Everyone's like lined up for the comfortable lie.
No one wants to get in the line of the inconvenient truth.
Would he start launching nukes?
What happens next?
People are paying $350,000 for a jet ride out of the Middle East.
You're in the UAE and you need to get your money out of UAE as fast as you can.
I buy some Bitcoin.
Bitcoin was going up as things were getting worse in the Middle East.
Normally, Bitcoin is fully risk-on.
And in this case, it was actually acting as risk off.
This is going to go really fast.
You know, it moves, you know, connect up a couple computers, boom, gone.
GTFO, like game over, see you later.
People are going to pay their mortgages and their car loans and credit card bills.
And then those things are going to blow up something in private credit and private credit's going to have an issue.
And then the banks are going to pull back on lending.
And any kind of recession will force us into default on the treasuries or entitlements or print the money.
And they'll print the money.
I don't know how they're going to get there.
To me, the only debate is how fast.
Luke Groman, great to see you, mate.
How are you?
Well, Danny, how are you?
I am really good, thank you.
I was just talking to you before we started recording.
It's 6 a.m. here in Australia, and I was like, what did I miss, Luke?
And you said, well, the war's over.
So fill us in.
What's happened while I've been asleep?
Um, well, was you were going to bed, you probably saw oil at one 19.
Uh, it finished.
It is now at 84 again.
It basically went straight downhill after they came in this morning.
Uh, there was a rumor of a G well, not a rumor, a report that G seven was going to get together
and sell their oil out of their SPR, uh, to get oil down.
Then they said, well, we're not actually doing that.
Um, yeah.
We've seen more news of refineries shutting down.
I think I saw the Saudis.
There was news last night of the U.S. evacuating its embassy in Saudi Arabia.
There was news earlier today, potential, I'm not sure if this was confirmed,
the U.S. consulate was evacuated in Adana, Turkey.
This afternoon, Israel came out and said,
And there was a report in Washington Post, essentially, that Israeli officials were beginning to, quote unquote, get concerned.
Understandably so, with Tel Aviv getting hit last night and the lights getting apparently turned off, as the reports that I saw.
We had, what was the next thing?
Oh, we had Senator Warmonger from South Carolina.
What's his name?
I can't think of it.
At any rate, this guy has like literally been dreaming about bombing Iran since he was in the crib.
And at any rate, he came out today and said, oh, the Saudis are not supporting us.
Maybe we should like slow this down a little bit.
What's going on here?
And Senator Graham, Lindsey Graham, that's his name.
not Senator warmonger, uh, translates actually in South Carolinian Senator Lindsey Graham
translates to warmonger.
Anyway, I'm being more overtly political than I usually am.
I should stop it.
Um, it's only because I think it strategically was a very big mistake at any rate.
Uh, shortly thereafter, the Iranians came out and said, every missile we fire from now
on is going to be more than one ton warhead.
Uh, which, you know, I tweeted at the times, a big, uh, geopolitical poker call, right?
poke, call, and raise, which is we've been saying we have plenty of air defense missiles left. The
Israelis have been saying same, and we've both been saying the Iranians are going to run out soon.
And the Iranians are like, we can keep doing this for a while, and we're fine. And we're about to
find out. And literally, probably about 20 minutes after that headline hit, and about an hour or so
after the Israeli Washington Post headlines hit, we have a CBS report citing Trump that he's
saying basically the war's over, that we've destroyed their navy,
and we've largely disrupted their ability to shoot missiles.
Now, literally 20 minutes after he said that, Iran began getting hit,
or Israel began reporting getting hit by more missiles overnight.
Yeah, it's getting to be nighttime there now, or it is nighttime there now.
So markets are rallying. Oil is down a bunch.
Um, it's been like a giant seesaw up and down across most markets today.
And I feel like that's a day of my life I'll never get back.
Who's been the winner out of this situation?
Because, um, I think Trump expected to go in this to be over very quickly and maybe
didn't expect the pushback from Iran that they got.
And like Iran have been on the offensive in a way that like, I don't know if anyone imagined.
i think we have done a lot of damage to iran
i think israel's done a lot of damage to iran i think israel was
is is was is staring down the prospect of tel avid being turned into something that looks like gaza
which is to say flattened um
I think forget about what I think I know Iran was much more effective than our planners thought
why they thought that I don't know we're supposed to have superior intelligence I think our war
planners were telling our civilian leadership exactly that there were hints of that two weeks
ago when Chairman Joint Chiefs of Staff Cain, General Cain, came out and was quoted in at least
four of the most important media around Washington and New York City in the Beltway saying,
we don't have the weapons to do this, essentially. Effectively, like,
distancing himself from this, putting it all on Trump. And in the ensuing two weeks,
It hasn't gone nearly as well as advertised, which I, again, I know for a fact I'm not guessing at that based on what I'm hearing.
And so it definitely destroyed a lot of stuff on the ground for Iran.
Israel got bloodied up.
the you the uh iran navy not that that was ever really a threat
was definitely a big w for us and an l for them um now what did iran and the if this really is the
end of the war i would probably gun to my head at best chalk it up to a strategic draw and possibly
you know you know you're you're a former fighter right i would probably give it i would probably
from a strategic standpoint it probably would be a you know i don't know one one one one with i
mean yeah literal a literal draw right i'm not a big boxing or fighting guy so but but and the
reason i say that is they got him to taco again they got him to taco again oil goes to 100 and
And he panics as he has to panic because he doesn't have, you know, a year ago with Liberation Day, we said that the bond market were his broken ribs, were the U.S.'s broken ribs.
And a fighter who knows the other fighters ribs are broken is going to beat on those ribs until they're on the canvas.
And the U.S. can't abide a hundred dollar oil.
They can't.
The bond market can't.
And stock market can't.
And we just saw that.
And so that was a big tell.
But I think even bigger than that, because I don't think that's necessarily a shock to anybody, is, A, I hear very credible rumblings that the United States strategic radars, and New York Times wrote about this, not quite in this depth, but that our strategic radars were heavily damaged or destroyed around Gulf.
and there's a lot of people that as of a couple hours ago were saying we need to keep doing this
we're doing this to to really put the squeeze on china those same writers were not talking about
you know how do we rebuild strategic radars without chinese rare earths
and if the chinese might be slightly reticent to sell those rare earths to rebuild our strategic
radars. And I think bigger picture, there's been a lot of people sort of bragging about how we're
running a protection racket, essentially, which we kind of are, right? You know, some of the,
you know, hashtag Murica crowd, you know, hey, we've got the world's best military and we run
a protection racket and there's nothing they can do about it. Yes. And when you run a protection
racket, and then you don't protect, that starts raising very uncomfortable questions amongst the
protectees. And what they start to say is, you know what, we're going to invest in our own
protection. Well, we needed those dollars flowing into our treasuries, markets, AI, etc.
um and so that's kind of a tbd to be determined outcome to it so you know it's it's kind of like
we we definitely got a you know a victory from the standpoint of look there's a bunch of stuff
burning and the leaders are dead and you know it's you know i saw one meme said you know it look
it's a victory it took us 21 years to remove the taliban and replace you know take afghanistan from
the Taliban and then give it back to the Taliban.
It only took us eight days
to take Iran from Khomeini and give
it back to Khomeini.
That was
a lot faster. I couldn't help but
laugh at that.
Like I said, I netted
out, if this really is the end of the war,
it's at best
to draw.
Because
if I'm Iran, Iran is going to now
like work as fast as possible to get nukes number one yeah and china knowing that we are going to
try to use iran to cut them off their oil is going to help them get those nukes as fast as they can
as will the russians because the russians it's a bit of an underbelly for the russians
and we learned that what eric prince former head of blackwater
said last February was true,
which is there's been a revolution in the military affairs.
And missiles and drones have made obsolete
a lot of existing equipment.
And there is a lot that has occurred in the last two weeks
to support that view,
not least of which is the closing of the Gulf, right?
We have the most dominant Navy in the world,
and they closed the Strait of Hormuz with missiles.
And our Navy wouldn't get anywhere near it.
And that's sort of that line of inconvenient truths and comfortable lies.
And everyone's lined up for the comfortable lie.
No one wants to get in the line of the inconvenient truth,
which is we do have the world's most dominant Navy.
There's no question about that.
But that world's most dominant Navy wouldn't dare
go into the Strait of Hormuz over the last two weeks.
Why?
And I've heard some very credible rumblings on the ground as to why that is.
And that's why I would say at best case, it's a draw.
So, you know, let's see what happens.
It's Trump.
You know, this could change, you know, tomorrow.
This could change tonight.
Who knows?
But at any rate, it's been a heck of a day.
It's been a heck of a week.
In boxing terms, it really has.
In boxing terms, this seems like it's not a victory.
It's like someone's got cut and they've stopped the fight.
But the thing that I can't quite figure out is what this means.
Like, there's so many questions in this.
One is that, like, they wanted regime change in Iran.
They kind of got that.
But have they going to have just brought someone in who's going to hate America even more?
He's seen his family liquidated by missiles.
Like, what does that do to his psyche?
Like, is this actually over?
and if it is even for now who's got the upper hand in negotiations because if i was the the
man in charge of iran i would be like we need to ramp up now let's actually get nukes
yeah i mean i i've heard conflicting things on the the new guy right so like his regime change
ostensibly but it's it's um you know father to son i've heard the son is harder line i've heard
Maybe he's not as bright as the father. I don't know. That's one person whose views I respect asserted that. I don't know their grounds for saying that or basis for saying that.
I hear I have another person I respect who says he's you know this new leader is respected by the IRGC right the Republican Guard or whatever they are and that he was in naval intelligence or military intelligence which suggests he's not that dumb.
um and look i i just think there's i look at it simplistically which is i try to put myself in
every other person's shoes i ever interact with to understand their motivations and if someone
killed my father my wife and my children with with a drone and then i knew like like there was
overnight there was a um overnight my time a iranian general on their state media saying like
trump and netanyahu have have are now stuck in a persian gulf slaughterhouse because
they're running out air defense missiles and we know it and in the next three four days
we're gonna pound on them and so if it's me
I pound on him and I don't I think I don't I would like to think I'm a better person than that
um but I'm I probably not that's probably I'd have to do some work around that right that's
you know our good lord himself it was probably the only person on earth that isn't gonna be
saying oh wait he has not a lot of defenses left button button button button um and tonight you
know we'll see i'll get all i was i was getting on i was seeing some reports i've not seen anything
um of more strikes tonight from iran into israel so let's see um but the broader point is is
the other guy gets a say right this is like in a boxing match you don't get in the middle of the
boxing match just go you know okay i'm done for now oh i broke my hand we're good right no you
You've got to keep fighting for, you know, or you've got to take a knee.
You've got to go down.
So I think it's going to be very interesting to see the next couple days.
Because if the other side, if Iran doesn't back down, and especially if they really do start hitting Israel more aggressively,
then what?
Because it's very hard to say
would Netanyahu
when faced with Tel Aviv
getting turned into Gaza, would he start launching
nukes? Bet him, man, I bet he would.
Then what?
Do Russia and China
get involved then? What happens
next?
Like,
so let's see, but
I'm
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which is swan.com forward slash wbd so what do you think would have actually gone into trump's
decision making more would it have been the missiles and drones the actual kinetic side of
this war or would it have been the economics with oil going to you know 110 dollars a barrel
think that is visibly the thing that is causing him to pull back i think that is the thing that
is not visible to most people is what has happened to our radars on the ground our ability to protect
allies in the Gulf, what that is doing to their willingness to host American bases and
troops, et cetera.
You know, I've said before in this year a couple of different times in both reports and in
public appearances, it's really important these days to ask about the dog that doesn't
bark, you know, or as Charlie Munger says, invert, invert, invert, always invert, right?
Secretary Rubio was on
you know the idiot box today
talking you know he literally said
with our most powerful military
in the history of the world
we
you know we are doing this
and we're focusing on now a week ago
was regime change it's not regime change anymore
now it is getting rid of their ability
to shoot missiles and sinking their navy
which is in my opinion de-escalatory
anyway
but the reason I
I would get to go exactly one of these press conferences.
I'd be like, Mr. Secretary,
if we have the most powerful military
in the history of the world,
why don't we just send the Navy
into the Strait of Hormuz and open it up?
And he'd go, uh, uh, mm, eh, well, uh.
And once you look at it from that angle,
that I think is the sort of the taco that is,
you know, that's the secret sauce on the taco.
I think the overt, you know, the shell and the meat and the cheese and the lettuce is, yeah, oil's at 100.
Treasury market's gone from 3.95 to it was 4.20 last night.
You know, it's back to 4.10 today.
But you're up 26 basis points in, what was that, six trading days.
You get the stock market down.
You got gas prices up a ton.
uh you got polls in this country that are very much going against him um
and that was sort of the big but i think sort of the underpinning of it is it didn't go like they
thought it was the iranians were it was and it's i want to be clear some of this was iran but i
think a bigger part of it is what eric prince talked about which is eric prince last year said
this is the biggest change in military strategy since stirrups were put on horses 800 years ago
like and it allowed genghis khan to run rough shot and what his point was is that missiles and
drones have made obsolete trillions of installed equipment of the hegemon that's the reason we
didn't run the navy into the strait of hormuz that's the reason why once the missiles started
flying some of our carriers went away from the action deeper into the indian ocean i'm told
because missiles and drones the mayhem doctrine has has been enforced by navy i made a tweet about
this the other day and and you know a number of people rightfully uh called me out that i wasn't
specific enough. I said that it was 250 years, really 200 plus with when you add in Britain,
of mayhem doctrine has been turned on its head. Naval, you know, it had been, you use your Navy
to control naval checkpoints and you control the world. And missiles and drones, which we just saw,
mean that naval checkpoints turn into kill zones for navies. And so you've had 400 years of
of world geopolitics defined by blue water Navy powers,
America,
and then,
and arguably,
you know,
the Spain,
England,
Portugal,
Spain,
England,
America,
or maybe Spain,
Portugal.
I forget what the order that was to us a long time ago,
but you're three,
400 years that the people who had the deep blue water Navy
control the world.
And I think bigger picture,
this is,
tells us that world's over.
And if that world's over,
enormous, enormous implications,
enormous implications.
So what are those implications?
Especially like if we get into the sort of
economic side of things,
like how is this,
like I think the picture's probably changed
just in the last few hours
with Trump making the announcement
that the war might be coming to an end.
But like how are you,
what's your read on that?
Especially like in the early moments of this.
If that's true,
if it's true that the war's over
the missile and drone thing is
absolutely
and what it means is it's essentially democratizing
of war in the same way
that
the internet was democratizing
a whole lot of stuff
in the old days
20 years ago, 30 years ago
right? A couple of music companies had all the A&R agents and they had all the relationships with
the radio stations. And if you were a band, you had to like, you know, play a bunch of shows,
get discovered, get signed, go on tour, build an audience, get on the radio, right? All this stuff.
And then the internet and iTunes and what have you is just like,
now you just got to know how to play. If you play, you can play, you can find an audience
and you can become world famous
and you don't need radio stations,
you don't need DJs,
you don't need A&R guys
and those record companies as execs
and all of them taking their cut.
Gone.
And in the same way,
the United States Navy
could not open the Strait of Hormuz.
And I think people need to keep saying that
over and over until the implication of it
hits them.
the United States Navy is the record company
with the A&R guys and the big expensive stuff.
And Iran with missiles and drones,
I mean, what does Iran spend on their military
relative to us?
I mean, if they spent one one hundredth of what we spend,
it might be, maybe it's one fiftieth, who knows?
I don't know, but it's not a lot.
And yet, best case of draw?
okay then what does that mean for macroeconomics multi-polarity you know we want to trade outside
the dollar well we're going to send the navy to come beat your head and okay send it into the
strait of hormuz you know and you know the chinese are reportedly you know uh john um
David P. Goldman reported two years ago that the Chinese can produce 1,000 cruise missile motors a day.
We reportedly have 6,000 Tomahawks roughly, less now, 6,000 Tomahawks in cruise missiles in inventory in total.
They can make missiles for that in a week, for that many.
And so it turns into, if we want to stop de-dollarization, if we want to stop multipolarity, how many times have you heard it? It's too many for me to count, but ultimately the U.S. military backs the dollar.
right what backs the dollar is we have 13 carrier groups yeah and none of them wanted to go to the
strait of hormuz because of iran's drone and missiles which cost way less than those 13 carrier
battle groups that is that's every bit the shift in power that eric prince talked about and and it
was just manifested in the last two weeks so do you think china are looking at this thinking well
we're the superpower now then i i think they are looking at not superpowers broadly in the in the
traditional sense of the word but i think china understands it is the manufacturing uh linchpin
and i think russia understands and has understood i think they've understood this for
10 years, certainly last five years, that the world cannot survive without Russia's oil.
That was one of the most hilarious things going into last weekend, right? Which was
Scott Besson on Friday night, his oils at 95 and ripping high or into the weekend.
He gets on with Larry Kudlow and says, well, we're going to unsanction Russian oil.
despite the fact that the washington post had just reported that the russians were helping
the iranians target american assets despite the fact that russia is still supporting ukraine
who's who's the power guy in commodities in that case it's russia it's not that says a lot it says
a lot. It says all you need to know.
And
that's the part that these guys, whether
they be Biden or whether they be Trump's
administration, they just, they don't get.
If Iran,
Russia, and China,
with a little help from India, all stay inside
the tent pissing out,
you can take Iran's oil offline
and
Russia has all the power.
Because now you can't take it.
You've got to have Russia running full out.
You can take Russia offline and control Iran.
But again, if you pick fight with either of them, you're going to blow up the oil market.
When you blow up the oil market, you're going to blow up the treasury market.
You blow up the treasury market, you're going to blow up the government's ability to fund itself.
And so we just kind of ran through this very, very quickly.
And so kind of here we are again.
So I don't think they think they're superpowers.
I think they know. I think they know what they are. I think they understand the leverage they have. And I just think that I think. Putin and Xi are much more low time preference than Americans are.
You know, Americans, they only want to buy assets if they're going up at that moment.
And, you know, they want immediate pushback and they want immediate reaction.
You know, they want it all to be sort of tidied up with a happy ending.
And the guy gets the girl, the kiss from the girl at the end of the the end of the half an hour sitcom.
And Russia and China, I think, are just happy to sit back and go.
Your entire financial system, which is your economy, will blow up without our factories, without our oil.
And we know that. And so we can wait.
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okay so if we like move this on to sort of markets a little bit I read your newsletter last week and
you were saying you know assuming the war continues then markets are going to be down
across the board everything's too high basically um with this change what do you think happens now
do markets shrug this off or is this going to have a longer term effect i think it really depends on
what happens in the next couple days um if iran stops shooting missiles then yeah i think markets
rip if i wake up tomorrow morning and like tel aviv's gotten hit again and trump's going you know
please stop shooting the missiles we've said nicely um i said the war was over everyone should
listen to me i have the best idea about war it's the best war it's the shortest war anyway the
if the iranians keep hitting the israelis and if it especially apparent that they have no intention of letting up and if the straight the stays shut despite Trump saying I opened the straight Hormuz Open sesame
I said it to open.
Why are they not opening?
I don't understand.
If the straight Hormuz does not open up in the next couple days,
then I think you're going to get a relief.
You got a relief rally today.
I think it'll fall through tomorrow.
If Iran keeps hitting them and we get towards Wednesday, Thursday, Friday,
and it's like, hey guys, straight over moves is still not flowing. And Trump has said what his
piece, you know, set his piece and it hasn't made a difference. And Iran is pounding on Israel.
Then I think you're going to go, I think you'll go and set new lows in stocks. And I think oil
will go right back over a hundred because at that point people go, oh my gosh, this wasn't,
this wasn't a draw. This was a strategic loss. This was a Suez moment, 1956 for the United States.
And now what? The U.S. has to escalate. Iran's going to escalate. Israel can't really defend
itself. It's sort of in the turtle position on the canvas. What are we doing here? And
so let's see. It's a wishy-washy answer, but that's...
We're in wait and see mode.
I don't know. Yeah. You're in wait and see mode for the next 48 hours, I think.
One of the really interesting things in terms of how markets reacted to this war was Bitcoin.
So I know you've been sort of bearish Bitcoin for the last few months.
But while this happened, you would normally expect Bitcoin to drop off a cliff with some geopolitical tension like this.
But it was pretty strong.
In fact, I think it's even maybe been up across the actual duration of this war.
Did that surprise you?
It did a little bit.
And what I think I was watching, and this is going to be like Schrodinger's Bitcoin commentary, right?
Especially since the war's over.
If you look at the days that Bitcoin was really strong, some of it was like, I noticed a couple things on the days it was very strong over the last two weeks.
one was day it was days that nasdaq was up really strong and software in particular
was up very strong so that's like okay well that's just like dead cat bounce from the
you know from february um and some of that could be okay well you know consumers gonna get killed
with oil going up so software doesn't use any oil quick or software's oversold
maybe uh the other thing i noticed was it was also up on some days where
there were things were getting worse in the Middle East,
but were not necessarily reflected in the stock prices at that moment.
And when I say getting worse based on what I was reading,
based on what I was hearing,
and I think some of that is very possible.
If you're in the UAE and you need to get your money out of UAE as fast as you can,
I buy some Bitcoin.
and that's why i say some of it is schrodinger's schrodinger's asset class through this thing which
is normally bitcoin is fully risk on or at least it has been and in this case it was actually
acting as risk off uh because you know normally i've been saying hey bitcoin is the last functioning
smoke alarm watch what bitcoin does that's what risk assets are going to do um so far it's kind
of holding again, I guess, on one level, but it was from a geopolitical standpoint, Bitcoin
was going up as things were getting worse in the Middle East, as more radars in the
US were getting hit, as more drones, as Hagseth has gone, sorry, we can't really stop any
of these drones as they're coming in.
Bitcoin was getting bid.
So I think there was some element of sort of, it's not oil, it's not going to get killed
by oil software dead cat bounce stuff i think some of it was actually asking acting as risk off
um my working thesis had been up until literally like two hours ago
this you know the war is not going as well as expected and without a taco risk is way too high
We've got our taco. So let's see. It could be good for Bitcoin. It could be bad for Bitcoin. It depends if we go right back to the AI software is dead mode. Well, then Bitcoin's probably going to hit with that in the short run. And if it's risk back on, maybe. Yeah, it's hard to tell. It is very much. But it has been better than expected. And I think that is I think Bitcoiners should be encouraged by that.
I am not feeling like, oh, I need to chase this yet.
But it definitely has done better.
You just said to me, hey, Luke, everything you know today,
you know, two weeks ago, where's Bitcoin?
And I would have said probably 55,000.
And it's at whatever, 68,000.
And so it's definitely better than I would have expected.
Some software bounce.
but I think some of it really is Middle East capital flight,
which I think true Bitcoiners would tell you,
good, that's what it's supposed to frigging do, right?
Like that's how it's supposed to work.
Yeah, I mean, I think as Bitcoiners,
we quite often blame the fact that Bitcoin trades
like a risk asset as sort of information asymmetry.
Like people actually don't understand what this asset is.
So like seeing it trade like this is incredibly promising.
Do you think we could be getting close to the point
where Bitcoin has matured into something different
or do you think that still is way too early to say?
I think it's probably still too early to say,
but it was, I think, really encouraging, right?
That, you know, look, people were paying 350,000 bucks
for a jet ride out of the Middle East
and you got to get your capital out.
Like, let's be blunt.
Hey, how much more if I want to bring, you know, $40 million of gold in me in the luggage?
Like, well, it's going to be another versus, you know, you know, can I take this thumb drive?
Yeah, just put it in your pocket.
Right.
That is sort of everything it's supposed to be.
And and it did it.
So.
Let's see, I think it's still too early.
but I you know again I want to acknowledge what I think we just saw which is I guess
said for Bitcoin is I think very encouraging yeah so when you actually wrote in your letter
that you were going to sort of get rid of some Bitcoin what was your thinking there was that
around the idea of like four-year cycles you thought that it was just going to roll over I
think it was in like the low hundreds that you you maybe first said that and which clearly has
been a great trade i when you first did that i was like luke doesn't know this time's different
who knew someone who's been in the markets for 30 years would know better um but like what were
you looking at when you first started getting rid of some bitcoin yeah it was probably i started
getting nervous probably low hundreds i sold most of it call it 95 96 000 you know call it 23 24
ounces of gold right um what i started watching was that it was it started off just by it's not
acting the way it should right like m2 money supply was like this and bitcoin wasn't reacting
okay that's interesting but then it's you know well bitcoin always goes up by an order of
magnitude peak to peak against gold cycle to cycle except it's not in fact you know i was one
of them where i pointed out i was like bitcoin's unchanged versus gold over five years and that had
never happened over any other five-year period okay and that's kind of one of those things of
like maybe it means something maybe it doesn't right these these as bitcoin matures you're
going to see more of these things never and as bitcoin gets bigger this has never happened or
this always happens those will start breaking down so that was something that broke down
um you know in the same way that like last cycle 2022 right bitcoin has never traded below a prior
cycle huh didn't 2022 didn't mean it was over but also didn't mean it was a great buy at you know
40 you know 40 i mean in hindsight you make the case it it probably was but you understand what
i'm saying uh there were better buys to come um and then what i was seeing in sort of the bond
markets, right? When I was seeing what in the Japanese bond market, it yields up, yen down,
that's emerging market behavior. And that is in the JGB market, which is just, there's no way you
can look at that as a market participant and go, oh, this is going to end up good for Bitcoin.
Like that, that's, it's a, it's a horror show for risk assets. And so you just kind of go,
And then you see the way it's trading. And then, you know, there were legitimate concerns.
Well, then there were within all of this, right, you were seeing a whole bunch of, you know, OG whales or whatever, just sort of these big long term holders selling.
And it was holding up, right? Now, that was initially my reaction was, wow, these big guys are selling and it's not breaking like it used to.
That's really encouraging.
That was my initial read.
And then it starts breaking.
Yeah, selling $9 billion of coins.
Right.
Yeah, yeah, yeah.
Right.
And then it started breaking down.
Then you started having like a whole slew of who I would say are pro-Bitcoin people raising what to me as a tourist seeming to be relatively valid concerns around quantum and some of those types of things.
which again, I was not like, oh, this is an eminent. And like the markets are smarter than
all of us. And I'm watching Bitcoin trade as all of these things are happening. And the final straw
was just, and I wrote this and highlighted for clients before I ever sold. And it was just
two different momentum indicators on a monthly momentum charts. I don't pay a lot of attention
to technicals in the short term because I'm not a trader, but big sort of capital flow,
monthly sort of technical moves i have been doing this 30 years and when i see them i have
gotten my head kicked in enough to just not grow a brain and just respect them and i think i
said something that effect like i've been doing this long enough when when a technical indicator
breaks down you know if they just kind of you know in for a smooth landing and cross that's like
when they go through like a hot knife through butter that is like gtfo like game over
see you later and is it quantum is it is it japan is it war is it i don't care doesn't matter get me
out and i think the last part was just the context of understanding like and i i think i might have
even said this to you before but i i've been doing this 30 years and bitcoiners have been doing
bitcoin for three years and know way more than me about the technology and what have you whenever
uh but doing this 30 years and advising when i say doing this advising institutional investors
consulting with institutional investors for 30 years with the marginal bid, so much of the marginal
bid for Bitcoin coming from institutions over the last however many years and celebrated rightfully
so by Bitcoiners. I also knew that chart, there's like going to be no institutional interest in that
chart for some time. Everyone and their mothers is going to go, I'll wait, I'll let it come to me.
And that's kind of what they did. And so that was, it was not so much one thing. It was a whole lot of things. In the context of me, like, look, Bitcoin was a frigging enormous position for me personally. It was, it was, you know, irresponsibly large.
right and so you know having a three to five percent position in something and have it with
that chart is a completely different animal than where i was um in terms of positioning so i i just
you know i wanted to get uh i wanted to degross significantly and i did yeah on the quantum side
i like i'm no quantum expert but from people i've spoken to i think that's mainly a narrative issue
rather than anything real right now.
Like, I think quantum is still a long way off.
And if something does happen,
there's people working on ways that we can change Bitcoin
to make it quantum resistant.
But like to make this trade now a genius trade,
you obviously-
I got to buy back, huh?
You got to buy back.
Assuming your long-term thesis on Bitcoin hasn't changed.
No, it hasn't.
When do you?
Like, what do you need to see
before you start looking at this again?
I need to see more-
aggressive um nuclear printing if you will um is you know it's we literally have completely put
on the back burner this whole ai thing for the last two weeks and i think you know if this around
wars over which is sort of like they've managed to paper over ai concerns like friday after friday
here in the US, we had 92,000 jobs lost.
And you're seeing job openings in sort of every sector
where you'd expect AI to curtail job openings.
You're seeing job openings in free fall in finance.
You're seeing them fall in tech.
You are seeing them drop in services.
And I just keep hearing more and more
and seeing more and more signs in that world
that this is accelerated at an exponential rate.
And if that's the case, then our debt-based system,
consumer credit is going to be a giant smoking crater because of AI.
And we can debate if that's in three months or if that's in six months
or if that's in 18 months, but from what I can tell,
I don't think it's a debate that it's coming.
And we're seeing cracks in private credit.
I think there's gonna be a lot worse
and so my point is
and then we still have the situation
that Japan
trading like an emerging market
where yields are going up and the currency
is going down
so even if we get a resolution
on Iran
and geopolitics
I still am
I still don't like the risk
I still think we need
very aggressive
I still
I still think anything less than probably like negative interest rates is negative for risk, is tightening financial conditions.
And so at the very least, I don't think that's a world where I'm going to wake up in a month and Bitcoin is going to be at $120,000.
I'm going to go, oh, God, now I got to buy it back and what have you.
I could be totally wrong.
And if that happens, that's OK.
You know, some of that I would expect gold would probably go up with that and ease some of that pain.
um but that's that to me i still feel like we're in a risk-off world um there's a lot of really big
issues that have to be resolved and when you've got a lot of debt you don't have a lot of maneuvering
room to resolve those things it's interesting that you bring up the private credit stuff i was
doing a show with jeff snyder last week and he talked all about this and the issues that are
happening in the private credit markets. And he was saying, like, while he's not sure,
there's potential that this leads into another financial crisis type situation.
Do you think we could see another 2007 come out of this?
I don't know. I have not. There are things that remind me of the early days of it, right? Like
the last week with the three months ago, some BlackRock fund, you know, credit was marked at
100. And then, you know, three months later, it's marked at zero. You know, it's like the
the South Park chicken meme, right?
And it gone Right And and the one he was bringing up was Blue Owl I think Yeah Blue Owl I had not you know we written a little bit about that It not you know I don cover the company or anything but
People that I respect have said there's some real issues with credit quality.
And again.
And I think if you take a step, to me, I think it's a symptom of a broader issue of the pace of AI disruption of productivity growth is too fast.
We talked about this down in Nashville last fall where it's moving too fast.
And you're seeing this in youth unemployment.
You're seeing this in credit delinquencies.
you're starting to see unemployment move up a little bit off the lows
so could it be 2007?
maybe but to me it's a
the reason why I'm so concerned why I still am sort of okay
holding off on getting fully back to a really
overweight Bitcoin position is unlike 07
debt to GDP in 07 at the federal level was
60% right? We still had all that balance sheet room
The deficit was, I don't know, 1.5%, 2%, maybe 2.5%, even with a war going on.
Maybe it was 3%.
But now, if you have credit issues, and I think you're going to have consumer credit issues, simply because of the AI side.
It is just, it is, you know, as we talked about in the fall, like this, just to me, it reminds me so much of what China did to the Rust Belt, except, you know, the Rust Belt, you know, the loss of 35% of manufacturing jobs was ultimately the pace of that was governed by the speed at which the Chinese could build factories.
And as fast as they were, that was still, it took years and years.
Like, this is going to go really fast.
You know, it's, it moves, you know, connect up a couple of computers, boom, gone.
right so then people say well it's still it's still you know has hallucinations and and and
and of course right and that's the exact same you know basically the exact same thing i heard from
union guys here in the rust belt right well the chinese they're you know they just do low quality
stuff they're just cheap and it's like well their quality is good but they're still just cheap they're
not going to move up scale well their quality is still really good they're really cheap and they're
moving up scale well my job's gone and right so like you know we can debate is the ai hallucinatory
We can debate how quickly. We can't debate that it's going to keep getting better faster than you think it is. And so we can debate, hey, is this a three-month-away problem? Is this a six, nine, 12, 18-month-away problem? It's probably not a two-year-away problem.
And again, look in 2008, this is February of 08.
So we've already had, right, we've got 2005 home price, you know,
Greenspan raises rates in 04, summer of 04, summer of 05 home prices peak,
start to roll over, fall of 06, subprime losses start piling up at that point.
Oh, the worst case is like $60, $80 billion in losses.
Maybe 100 worst case.
That was like a huge shocker late in 06.
I remember that if I remember right.
May of 07, Bernanke says subprime is contained in essence.
July of 07, you know, poof, 3 billion in mortgage funds gone.
Wait, what?
Even then, the S&P set a record in October.
February of 08.
So after all of that, right before Bear Stearns goes boom in March of 08,
gets bailed out for two bucks.
In February of 2008, New York Times reports that the mortgage delinquency rate, mortgage delinquency and homes in foreclosure is across all homes in America is 7.3%.
92.7% of mortgages in America were current.
A month later, Bear Stearns.
Over the summer, Fannie Freddie, Bazooka, Lehman.
Literally seven months later, eight months later, we were that close to the entire financial system collapsing with 92.7% of mortgages current.
So the whole debate around this AI, AI is not going to take all the white collar jobs.
Like, you're right.
Not.
it's going to take a few of them and those people are going to pay their mortgages and their car
loans and credit card bills and then those things are going to blow up something in private credit
and private credit's going to have an issue and then the banks are going to pull back on lending
and so to me i don't know the whole private credit thing and how levered they are where
they're connected um i know the whole system's highly levered and i know that we are as a as a
government as a federal government with receipts at all time highs we are barely covering entitlements
plus interest expense and any kind of recession will force us into default on the treasuries or
entitlements or print the money and they'll print the money so um that to me is like the
i don't know how i don't know how they're going to get there but i'm like i'm pretty sure you know
to me, the only debate is, is like how fast, you know, it's, it's, you know, in golf, right.
They don't ask you, right. They don't ask in golf. They don't ask you how they just ask you how
many, um, you know, you know, in a, how fast, you know, in, in, in AI disruption of the economy
and will it create a deflationary, like sort of a credit crisis for me, it's not, you know,
how it's just how many months. See the, I I've not heard that. I've not thought about it that way,
where you talk about the Rust Belt and China taking those jobs.
And in reality, it doesn't matter who's taking the jobs,
just someone's taking the jobs and they're not yours anymore.
And we've seen what happened in the Rust Belt.
And there was a massive growth in the opioid epidemic
and alcoholism and people dying.
And it was very isolated from the coasts,
but this is not going to be.
This is going to be entirely different.
And it's really scary.
Why do things just...
I don't know if this is doomerism,
but things just seem to get worse, Luke.
You know, it's, I don't know.
It's a fascinating study in the American psyche, I think,
that it's just like, you know,
versus say like the Russian psyche, right?
Like you read a Russian novel and you're like,
oh my God, it is like one bad thing after another.
And then you like look at Russian history,
you're like, well, that checks out, right?
Whereas in America, right?
It's like American movies, they all have the same plot, right?
which is like, ah, something happens,
and ah, redemption gets the girl, happy ending.
That's like all American movies.
You talk to someone in the Rust Belt in America,
like, it's not all happy movie.
Like, we've been to any number of funerals
for kids that overdosed, parents that overdosed,
suicides, what have you.
We saw these jobs lost.
You know, 1965, Cleveland was like
the fifth richest city in America.
You know, by 1980, the river,
or 1975, the river was on fire, right?
So like it happens fast.
And, but it's fascinating, right?
The psyche of America of like,
hey, we always get a happy ending.
People are like, you never short America.
You never short America over the span of your lifetime.
You shorted America in November 23rd, 1963,
the day after they shot JFK
and you covered your short in 1980.
It's a pretty good time to short America.
If you shorted America in October 1929, you covered your short like 1933, 1935, pretty good short.
There's periods of times where stuff happens, and in different parts of the country.
If you shorted the American farm belt right before the Dust Bowl, horribly, that was a great short.
It was a disaster.
and when you have these
losses of
meaning
right, Plains Native Americans
in this country, they lost their meaning, they were put on
reservations, they drank themselves to death as they lost
their meaning, even though it was a better
way of life, they lost their meaning
you take a bunch of Soviet
apparatchiks, and under the Soviets things were not great
especially in the 70s and 80s, they were not
great at all they got a better way of life and they drank and shot themselves to death at
staggering rates through the 90s because they lost their meaning
2000s i lived through it ruspa you take people's meaning away they drink and shoot themselves to
death at staggering rates and so there's like this you know a lot of the people that are in
sort of in charge of the ai renaissance are for lack of a better word autists right they are
brilliant people whose eq is probably not really high um like oh it's just all gonna be great we're
never gonna have to work again elon's like well we're just gonna have everything's gonna be like
free and you're like how about between here and there dude like you know um and he doesn't have
to think about those things i was worth whatever 100 trillion dollars i wouldn't either um
but the rest of us do and that's like the reality and and forget about the social side of it
for a moment the credit side of it every single person
that loses their job or loses wages to an ai none of these people are living debt-free like
there are so few people living debt-free um so i just to me that's like a major major story around
you know i think ultimately rates will be much lower they could be negative i don't know how
the you know universal basic income job guarantee there's a lot of different ways you can try to
handle this um but we're not at the level of sort of uh panic that i would like to where i'm like
okay let's go i want to own everything i you know i'm much more rifle shot approach uh you know and
i'm in a very cautious position right now yeah the the crazy thing there about like shorting america
is i can see the sort of fabric of society breakdown that you're you're painting here like
the loss of meaning is is incredibly impactful but at the same time it will probably be american
companies that benefit the most so it's just like even greater wealth divide and i think ubi seems
just an obvious solution to this that I think will be tried.
Who knows if it'll work?
But at the end of the day, it seems to all lead back to
someone's going to press the money printing button.
I think so.
So how long do you think we have until this snowball gets out of control
and someone does have to do a turbo print?
I don't know, probably only three to six months,
depending on AI.
I mean, remember where we're like literally like two weeks ago
before the whole Iran thing where it was like, you know,
we literally had just gotten where, you know, you know,
Jack had fired 40% of his workers, right?
And it was like, holy cow, you know, and sort of all of the, you know,
you know, Kevin Bacon's, you know, you know,
everything is under control or what does he say in Animal House, right?
Remain calm, right?
The people, those people in markets, they're like, well, Jack, you know,
he has way too many people anyway.
and he had way too many people at X
and they got rid of all those people
and it didn't affect X's thing at all.
I'm like,
you're missing the entire point, dude.
Yes.
Okay, let's say you're 100% right.
And let's say they do that.
Let's say there's lots of organizations.
I had dinner last fall
with a corporate exec
fairly high up.
He's like, yeah, corporate.
60% of corporate is just showing up.
And I'm like...
That's insane.
right so you go in big corporations you showed up do your job go home okay great
how many of those just show up do your job like and again 92.7 only 7.3 percent of mortgages
going into delinquency or default kaboom whole system so 60 is showing up and just like
what percent of that's ai gonna take like morgan stanley just blew out three percent of the workers
with record profits, by the way.
And they didn't say anything about AI in the release,
but then New York Post over the weekend's like,
that execs are quietly saying it's AI related,
that they're just getting more efficient.
3%.
Boom.
3%.
Boom.
And we're not a manufacturer.
People are like, well, they're just all going to go to construction
and trades and all this.
You're like, come on.
You know, I've seen that movie.
Like, you don't teach old dogs new trick.
I'm an old dog.
You know, 50-year-olds don't go, like, leave banking.
Well, I was a commercial lender, and I had a golf membership.
I was down every day to four on the course by five.
And now I'm out of a job.
I got a mortgage.
I got two kids in college.
I got a $2,000 a month lease on my Mercedes or my Range Rover.
And now I got to go learn how to trade?
Come on.
These people are high.
This is not how that's going to go.
Maybe on the margin, but for most of them, no.
So I think it's going to happen faster than people think.
I really do.
And I think, look, the jobs number down 92,000.
Everything is star-spangled awesome, and we're losing 92,000 jobs.
I think it's a big deal.
And it was fascinating because of the Iran war.
No one said a thing.
If there was no war and we printed that jobs number, holy cow.
nobody even noticed it was like wag the dog i guess the the positive notes close out on is that
for people for the people that do harness ai and use it in like an interesting and meaningful and
and maybe novel way there's going to be massive opportunity there'll be a billion dollar company
run by one person at some point um so there is there is hope out there oh yeah right like that's
you know it's it's you know i think we even talked about this last time in nashore like like there's
there's a couple eighth graders in a garage happening like right now and there's they're
going to put some like 10 billion dollar u.s company out of business yeah and you know we
we literally said that in october this is right mid-october when we were together
and in february software as a service is like yep right which is essentially happening
a couple of eighth graders in a garage can now vibe code like that was the fear right and and
And AI is only going to get better.
So there's going to be a lot more of those.
And that's like super exciting and super scary, right?
It's like, you know, you've got to be on your game.
Like you can get disintermediated in some of these traditional white collar positions
and you can be a disintermediator.
And so like, okay, here we go.
Disruption everywhere.
Disruption is the theme of this show, I think.
Luke, this has been awesome.
Thank you very much for making the time.
I will let you go.
But before we do, tell everyone where they can get your newsletter and follow you.
I'm sure everyone knows.
No, thank you.
I appreciate it.
If they're interested in more information about our different mass market and institutional research products at FFTT-LLC.com and Twitter or X.
Sorry, Elon.
At Luke Groman, L-U-K-E-G-R-O-M-E-N.
I still can't get you saying X either.
Luke, thank you so much, man.
I appreciate it.
Thanks for having me on, buddy.
We'll talk to you soon.
Thank you.