually reversed. It got kicked into

845
01:07:12,994 --> 01:07:17,014
overdrive in 2022 because then you have

846
01:07:17,014 --> 01:07:21,174
potential risk of confiscation or freezing of assets. If a sovereign

847
01:07:21,174 --> 01:07:25,174
is holding their securities of another nation, they're not really

848
01:07:25,174 --> 01:07:30,634
sovereign assets. And so there's kind of been a shift toward that. Then there's the increasing

849
01:07:30,634 --> 01:07:35,454
awareness of fiscal dominance and the increasing awareness that nothing stops his train, which says,

850
01:07:35,594 --> 01:07:41,834
well, if this is just going to happen for 5, 10, 15 years, maybe I want to own some gold.

851
01:07:42,094 --> 01:07:45,574
That's the one that's got an established track record. So big pools of capital already know what

852
01:07:45,574 --> 01:07:50,354
to do with it. They don't have to research it. They already know what gold is. And then in addition,

853
01:07:50,354 --> 01:07:56,074
this is not really even though the stock market is near all-time high it's it's because it's so

854
01:07:56,074 --> 01:08:00,794
narrow it's mostly not even a risk on environment like i mentioned before we've been in an usually

855
01:08:00,794 --> 01:08:07,634
long period of kind of like like flat yield curve pmis like purchasing managed indices of like

856
01:08:07,634 --> 01:08:15,194
manufacturing and other other signs that are just kind of like in stagnation um outside of ai the

857
01:08:15,194 --> 01:08:21,494
stock market is pretty flattish, kind of consolidating. And so it's not a very risk-owned

858
01:08:21,494 --> 01:08:26,174
environment, even though liquidity is good. So when you have kind of pretty decent liquidity

859
01:08:26,174 --> 01:08:31,034
up until maybe very recently, and then you have kind of stagnating broader economy,

860
01:08:31,634 --> 01:08:37,434
the Fed still trying to tighten things where it can, the things that have taken off has been

861
01:08:37,434 --> 01:08:45,274
ai gold uh like kind of the what the market ironically looks as low risk they they view ai

862
01:08:45,274 --> 01:08:49,014
as low risk even though the pockets of it that are obviously not but they viewed as low risk

863
01:08:49,014 --> 01:08:53,934
because they viewed as like a sure thing it's like okay that's cycle resistant let's let's go to ai

864
01:08:53,934 --> 01:08:59,974
then they say gold okay that's low risk um bitcoin until pretty recently was in that bucket was

865
01:08:59,974 --> 01:09:07,094
benefiting uh from liquidity um from kind of gradual adoption um but as you have kind of like

866
01:09:07,094 --> 01:09:09,794
a flattish environment, Bitcoin cooled off.

867
01:09:10,934 --> 01:09:17,374
So I think basically gold's behaving kind of, you know, rationally, just a little bit,

868
01:09:17,534 --> 01:09:19,434
you know, these things tend not be linear.

869
01:09:19,594 --> 01:09:22,554
So you tend to overshoot to the upside, then overshoot to the downside, then overshoot

870
01:09:22,554 --> 01:09:22,954
to the upside.

871
01:09:23,394 --> 01:09:26,154
So this did overshoot to the upside faster than I would have thought.

872
01:09:26,154 --> 01:09:31,654
But I think it's a gradual realignment for things we've talked about in prior podcasts,

873
01:09:31,734 --> 01:09:37,034
a more multipolar world, less kind of a focus on every country just holding one country's

874
01:09:37,094 --> 01:09:41,074
bonds as the reserve asset and saying, okay, we'll hold those, but we also want to hold these

875
01:09:41,074 --> 01:09:46,114
other, say, three things. We want to hold gold. Maybe we want to hold another trading partner's

876
01:09:46,114 --> 01:09:50,334
currency around the margins. Smaller ones might say, well, let's look at Bitcoin a little bit.

877
01:09:51,054 --> 01:09:56,734
You get that kind of gradual broadening of assets that are viewed as kind of reserve assets. And

878
01:09:56,734 --> 01:10:01,934
gold, as the incumbent, has kind of been the chief beneficiary where we're talking about

879
01:10:01,934 --> 01:10:07,694
the market's being increasingly spooked about these tens of trillions of dollars of sovereign

880
01:10:07,694 --> 01:10:14,254
debt so whether it's the u.s it's europe it's elsewhere the market is kind of long term says

881
01:10:14,254 --> 01:10:20,594
okay what's the end game here uh and you have gold which is a much smaller market despite being huge

882
01:10:20,594 --> 01:10:27,354
than those sovereign bonds it only takes a small gradual spillover for investors to start kind of

883
01:10:27,354 --> 01:10:30,494
going into gold they don't have to do a ton of research because they know what gold is

884
01:10:30,494 --> 01:10:36,454
yeah one of the things i found really interesting is the kind of retail fomo around gold um because

885
01:10:36,454 --> 01:10:40,274
as we were saying earlier in the show there's really not been a huge influx of new retail

886
01:10:40,274 --> 01:10:44,434
participants in bitcoin but i don't know if you saw the pictures going around twitter and stuff of

887
01:10:44,434 --> 01:10:48,114
people literally queuing on the street outside gold shops i think they were actually here in

888
01:10:48,114 --> 01:10:53,074
australia um yeah has that surprised you and like one of the things we talk about often in bitcoin

889
01:10:53,074 --> 01:10:57,734
is like the unit bias obviously the unit bias for gold is lower but as a market it's huge compared

890
01:10:57,734 --> 01:11:04,094
it's a bitcoin so the short answer is it hasn't surprised me because so back when gold was like

891
01:11:04,094 --> 01:11:09,434
three thousand one of the interesting things at the time was that it was not retail driving it

892
01:11:09,434 --> 01:11:15,514
so when you looked at like interest in gold etfs or interest in physical coinage uh it was kind of

893
01:11:15,514 --> 01:11:21,074
lukewarm uh whereas the price was going up anyway and it was because sovereigns institutions were

894
01:11:21,074 --> 01:11:27,114
driving it it was kind of like gold moment of like um the treasury company thing right it's like

895
01:11:27,114 --> 01:11:32,374
big pools were interested in it China and India were interested so their retail was interested

896
01:11:32,374 --> 01:11:38,254
but kind of the western retail was like they other things are going on when the mag 7 was soaring no

897
01:11:38,254 --> 01:11:41,854
one's like they're like yeah gold's okay but you know I'm not really interested in it it's only

898
01:11:41,854 --> 01:11:48,134
really in in in kind of the second half of this year uh where we're retailed western retail did

899
01:11:48,134 --> 01:11:53,634
start to fomo into gold so that's kind of a later later stage portion of it so first first

900
01:11:53,634 --> 01:11:59,674
institutional than retail. And that's generally how things go. So if anything, if you'd asked me

901
01:11:59,674 --> 01:12:03,154
last year, I'd be, I'm surprised there's not a little bit more retail FOMO than there is right

902
01:12:03,154 --> 01:12:08,994
now. But then I would also not have guessed you've gotten a 4,000. But when you do get to 4,000,

903
01:12:09,074 --> 01:12:13,694
I'm not surprised that, yeah, you start seeing lines outside of gold stores, either to buy it

904
01:12:13,694 --> 01:12:17,014
or sell it. Because actually both tends to happen. There are people that need money and have,

905
01:12:17,094 --> 01:12:21,834
you know, a gold ring and they want to go sell it. And there are other people that are then

906
01:12:21,834 --> 01:12:28,174
FOMO-ing into it is how these things tend to go. And, you know, if Bitcoin can have a cycle like

907
01:12:28,174 --> 01:12:33,154
that, where if you break the four-year cycle, you have an up year, institutions are positioned,

908
01:12:33,154 --> 01:12:37,594
and it starts to rip, you can bring in retail. So it's like, just because retail is not here

909
01:12:37,594 --> 01:12:41,754
now doesn't mean they can't come later. And unfortunately, retail tends to be kind of the

910
01:12:41,754 --> 01:12:48,474
later phase of a given bull run. Now, but I think I view gold in a similar way that I would view AI,

911
01:12:48,474 --> 01:12:51,274
which is that it can get into a local bubble,

912
01:12:52,174 --> 01:12:55,474
but that I still think it's structurally fine.

913
01:12:56,774 --> 01:12:59,994
The last time I gave a warning of that sort was back in 2020.

914
01:13:00,194 --> 01:13:01,634
Gold, of course, had a very big moment.

915
01:13:02,674 --> 01:13:04,754
And I was like, I could see it taking a breather here.

916
01:13:05,754 --> 01:13:07,854
It took a little longer breather than I thought,

917
01:13:07,954 --> 01:13:11,534
but then it did this whole kind of next doubling that it did.

918
01:13:13,054 --> 01:13:14,594
And I view it kind of similarly,

919
01:13:14,714 --> 01:13:16,814
which is sure it's over at Skis right now,

920
01:13:16,814 --> 01:13:21,274
but I don't view it as like structurally overvalued if anything it's going from being

921
01:13:21,274 --> 01:13:25,274
just kind of structurally undervalued just like back closer to like what I think makes sense

922
01:13:25,274 --> 01:13:31,934
and so yeah I just view gold and bitcoin as kind of two different assets gold still because it's

923
01:13:31,934 --> 01:13:37,034
incumbent it has more of a risk off aspect to it it's got more of a sovereign interest in it

924
01:13:37,034 --> 01:13:42,654
whereas bitcoin is still kind of collectively lumped into a tech play even though from those

925
01:13:42,654 --> 01:13:47,194
that people understand it, it does have, you know, digital gold, digital cash attributes

926
01:13:47,194 --> 01:13:52,454
that can be viewed as risk off as well. Just the price action tends to correlate more of the risk

927
01:13:52,454 --> 01:13:58,714
on type asset. That makes sense. Okay, Lynn, last question. Bitcoin's just above 90,000 now. I'm

928
01:13:58,714 --> 01:14:02,834
not asking for a price prediction here, but just like directionally over the next 12 months,

929
01:14:02,894 --> 01:14:08,234
what do you think? How are you looking at Bitcoin? My guess is up. I don't have a view of the next

930
01:14:08,234 --> 01:14:14,654
quarter um i've i always do try to avoid price predictions when i get quartered into one like

931
01:14:14,654 --> 01:14:19,854
for 2025 i was like yeah anything under like if we don't hit 150 be a little disappointing of

932
01:14:19,854 --> 01:14:26,374
course we only got to like 125 or so so it's on the disappointing end um i i do expect that you

933
01:14:26,374 --> 01:14:31,474
know in 2026 we'll be back into the six figures i mean anything can happen between now and year end

934
01:14:31,474 --> 01:14:37,514
um and whether it's 2026 or 2027 i think we'll be seeing new all-time highs most likely

935
01:14:37,514 --> 01:14:43,474
um and it's funny when i because i watched twitter sentiment when bitcoin is absolutely soaring

936
01:14:43,474 --> 01:14:49,174
i get sometimes dunked on by bitcoiners saying why do you own any gold why do you own any stocks

937
01:14:49,174 --> 01:14:53,094
why aren't you 100 bitcoin and it's like well because i like some degree of diversification

938
01:14:53,094 --> 01:14:59,034
here uh and then when bitcoin's crashing i get the gold bugs coming out and saying oh like uh

939
01:14:59,034 --> 01:15:02,714
you know they should just own all gold they're like why do you own any bitcoin at all and it's

940
01:15:02,714 --> 01:15:08,874
funny how that emotional trend goes. And one of the ways is to say, okay, well, you don't want to

941
01:15:08,874 --> 01:15:13,754
de-worsify so that you own a little bit of everything. You still want to have opinions

942
01:15:13,754 --> 01:15:19,494
on assets and you can make concentrated bets. I mean, I'm quite structurally bullish on Bitcoin,

943
01:15:19,674 --> 01:15:24,814
for example. But that's also why I own gold and I own equities that have nothing to do with Bitcoin

944
01:15:24,814 --> 01:15:31,454
because there are different size markets, different performance patterns that they go through.

945
01:15:31,454 --> 01:15:35,134
And for me, it's not just about owning what I think is going to be the fastest horse.

946
01:15:35,274 --> 01:15:39,534
It's okay, I'll put extra on the fastest horse, but I want to own a handful of horses.

947
01:15:40,914 --> 01:15:50,154
And so when you structure a portfolio like this, it's like, okay, I'm disappointed in Bitcoin this year, but I'm enthused by what gold did.

948
01:15:51,294 --> 01:15:56,234
And if you structure a portfolio that way, you take the edge off for a lot of these things.

949
01:15:56,234 --> 01:16:00,274
and so I think we'll see a rotation at some point

950
01:16:00,274 --> 01:16:02,354
where I'll be disappointed in the gold side of my portfolio

951
01:16:02,354 --> 01:16:04,714
and I'll be enthused about the Bitcoin side

952
01:16:04,714 --> 01:16:06,774
and then probably it'll repeat again

953
01:16:06,774 --> 01:16:12,254
so yeah nothing's really changed around my view of any of these assets

954
01:16:12,254 --> 01:16:14,834
it's just they catch on at different speeds

955
01:16:14,834 --> 01:16:16,454
and they have different correlations

956
01:16:16,454 --> 01:16:20,074
and like I said before I think that a year ago

957
01:16:20,074 --> 01:16:22,354
or six months ago

958
01:16:22,354 --> 01:16:25,914
some percentage of people bought Bitcoin for maybe the wrong reason

959
01:16:25,914 --> 01:16:34,914
They bought it because they think Uncle Sam's going to buy it rather than buying it for its own qualities and kind of the longer term story of what it is and what it changes.

960
01:16:35,834 --> 01:16:40,794
In addition, I think the broader crypto space is basically out of narratives.

961
01:16:41,894 --> 01:16:43,794
And that's basically dead weight now.

962
01:16:43,794 --> 01:16:55,414
So other than Bitcoin and stable coins, a couple small tech rails to run that kind of stuff, at a macro scale, there's really no there there in the broader crypto space.

963
01:16:55,914 --> 01:16:59,874
And so I think that that's part of why kind of the whole space is bearish.

964
01:16:59,954 --> 01:17:03,394
There's a lot of people that own Bitcoin own other assets.

965
01:17:04,194 --> 01:17:08,874
And they view it as not just a bad cycle, but that there's just, what's the next narrative?

966
01:17:09,394 --> 01:17:15,834
You had ICOs, you had NFTs, you had DeFi, you had meme coins, which is basically the

967
01:17:15,834 --> 01:17:19,294
most cynical narrative is saying that we're just flat out saying there's no there there.

968
01:17:19,874 --> 01:17:22,454
Then even that kind of eventually rolls over.

969
01:17:22,454 --> 01:17:28,454
and you know there's really no kind of you can always be surprised by another one kind of coming

970
01:17:28,454 --> 01:17:33,414
out of the hat but i think a lot of that is kind of tested almost every directional narrative that

971
01:17:33,414 --> 01:17:41,034
it could and is kind of set for structural stagnation so bitcoin has to kind of decouple

972
01:17:41,034 --> 01:17:46,094
from that dead weight to the extent that it's going to keep kind of reaching higher highs

973
01:17:46,094 --> 01:17:50,794
i totally agree with that i mean the altcoin side of things i think is is over

974
01:17:50,794 --> 01:17:55,894
um i don't want to speak too definitively because you never know what might come out but um i've

975
01:17:55,894 --> 01:18:00,634
been i've started having the text from the people sort of close to me who might have bought bitcoin

976
01:18:00,634 --> 01:18:04,994
for the wrong reasons being like is this going to go down to 50k and all this stuff and i obviously

977
01:18:04,994 --> 01:18:10,294
i've no idea but like the the best message i think is just just do nothing if you're not sure just do

978
01:18:10,294 --> 01:18:15,334
nothing like just wait because like i know that 90k is not going to be the top of bitcoin forever

979
01:18:15,334 --> 01:18:21,214
um lynn i always love talking to you thank you so much for doing this um i'm gonna see you at

980
01:18:21,214 --> 01:18:26,874
cheat code in march yeah i missed last year but i was there the year prior i believe so definitely

981
01:18:26,874 --> 01:18:31,134
i definitely think it's worth going i love the conference uh and it's great to see everyone

982
01:18:31,134 --> 01:18:35,274
it's gonna be fun we've got you announced as a keynote and jack mallers at the moment we're

983
01:18:35,274 --> 01:18:40,314
gonna be dropping some more speakers soon so cheat code.co.uk there's my little shill um lynn

984
01:18:40,314 --> 01:18:43,674
where do you want to send anyone uh who wants to find out everyone knows who you are but who wants

985
01:18:43,674 --> 01:18:44,294
to find out more.

986
01:18:44,474 --> 01:18:45,814
Just check out lynnaldon.com.

987
01:18:46,094 --> 01:18:47,774
Everything can be found from there.

988
01:18:48,054 --> 01:18:49,774
We're at lynnaldoncontact on Twitter

989
01:18:49,774 --> 01:18:51,414
or Broken Money on Amazon or elsewhere.

990
01:18:51,774 --> 01:18:52,674
But thanks for having me.