What's up, everybody? Before we get started on the show, I just want to give a quick shout out to our new Forward Guidance newsletter. It runs five days a week and talks about all things macro, digital assets, and how the two worlds are starting to collide together. I'm a writer for it at least once a week, as well as a very talented editorial team.
And so check the link in our description to go sign up today. It's free and you won't regret it. All right, back to the show. What's up guys?
Great to see you all here. Before we get into it, I want to ask, has anybody here watched a Forward Guidance episode before? Just raise your hand if you have. Or on the margin.
Or on the margin. One or the other. It's actually Forward Marginal Guidance.
That's the official name of this. Forward Marginal Guidance, Guys in Portium Edition. Unfortunately, we don't have our other compatriot Tyler here today. He couldn't make it, but we got the three of us here, and we're super excited to do this. Quinn, for those that don't know you, maybe you can just introduce yourself real quick.
We won't let Mike do that because everybody here should already know who Mike is. But maybe if we don't, he can also add in there. That made me sound way cooler than I actually am.
So thanks, Felix. Yeah, I'm Quinn Thompson, founder and CIO. of Lekker Capital.
It's a macro hedge fund that focuses on both traditional macro and crypto. Launched in May, fully discretionary, no long or short mandate. So kind of go anywhere in both crypto and macro.
Awesome. Well, look, for those that are watching this or listening for the first time, what we do here is we normally round up the markets, what happened in the week, get our takes on what we're seeing out there, mostly focused on macro, but also through a crypto lens and how they both intersect. So with that in mind, we're just going to get right into this. I want to start this episode of Forward Guidance, Forward Marginal Guidance, by just looking at some of the economic data that we got in today.
We had the CPI print, which came in Hot versus expectations. I'll just go through a couple numbers that I have here, just a level set. But the core inflation month over month came in at 0.3% versus the consensus 0.2. On a year-over-year basis, it came in at 3.3 versus the consensus 3.2, which was actually the first increase on a year-over-year basis for core inflation since early 2023, I believe.
Headline also came in hot by 10 basis points. At the same time, on the other side of the spectrum of the labour market, we also got initial jobless claims that came out. And this is going to be something we're going to be talking about in here today, but this came in above expectations.
And there's a lot of potential noise occurring right now in those data dynamics because of everything that's going on. There's a lot of strikes going on, and there's a lot of hurricanes going on. So that's going to affect the high-frequency data of initial jobless claims. But set that aside.
A few other key insights that I saw before I got your guys'take on what we're seeing here. But overall, what was really interesting for me is the story around shelter inflation and owner's equivalent rent. The previous month, we actually saw an uptick, but we've seen that trend continue downwards. For those that aren't as in the weeds on inflation data, owner's equivalent rent and shelter inflation pretty much makes up like... 55% of all the inflation that we're seeing these days.
So it's the stickiest component, it's the most lag component, and that's what we're really trying to see to get back to that 2% target. So that came in lower than expectations, which was great. But on the other side of things, we saw goods actually rebound higher for the first time in a long time.
So most of the disinflation and outright deflation we've done on a month-over-month basis actually came from core goods. So to see that rebound, potential concern, but we're going to want to see more data. And then lastly, we also saw that services actually came in lower than expectations.
So the overall vibe from what we've seen today so far is somewhat sticky inflation, but I wouldn't really say it was re-accelerating inflation. Quinn, maybe we can start with you. What was your high level take from all of that?
Yeah, I think we're in this period where everyone, you know, a lot of the market impacts of rate cuts were front run. particularly in the yield curve and the currency markets with the dollar getting beaten down and actually bottoming on the day of the FOMC 50 basis points surprise. And that's kind of spooked a lot of people.
But the bright side of that was most of that yield strength and dollar strength is on the back of a stronger U.S. economic data with the labor report from last week. So I think we're in this digestion period where the market's trying to both price out some of the rate cuts that were in there. You know, today we heard one of the Fed speakers even float potentially pausing in November, which I don't think is going to happen. The forward guidance, they're kind of locked into that a little bit. And with the probably, you know, murky hurricane data that's going to come in the November NFP, if that shows, like, let's say it showed zero job growth in November, the Fed's not going to pause at that.
Like, there's a million reasons to say that data is... wrong because of the hurricane and it'll get revised higher, but that is, they're going to have to cut and stay on that path. So I think maybe there's a, there's a case to be made why they might pause in December or push out the cuts maybe to January after that next one.
But, you know, that's if the market is, if the economy is fine. And so, yeah, I think, you know, stocks don't really care. And we're seeing that. And, you know, the thing I'm looking most at is, how quickly the Middle East tensions calm and the geopolitical premium comes out of oil a little bit because that has contributed to this yield spike, oil spike, dollar spike, that's kind of brought the inflation scares back quicker than I think I would have expected. So I think the market's fine, the economy's fine, and we'll see through the data, but it's hard for the Fed to really change course too dramatically.
in such a short time after last meeting around an election and things like that. All right, I have thoughts here, but before I do, I want to actually poll the audience here. And I want to get a show of hands.
How many folks in the audience think that we have conquered inflation and that has been completely beaten? All right, that's interesting. So that's going to build on the point that I'm going to make, which is inflation.
There are mechanical reasons for inflation, but the tricky part of inflation is that it tends to be very psychological. It's very difficult to actually make quantitative analysis around it. I think the stock market is trading a little bit weird right now.
Crypto's trading a little bit weird. I think a lot of people are in wait and see mode until the election happens. I'm in the camp that I don't think it really matters that much whether Trump or Kamala win.
Because I think markets hate uncertainty. And even if it's like a less positive outcome for stocks, in the case that Kamala were to win, I think the market still can understand that. And then they get certainty that they need for prices to go back up. But I think the part about inflation is there's a mechanical part about it, which is the Fed is looking at unemployment.
Now they have their dual mandate. I don't think that they're looking at inflation very much. I think they think that they've conquered inflation.
And Dan Moorhead was on stage this morning talking about one of the biggest policy. errors that the Fed has made in a long time about injecting some $600 billion into the U.S. mortgage market. And there are a lot of potential rationales for why that might have happened. But part of it was they were looking at unemployment more than inflation data at the time.
And I think we're in the situation where they're going to set up to do that again. The other thing about inflation is that I think most people think that inflation is still with us. And then when I look at how our policymakers and our politicians are handling things, I see handouts all over the place.
on both sides of the aisle, right? So you see it on forgiving student loan debt or not taxing tips or whatever it is. And I think that's the reason that inflation tends to be very stop-start because it takes a while, right?
Like we had big inflation in the 40s and then the 70s. And there's a long period of time in between that, right? And people forget what inflation is like and how hard it is to conquer.
And so I don't think we've gotten to that psychological component yet. And I think in the long run, I'm just a big believer in this financial repression idea that- the only way to really solve our debt crisis long term is a nominal default, right? Not like this debt jubilee that we're just going to forgive all these debts and rip them up, but you're just nominally going to reset everything to inflation.
So I don't know when it's going to reignite, but I'd be in the secular. more long-term inflation camp. The thing I'd add on that is the market trying to, you mentioned it a little bit, decipher, is the Fed's target actually 2%? And I can point to many reasons, a 50 basis point cut.
when inflation is nowhere near 2% being one of them, that their implicit target is not truly 2%. And in the past, they moved to this inflation targeting regime. So they said pre-COVID, we were below 2% for a while.
Now we can run above 2% for a while. And so that 2% is like what all the economists argue about. And, you know, should they, shouldn't they, you know, right or wrong, but you just got to look at what is and they're, they're cutting rates when inflation is nowhere near it and bottoming.
So I think that's another part of this digestion period for the markets where it's like, because inflation is bad only if it instigates Fed action, right? So inflation all throughout 2021 was fantastic for. risk assets.
I mean, they weren't even acknowledging it as like a real thing. It was transitory, despite every sign being it more structural, you know, you had the supply chains and things to blame it on. So keep in mind that there's going to be these little spurts and misfits of fears before inflation actually comes back that, oh, the Fed cut and there's an inflation problem soon.
And I believe it will come back next year, but I believe the Fed will be very delayed in the response. response. And, you know, the dollar going lower while Bitcoin and gold and stocks continue to move higher will be your sign that they're actually still too loose until, you know, inflation prints a four handle or a four and a half handle.
And they're like, and then, you know, the populace, you know, in society kind of comes back and says, okay, you got to do something here. Yeah, I mean, I think the big theme we're hitting on here right now is that there's a lot of noise and there's a lot of uncertainty. So one point that Mike was mentioning about the labor market and the Fed's focus on the labor market right now, that's extremely important to focus on. So, you know, if you've been somebody who's been, you know, trying to trade economic data, especially, you know, if you're in crypto and you're trying to just like chime in and quickly look at what the macro data is doing, you know, you're probably pretty used to being up early and focused on the CPI prints.
But you need to shift that mindset towards the labor market because that's where the Fed put its truck. now. The issue is the labour market data is extremely noisy and it's about to get even way more noisy because of what's going on with these hurricanes. So you know just the level set here on a couple points, I'm pretty strongly not in the recession camp.
I'm pretty strongly in the camp that a lot of the unemployment data has been very noisy because of labour supply growth due to immigration and these ideas that have thrown off these traditional signals like the SOM rule which captures the momentum. It basically says these are the early innings of a recession. We saw that SOMROLL get triggered a couple months ago, and then it's actually reversed last month, which has pretty much never happened before.
So this noisiness is going to get a lot worse. You know, in the next few weeks here, we're going to see some initial jobless claims that come out every week, and they're going to be way above expectations because of this. That's going to lead, you know, I was talking to Jim Bianco this morning, and he was saying, I think it was Bank of, or JP Morgan, thinks that we're going to get a negative jobs print next month.
And that's going to lead to a skyrocketing unemployment rate. We need to really focus in on the fact that it's mostly temporary layoffs and their temporary dynamics, but it's going to skew the perception of things. So in a month's time, I guarantee you, you're going to see a lot of people start talking about a recession again.
We need to dig into the data and it's noisy data. It's even, you know, it's screwed up a little bit about what the Fed is focusing on. You know, they went 50 bips, but literally a couple of weeks later, we started to see a lot of upside surprises in the economic data. that now they're they're a little bit caught flat-footed and like quinn said you know fed bostick came out this morning and started talking about a potential pause in november which is uh you know pretty different from where the narrative was a couple weeks ago um quinn you and i backstage before we came up here we're talking about just it seems like the entire market and world is just in this like it's so over we're so back i have one on the jobs data actually before we go there which So one thing also about digging deeper into jobs reports, there was this string of beats for the last couple months. And everyone was like, wow, the economy is doing so well.
But if you looked underneath, the jobs were getting created in government services and health care. So this is literally the government creating these jobs themselves. So I kind of wonder if part of the reason that the Fed is looking more at unemployment than they are at inflation at the moment is like, holy shit, unemployment is going up and we're creating all these jobs ourselves. So maybe there is a little bit. something to look at here.
Yeah, fiscal dominance. That's why they need to cut rates because there's a private productive sector recession that needs to be fixed via lowering the front end, which is inflationary. So yeah, that's about totally.
And yeah, maybe we can just have one more point here on the labor market before we move on from it. But paired with what Mike is saying about government jobs creation is the other side of this coin. And this is what a lot of the folks that think we're in a recession look at is the downside revisions that we see in the job sprints. And, you know, it's valid.
A couple of months ago, we saw that. that negative 800,000 jobs revisions for the past year. You know, we've seen this consistent downside revisions in jobs prints.
You know, my argument is that you can just bake it into your analysis from here on. You know, it's based on how the NFPs are surveyed, based on a confidence interval that just gets closer and closer to be more specific and finalized as the tax receipts come in. So it's fairly forecastable.
So, you know, you can just bake in that revision analysis. into, you know, last week we got the super hot jobs report. You can just bake that into your forecast and just look at the trend change that's occurring and you can still get a signal from there. I think that's a pretty easy way to do it. So shifting gears to just something I wanted to talk a bit about is just this it's over, we're so back type dynamic that we're also used to in crypto, but we're seeing it's just being so much more pervasive in macro as well.
We're literally, you know, early August, we saw the yen carry trade unwind at the same time that we saw horrible labor jobs report. come out and suddenly everybody was talking about that. You know, there's folks on CNBC talking about a 75 bps intermeeting cut, which is, you know, outright ridiculous.
A month later, we're back into, you know, we need to think about pausing in November and 50 bps was a mistake. So we're just whipsawing from each extreme direction. Quinn, how do you think we got here?
And why is it so insane like this? I'm gonna, because Tyler's not with us, I'm gonna put my honorary conspiratorial Tyler hat on and talk about the boomers and the fourth turning. But really it is, I mean, one of the things I wrote in my monthly letter that I put out a couple days ago was, you know, S&P at all-time highs, Bitcoin's close to all-time highs, gold's at all-time highs.
everything's happy, but then you peel back the onion. And in the last two months, we've had the second and third largest stock markets in the world have plus or minus 10% days, Japan in August, the third largest, China. Now they've had plus 10%.
minus 10, you know, that's not healthy for market structure. And that doesn't scream calm, cool and collected, you know, under the surface. And so you're really looking at a financial global financial system that's is centrally planned. I mean, you can point to I tallied it up the other day, it's like 10 things that the Fed and Treasury have done since 2022 to basically suppress long term bond yields and volatility started in October 22. And we had the Bank of England guilt crisis, the March banking crisis in March 2023. They front-loaded in October 2023 all of the U.S. debt issuance. They reduced coupon issuance, so they weren't issuing long-term treasuries.
They're just reducing the RRP program. Yellen's kept that going into this year. This quarter, they're burning down the TGA, $150 billion.
I mean, the list goes on and on. And it's also no coincidence that the second the Fed did. 50, you know, that catches them up to the ECB's 50. Bank of Canada just did 50. China comes in three days later with the bazookas.
You know, two days later, Bank of Japan stops talking about hiking in a matter of days. I mean, this is like, and so you're kind of looking at a world where when, you know, years ago, when you had a central bank or a government spending too much money and then monetizing that debt and that burden, it would reflect in their currency, right? You'd see fiscal irresponsibility.
in a currency that would get minus 10%. Inflation hits the country. They have to hike rates, be more responsible with their monetary policy. But it's all a cabal of central banks today.
And if you're looking at cross-currency pairs, it doesn't do anything because they're dampening the volatility in between, and they're all in cahoots to basically inflate out of the debt. So you really have to be kind of open-minded. I mean, maybe it sounds very conspiratorial. If I tell this to someone, they're like, like, you're crazy.
Like my parents, you know, like, what are you talking about? You don't believe the system. It's not working for you.
But that's what's happening. And then election years are very positive for markets because all of the stimulus and liquidity is front loaded to keep things together before the election. And, you know, it wouldn't be surprised at all if 2025 is a tough year for risk assets because you're facing a debt ceiling on January 1st.
you know you're gonna we'll see what what the house and senate look like in in the new administration uh just all the problems that the can was kind of kicked on bank of japan is going to have to probably talk about i mean the yen's back to almost 150. so like these are just kicking the can and i think that's the bulk case for bitcoin because we know they don't allow unemployment in recessions anymore and that's the world we live in so they'll find whatever way to kind of massage the data to say we need to we need to ease policy. Mike, I want to ask you, you know, you've done the macro interviewing game quite a bit longer than I have. You've talked to some very smart folks out there over the years.
And, you know, this big game that, you know, Quinn's talking about here, about just missing this coordinated global central banking game to achieve the financial repression that you talk a bit about. Why do you think there's just... Such a difference between, you know, the crypto generation, the people in this audience probably understand the big game at hand a lot better than some of these, you know, older veterans who are more in the mindset of looking at things.
I wouldn't say they don't look at them through a conspiracy lens, but they're a bit more doubtful. You know, the idea of the Bank of Japan coordinating with the Fed, it's like, oh, no, they don't do that. But why do you feel like there's just like this, you know, dispersion between these two ideologies that, you know, just at odds with each other? Yeah, so I... the way that I feel about the tinfoil hat stuff in general, which I'm actually somewhat, somewhat sympathetic to, is there's a comedian, do you guys know George Carlin, the comedian?
He had a great line about this, which was, you don't need a formal conspiracy when interests converge. When you have a lot of very powerful people who all have the same set of incentives... You don't need to get people in a smoky room and say, hey, we're going to do X, Y, and Z thing Illuminati style.
Everyone's just kind of wealthy and powerful, and they know what the interests are of other people, and they sort of loosely coordinate and act like that. So what are the interests today? I'm also not a believer that you know there's some Illuminati and these people are trying to screw everyone and devalue you. I generally think people do things for good reasons and I think what happened actually is that we actually had it a lot of you this you can trace actually back to World War two and there's a there's an interesting analogy around the GI Bill which was at the time the largest wealth transfer from the old to the young actually in the form of new GIs that were coming they finance mortgages, education, credit for small businesses, huge wealth transfer led to this big baby boom and that carried us through an entire generation.
That is like what most people who are in their 40s and 50s and 60s that's kind of the world that they grew up in. This world of structural growth where there was a huge investment in the youth and the entire country at least the United States benefited from that. So where are we today?
Now the GI Bill is actually not the largest transfer of wealth that came in COVID. And it went from the old to the young, right? Because there was a huge $7 trillion bazooka that got aimed at the stock market, at US mortgages, and it propped up prices for asset owners.
And so why is there this weird disillusionment, right? Why are young people more susceptible to conspiracy theories than You know, their old counterparts, which is not typically how it is, right? Your crazy uncle at Thanksgiving, right? That's the stereotype. I think it's because the institutions in power today are generally protecting people of one demographic.
And again, it's not for bad reasons. It's completely rational. I don't even know if I would make different choices if I were in their seats.
Like, it's all been very logical, and I think it was very well-intentioned. But that's why I see this divide in between. And I don't know, I know it's so right and left in the United States right now, and every side hates everyone else, but there's another, it's a subtle difference too, it's between old and young. I think.
Yeah, the propping up asset prices was the rich, the wealthy, not the college kids, not the young people. Yeah. And this is what people get mixed up.
And I think this has actually been a large cause of the confusion between whether we're in a recession or we're not in a recession, is that we are in a K-shaped economy. I don't need to explain that term. We've all heard it a lot over the last few years. But coming out of COVID, the lower income class is that own-owned assets.
are struggling because we're living in a cost of living crisis and I truly believe that this we're not used to these inflationary dynamics anymore because we haven't had them in a long time so they get misconstrued for a deflationary credit event when in reality it's just the price of goods are going up and it's squeezing you know basically how much they can afford things so that's happening on on the lower side of the k at the same time that people that own assets you know people that are just you know hanging out in money market funds earning four four and a half percent five where it is you know Every year, they got their real estate, you know, like Mike was saying, and, you know, QE came out and is just buying up MBS nonstop. That's bidding up housing prices. So, you know, it is somewhat logical to see that this distinction between, you know, I don't want to say the doomers that think everything's messed up, but, you know, it does make sense.
I do understand that. I'll also provide the other side of this case, which is that, you know. the older you are, the more experience you have. There's not a lot of gray hair on this stage.
It's possible that, you know, there's very good reason, right, for this divergence of perspective, because you live a long time, you see a lot of crazy stuff, you're more open minded, right? So I will say there's an opposite case to what we're making as well. I want to shift a little bit more to some tangible stuff just around markets and what we're seeing there in terms of maybe starting off with, again, we started to talk a little bit about this rate cutting cycle, but I think that's the key start to understand.
how different asset classes are being reflected at the moment. But starting off, I'll just chime off here on my opinion on this rate cutting cycle, is that obviously a month ago we got the 50 bps cut, and a lot of people were expecting the dollar to roll over. We actually saw the opposite occur, where because of just how aggressively the forward curve was priced, and just how aggressive the Fed was on the onset of going for 50 bps, It actually is going to lower and shorten the rate cutting cycle.
So then, you know, if we're talking about getting back to neutral rate of roughly 3%, you know, at that time when that 50 bps cut came out, the market was a lot more aggressive than the Fed in terms of just how quickly we get back to that neutral 3%. So we actually had to price out some of this velocity and speed of rate cuts. So it's actually been quite interesting to see that despite the 50 bps cut. We've seen long bond yields go up and we've seen the dollar go up as well at the same time. You know, you can almost call it a hawkish 50 bps cut, which is super counterintuitive.
But, you know, from a high level, I think from them being a few things here, from them being able to get under this rate cutting cycle so aggressively from the start, it's going to shorten it. I'm not in the camp of outright inflation reacceleration, maybe late in 2025. But it takes time for that to build, especially when you're fighting against China, which is just in a deflationary spiral right now. So I sort of see inflation sticky, somewhat like we've seen in the print today. But overall, you know, cutting into an economy that's seeing resilient growth, to me, I'm just crazy bullish on most assets, crazy bearish on long-end bonds and any sort of duration like that. But maybe, Quinn, I can just get your perspective on how much of that do you align with?
Where do you disagree? And then maybe we can also shift into, you know, we're all clearly bullish. bullish but you know crypto has not been reflecting that recently so maybe your thoughts there as well first off uh the election is on everybody's mind uh so i think that matters but um i mean it seems like there's this like hesitancy to to put risk on before before november 5th and particularly in the crypto markets um stock market doesn't care because I don't think it really matters. I'd say the macro is like when you think about the price of Bitcoin from March peak at 73, 74 to 50 and the liquidation in August to 60, or whatever we're at, we've had these dips that have all been defended pretty solidly.
And I think from September 17th, FOMC 50 basis points and on, it is a markedly different macro environment where the Fed has backed in Jackson Hole and then kind of backstopped the labor market despite inflation being sticky. So that changes what you want to own, because if they are cutting into this. inflationary regime, whether it's re-accelerating, whether it's just sticky, etc. They're backstopping the economy. So you're going to need to be invested in things that protect your real purchasing power, which is going to be risk assets.
So the biggest beef probably is that equities are expensive. On a historical multiple basis, they are expensive. They're probably like 10% or 15% off all-time high, like four P's.
So that's not great. And you're not going to see people bid that. to records unless something crazy on the stimulus side happens. So I think that just, but you're also not going to see the floor fall out, right?
Because you know, you know, these last two dips on the chart look very well supported and well bid. NVIDIA is, you know, rivaling all-time highs again. And so what happens when there's not a ton of upside in equities, but the Fed is supporting the market and the economy's fine and you have inflation, that's like a 2021 environment.
So I actually think... You know, there's a bit of chatter today about potential for the November cut to come off the table. I don't think that's going to happen.
I do, like, picture this, how strongly dovish the Fed was with their dot plots at the September meeting. And then we're going to get a labor report in November that's going to show some crazy low number from the hurricane. And you can write that off as the hurricane, but the Fed is not in a position to say, well, that was really weak, but we think it's going to get revised higher.
And so we're going to take the cut off the table. I mean, that makes no, they're just, that's not how the Fed operates. So then you're looking at a position going into September or going into December where you've got 75 bases of cuts behind you. You have probably a Republican in the White House.
And I think I just don't, I mean, the 10 year, the bond yields are starting to reflect a price of a higher growth environment. So a week ago I thought no way was that price for a potential Trump victory or reacceleration of the economy no matter who wins. So that's I think a little more fair but I do think that the glaring one is Bitcoin that's not and you know if you look at the tape most recently it does look like the government's selling part of that for 4.4 billion that they got approval earlier this week and I think is what's keeping it down. I mean today and yesterday most recently you can see ETH outperforming despite zero inflows into the ETF. I mean, how does that work?
Idiosyncratic selling in Bitcoin. And you can see it in the Coinbase premium. And so that's my guess.
I think it's a lot of noise and chop until that election. But with the macro at your back and in a fundamentally different position than when Bitcoin was at 55 or other low levels like this, plus I don't think the November, December positive. you know, potential election outcomes and reacceleration of the economy are priced in.
That's probably the area I would say is the most interesting to me. Yeah, so I think we should actually talk about like the polymarket odds that are moving quite a bit on the election at the current moment. I, you know, I think that there's a little bit, you know, we've been talking about stocks and cryptos if they're very similar.
But, you know, S&P is doing great this year, right? If you just close your eyes and buy, I mean, there's no reason to be upset if you own that. I mean, that's been straight up. And really, there's not any reason to be upset about crypto either. This is where I think we've got short attention spans.
I mean, I think that we probably pulled forward a lot of the price appreciation. when the ETFs launched and that was a little bit of a surprise. The market didn't believe it. Bitcoin appreciated quite a bit and it made it not much of a bear market. I mean, you know, past crypto winters have been like desolate.
Like there were not 20,000 person conferences going on in 2019. It was like, you're lucky if you're getting 400 people in a room, right? Talking about the blockchain and enterprise blockchain and stuff like that. That was the scene. I mean, it's completely different.
And I think we just pulled forward a lot of that growth. And eventually, like, Bitcoin just had to correct, and it corrected in terms of time, and it's ranged ever since, and I think that's very okay. I also think that, you know, I think it's interesting to think about, I mean, one thing to just consider is it's so consensus, it's such a consensus view that if Trump wins, it's just going to be crazy bullish for everything by risk with both hands. And every time, everyone is so lined up on that belief.
I've just never seen it be right. Never, ever. I don't have gray hair, you know, but... but I've just never seen it work for me once. And so, you know, it kind of makes you think, well, what could I be getting wrong here?
And I think that we were talking about something pretty interesting backstage. It's interesting to think about how Bitcoin versus a basket of alts might perform in a Kamala versus Trump victory. And, you know, right now the thinking is that if Trump wins, he's going to make it much easier to operate protocols based out of the United States.
Maybe we'll relax some of the geofencing and we can actually serve, you know, crypto-based products to users in the United States. which is great, right? It should be super bullish for alts. The bare case for that actually is that now these protocols are actually able to earn revenue. Maybe they're able to return some of that to token holders without it getting labeled security.
Well, then I won't ask, it's like the Russ Hanneman quote, right? It's like, why would you earn revenue? Because everyone's going to ask how much?
And then it's never going to be enough. And you went from being a potential pure play to the two times revenue dog. And there's a pretty interesting, you know, the more I, I know we were talking about this just an hour ago, but the more I chew on that. I mean, that's probably right. Like most of the alts are wrong in terms of their valuations.
Like 90%, 98, 99.5% are overvalued and like 0.5% are undervalued because they're going to be huge winners. And so, you know, it's just, it just bears in mind that it rarely ever plays out exactly how you think it's going to play out. And the future is always surprising, but I think that's an interesting case to discuss.
Yeah, I've been. more outspoken than the average. Most people don't like to go into politics, but I think pretty high degree of confidence Trump's going to win.
But I think how everyone's expecting on that note to play it is going to be wrong because one of the things that people don't talk about in the regulatory stamp of approval that presumably comes when you have the vice president owning crypto assets in his personal portfolio and they're not socialists is that the increase. incumbents of financial services presumably have a massive advantage because stable coins now being adopted by banks and financial institutions like Who have the customer base like JP Morgan Chase now can just you know add stable coins to their your account you have an address like or the NYC and CBOE and all these players can now who already have the users and Those use then that's competition for defiance up and the valuation The thing I would push back is if anybody is from the traditional world, investing world, like, you know that there's never a bad asset. It's just a bad price.
And, you know, even the shittiest, like, bankrupt companies that trade publicly, there's a buyer at some price. And, you know, I like to poke the bear with the ETH maxis because it's fun. But I don't think it's a crap asset necessarily.
I just think it's a bad price. And the Bitcoin ETF. put it on the main stage where you could say, I think Bitcoin has properties that are superior to gold and it's trading at one 15th of the market cap.
And so if I believe in the, you know, structural reasons to buy gold, you know, I should have like 10 or 1% of my gold allocation in Bitcoin. Uh, ETH got that ETF, you know, big woohoo. And, uh, you're like, Oh, this thing is a $250 billion asset. Maybe it's DeFi, but then it's like worth more than any of the large US U.S. banks market cap, or maybe it's an app store and it's like, you know, a quarter of Apple's valuation or whatever. And you're like, and traditional people are like, Ooh, like.
Ooh, and, uh, ooh, and, uh, so, that, like, people are whistling by the graveyard, I think, on the rest of the alt complex, because if you, if you hear, you know, it's gonna be so great for alt, it's gonna be so good, but, you know, it's right now just crypto native PVP race to the narrative. But no new money is, like stable coins haven't grown in three weeks. The ETFs are chopping along and all the new money is coming in through ETFs.
I think like if there's an alt season, quote unquote, that happens, it's in crypto equities. Because all the money's coming in the ETF. Oh, what should I buy? I should buy a Bitcoin miner.
Look at MicroStrategy. Look at it. I thought MicroStrategy would do very poorly after the Bitcoin ETFs because there's a premium, right?
Like all these public market investors that wanted exposure to Bitcoin, okay, you had a handful of crypto equities you could buy by proxy. But now you got the ETF. So anyone can just buy the ETF.
And I thought that premium would compress and MicroStrategy would stop trading so well. But it is nuts. I mean, it's pumping.
People like leverage. It's a different kind of leverage. It's not perp leverage. You know, it's convertible. It's respectable trad leverage.
Yeah, it's tradfi leverage. We love tradfi leverage. Beautiful leverage.
Yeah. Look, we got about three minutes here left. I just want to wrap up by just, you know, really hitting home that this is actually something that I was listening to Mike's panel this morning, talking to some macro legends with a lot more decades of experience than I. But one thing that was really interesting was just hearing Dan Moorhead talk about how, you know, he thinks we're going to have a booming economy.
He's of the opinion, and he's been correct for the last couple of years, that... you know, rates are secularly higher now. And I just want to really hit home that Bitcoin is an asset that, yes, was born during a time of ZERP, zero interest rates, and QE, but that's not what it's dependent on.
You know, it's same as gold. The correlation of gold changes over time. Sometimes it trades like a geopolitical asset.
Sometimes it's just trading in line with real yields and where they're headed. I think Bitcoin is heading into that world as well. And I think there's a place for it in a world where, you know, a lot of what we're talking about, where we're seeing, you know, a higher neutral rate, you know, accelerating inflation.
Yes, it didn't work that well in 2022, 2023, but that's because there's also a credit deleveraging happening at the same time. And, you know, the Fed was coming out guns blazing, talking about hiking. That's obviously going to take out an asset that has a high correlation to the Qs.
But, you know, just overall, you know, don't just be anchored on QE and ZERP. It changes its correlation over time overall. Just want to wrap it up there. Any final comments from you guys before we wrap up there? I have one thing for people to think about.
And I know you're talking about the underperformance of the ETH ETF complex, which I think is pretty obvious just looking at the numbers. But I think that for some of these other L1s, there's a really interesting opportunity where Bitcoin is kind of the original meme coin, just like gold is a meme coin, right? There's no cash flows around it.
And so it kind of can be valued however you want it to be valued. And... That's not to say it's not valuable.
A ton of people find gold valuable. A ton of people find Bitcoin valuable. But I think a lot of people just really get hung up because they can't value it based on cash flows. And I think that the opportunity, I've been saying this for a long time, I wish he thought of it like this. And I think Solana's thinking about it like this, but you can be this sort of store of value type asset that generates a respectable yield, which is basically what bonds are, right?
That's like, there's some capital appreciation, there's some yield that you end up getting. and I look at these L1s, and it's a little bit of a stretch, I know, but they look similar to me. And I think that's the thing. I still think that the L1 trade is not dead, and that's the big opportunity for the next generation. That would be my hot take.
Quinn, 20 seconds. Let's hear your final thoughts. Yeah, I think you just buy dips of Bitcoin into the election and wake up the sixth happy camper and kind of I mean the election itself is I don't think a ton of even if Kamala wins the macro is the macro and it's an inflationary environment. I mean, potentially the stimulus is going to be even better if, if she wins.
So I think it's just a more, uh, path dependency thing where, you know, you probably get a dip and, you know, does, Does it take longer for that macro to play out and a slower kind of grind up? Or a Trump victory, obviously people are going to speculate and probably pull forward months of price appreciation into a shorter time horizon. So I think that's a big determinant as to how quickly the cycle ends as well, is how kind of front run, kind of like we were earlier this year. And the bigger risks, then I see the election itself.
The US is fine. The government's fine. it's going to be corrupt the next day too after we wake up.
But the things like geopolitical, you know, right now, that's kind of the status quo. People aren't doing crazy things. China's, you know, there's a headline this week about Taiwan, you know, the Israel-Iran stuff, the Russia-Ukraine stuff. I think when you kind of loosen up the puzzle pieces on some of these big elections, that's, you know, you get people starting to perform strategically at that front.
So those are the end of inflation, I think, 2020. 2025 is like a maybe dicier period. Yeah. Nice.
Well said. Well, look, thanks guys for anybody that was listening to the first time, uh, go on the block works macro channel, subscribe to Ford guidance. We do this every week and I interview great macro traders and thinkers as well. Um, thanks for joining us. Thanks everyone.