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"We're Past The Point Of No Return" | Luke Gromen and Lyn Alden — Transcript

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0:41All right.
0:41Good morning, Luke and Lynn.
0:42Thank you so much for joining me today.
0:43I'm incredibly excited to have this conversation
0:45because the last one in April was phenomenal.
0:47And we've got so much to get into.
0:49So since then, the Strait of Hormuz has stayed close,
0:51but also appears to be the dog that didn't bark.
0:53The tenures gone from 4.4 to 4.8% is doubled.
0:56Buybacks at the long end of the curve, wars took the chair.
0:58Gold had a record in January before the war,
1:00but then it had its worst quarter since 2013.
1:03All while central banks were buying record amounts.
1:05Bitcoin bottomed in the low 60s,
1:06and the Japanese yields are at levels not seen since the 1990s.
1:09So with all of that, Luke, starting with you.
1:12What is your general read on
1:13what's happening right now in the sovereign debt markets?
1:16Because it seems to me this isn't just a US thing.
1:18Is this a treasury market event or is it something bigger?
1:22It's a treasury market event and something bigger.
1:25Treasuries.
1:27The center of all of it,
1:28as we're fond of being told, or as I'm fond of being told. So.
1:34This is a Western sovereign debt issue.
1:38There's one nation conspicuously or conspicuously absent
1:41in this bond route, which is China.
1:44And part of
1:47that is because China has taken pain.
1:50China has eaten bitterness. Right?
1:52They've let housing fall.
1:53They've taken they've been willing to take pain in the way the West has not.
1:58And so I,
2:01I think there is also another dynamic to what's happening in the West.
2:04In the West side I think is very insidious and underappreciated.
2:08It's almost like a snake eating its tail, which is hyperscalers,
2:13particularly in the US, borrowing lots of money.
2:18As as I heard this week on Wall Street, hyperscalers are the bond vigilantes,
2:23and and meta etc.
2:27they they're borrowing at 5 to 6%.
2:29And last week on the podcast, it was pointed out
2:33that they could easily borrow to 8% or more and still make their math work
2:36in the near term.
2:37And so that's what rates are going all else equal.
2:40The problem, of course, is
2:42the US and the West can't afford much above 4.8% of the ten year.
2:46And the other problem, as we're starting to see with disappointing jobs
2:50numbers at disappointing job openings number this week, the JOLTS number
2:54AI is
2:57the whole point of AI is that they are.
3:01The hyperscalers are borrowing trillions, competing with Beasant, raising Besson's
3:06cost of capital, which is then raising the West's cost of capital
3:10with a goal of undermining best into the entire Western white collar tax base.
3:15Because unless AI removes a lot of jobs from corporate
3:19America, it's there's no investment case to it.
3:22Yes, those people will find their jobs eventually, but between here
3:26and there, productivity means a lot of people get fired.
3:29That's what that means in the short run.
3:32Problem is that
3:33half of Besson's tax base comes from employment.
3:36So we're in this, I think, loop of rising rates.
3:41Besant does something to fight.
3:43It intervenes in the yen, blah, blah, double up sizes, buybacks.
3:46None of it's going to be enough.
3:48Ultimately, they're going to have to do something very, very
3:52as Lynn would say, there's no stopping this train.
3:55There's no stopping the snake eating its tail
3:57until they essentially cut off its head, which is
4:01full on yield curve control in some way, shape or form.
4:03So I'll stop there
4:05Just quickly before Lynn jumps in there, I just want to unpack one little aspect
4:08of it. You mentioned that China was suspiciously not included there.
4:11What specifically in China are you seeing that's different.
4:15Well, the ten year Treasury or ten year
4:17Chinese government bond yields are 1.5%, 1.4%.
4:22They are 300 basis points, 350
4:26United States.
4:27They're the lowest in the world. They used to be higher.
4:29And they are than sort of everybody.
4:31And over the last 15 years or so, they're not the lowest in the world.
4:35And what are they doing?
4:37There's two things.
4:38Number one, obviously they have strict capital controls.
4:41So there are
4:45money's not coming in in any real way.
4:47Money's not going out in any real way. And.
4:52You've had a very deflationary environment.
4:54And in the West, everyone that is a China hawk points out to all their
4:59their housing market is crashed.
5:00And so people are flocking into bonds and that's driving yields out. Yes.
5:04And they leave out the other parts because normally China hawks are saying
5:09how screwed the Chinese consumer is, how poor they are, etc., etc..
5:12Where's the money coming from to bid bonds to that level,
5:16unless they have a lot of money. And that's the answer.
5:18Chinese consumers have massive amount of savings and they've been bidding bonds.
5:22That's the first point.
5:23The other point that again here too is left out by every China hawk
5:27because it doesn't fit the narrative is they have employed AI
5:32in a very different way than the West, which is it's almost like
5:37they are applying it in sort of the continuous improvement
5:41Japanese type of way in terms of manufacturing
5:45all along the manufacturing process to continuously improve.
5:50And so a not insignificant portion of this.
5:55Again, what the China hawks call overproduction of Chinese goods
6:00is the massive productivity
6:02driver of AI being applied all
6:07along the manufacturing process throughout China.
6:10And so you get things like what a friend of mine just sent,
6:14which is an electric scooter that can be charged for 1 to 2
6:18and B for a 60 to 100 kilometer range.
6:22Right.
6:22So that A one rem and B is $0.16 to go 40 miles.
6:27And
6:30the scooter costs $500 fully loaded,
6:33and BYD cars
6:3510,000 bucks that are probably better than anything we have here in the West.
6:39So the point here is, is that
6:41China is in wholesale deflation because of how they are.
6:45Not just it's not just the negative,
6:47oh, China's screwed because they let real estate collapse.
6:51It's also that they are applying AI.
6:55They've decided to try to do a continuous improvement of manufacturing,
6:59which is very deflationary, as opposed to the Western model,
7:02which is, hey, let's create God in a box and then charge everybody to use it.
7:07And so when you look at two things,
7:11they finally I would point out is someone pointed out to me, China's
7:14real rates are positive at 1.4% on the ten year.
7:18They're one of the only big countries in the world with a positive real rate.
7:21And so.
7:23That's the reason why rates are that low.
7:27They are in
7:28both because they've been willing to take pain.
7:31Right? US tenure go down. Just let everything collapse.
7:33Well even then it wouldn't work.
7:34But, let let housing collapse.
7:37Americans won't let housing collapse.
7:39Chinese let housing
7:39collapse ten years ago, and now they're in a deflationary period,
7:43with AI being applied in a different way than we are.
7:48It's we're applying AI in a very inflationary way for the moment.
7:52Right?
7:52Because we're building all this stuff and we simply don't have the
7:56capacity engineers grid, etc., to do it.
7:59And so we're, we're we're driving inflation here with all that.
8:01So that's that's why Chinese yields are as low as they are.
8:06There's a there's a lot to unpack there.
8:08Where would you like to begin, my friend? A lot of topics.
8:10I mean yeah, China's had kind of the opposite asset performance obviously.
8:14So that you know,
8:14they've had if you're an investor in Chinese real estate,
8:17you've had a really bad time for a long period time.
8:19If you invested in Chinese stocks, you've had a really bad time.
8:21They've been constantly willing to sacrifice their mega caps and sacrifice
8:25the real estate market.
8:26They've been trying to internationalize their bond market by by keeping that,
8:31you know, pretty money good.
8:32Basically
8:33keeping both the value of their currency pretty stable in currency terms.
8:37And then also, you know, obviously the yields that Lucas went into,
8:40they've created that very deflationary environment.
8:42They're on opposite sides obviously from the US on a trade perspective.
8:45So they're running absolutely massive trade
8:49surpluses with the rest of the world, while the US runs
8:51absolutely massive trade deficits to the rest of world, especially in goods.
8:54And we're on we're in very different sides.
8:57I mean, as I'm as I'm here in Egypt, I mean, over the past five years,
9:00Chinese cars have just taken over the road.
9:02And it's they've gone through the same pathway that,
9:06like other Asian manufacturers went through.
9:08So like when hands were fairly new,
9:11you know, as a major exporter, they were kind of known as low quality.
9:14And then you fast forward a couple, you know, several years and then decades.
9:18Honda's are perfectly acceptable vehicles along with many other types of vehicles.
9:21And China is kind of going through that loop where five years ago it was like,
9:26you know, if you couldn't afford a like Honda's popular here, a lot
9:29of European manufacturers are popping here and you can afford one of those.
9:32You can get a Chinese one. It wasn't considered very good.
9:35But as of two, you know, two years ago,
9:38one year ago, I mean, they're increasingly going up the quality scale.
9:42And so yeah, a lot of moving parts there for China.
9:47Obviously, a lot of talk about in the global bond market.
9:49I mean, one of the of course, the big things,
9:51at least for at least for markets with relatively open,
9:54you know, capital controls yields influence each other.
9:58So one really big markets going up.
10:00It kind of drags all the others up by comparison.
10:03Unless there's a really big reason to have a huge delta.
10:06And so if you add 50 basis points to American yields, it's
10:09not surprising that you get you get kind of similar results in Japanese markets.
10:13These are all very interlinked and they feed off of each other.
10:16And I think one of the things I see on Twitter, I probably would push
10:20back on a some extent is of course, these things get sensationalized.
10:23And when
10:24we live through generational moments, they they are really big things happening,
10:28but they're usually happening slower than many people think,
10:31which is the other side of the nothing stops these trading thesis,
10:34which is that nothing stops the fiscal deficit,
10:37but also it doesn't blow up quite as quickly as, you know,
10:41many, many bears would think like it's not going to hyper
10:43inflate tomorrow or next week or next year.
10:45It's a very long process that gets kind of punctuated
10:49by little mini crises here and there.
10:51And what's interesting is that, you know,
10:54when when the Treasury market broke in 2020, it literally broke.
10:58I mean, like literally off the run.
10:59Treasury just went illiquid.
11:01There was like this the market stopped working.
11:04And similar things almost happened in 2022 for for the UK they did happen.
11:11Was interesting is that we see all this intervention
11:13from Besson and yet you know move index was pretty mild.
11:18Liquidity is still decent.
11:20It's just basically that
11:21that longer and yields were kind of pretty orderly grinding up.
11:25And they just didn't like the price of those, you know,
11:29they eventually put pressure on everything else.
11:31Anything that has tangentially discounted cash flow analysis to it, which includes
11:35the massive equity market,
11:36you know, obviously mortgage rates, we have a cost of living crisis.
11:40And it's partially because rates are so high, at least relative to prices.
11:45I mean, if you have mortgage rates where they are now, but you had a
11:49like a house price to income ratio, that was half of what it would be,
11:52then they'd be more affordable.
11:53But the combination of high house to income ratio is plus fairly high
11:57mortgage rates gives you, you know, kind of social disaster for for young families.
12:02And so we have this kind of unusual intervention which, you know,
12:09the the long kind of road I think does end at yield curve control.
12:13You know this people have asked on podcast is this yield curve control.
12:16I mean it's like the softest possible version of it, any sort of QE or, or,
12:21you know, kind of shortening of the average duration Treasury debt.
12:24These are kind of like softer forms of financial repression.
12:27And for me, I found that the only kind of strange thing is that they kind of did it
12:31prematurely, that there was no real crisis in the bond market.
12:35And so they kind of hopped in probably earlier than I would have expected.
12:40But here they are.
12:42And I think if anything's best in is kind of like doing the Streisand effect
12:46on the bond market, that I think more people wonder
12:48if there's a problem because he's focusing on it
12:50so much compared to just if he let yields go up to some extent,
12:54which then could pull capital from other things.
12:56People, you know, if he feels good high enough,
12:58you could get selling pressure and gold for period of time to hop in
13:01and treasuries, you could get, you know, selling of the marginal assets
13:04to hop in there and buy, you know, if tenure goes up to 5 or 5.5%,
13:08you know, he wouldn't necessarily have to intervene per se.
13:12It depends on how quickly things move.
13:14So the way I kind of phrase it is that,
13:16I mean, the US can afford high interest rates in the near term.
13:20You know, the longer term, obviously the higher rates they elevated
13:24things you get that long term spiral keeps kind of playing out.
13:28But it is interesting
13:30that they chose to intervene kind of as early as they did, I would say.
13:34I would add two to that.
13:36Lin made a good point, which is there's a bit of a dog
13:38that didn't bark in Besson's intervention, and
13:43I think the dog that didn't bark was historically.
13:46Yeah, you take the ten year up to 5 or 5 and a half, and
13:51pensions and insurance companies will buy it all.
13:54They'll buy everything out there.
13:56And yet they didn't.
13:59And there's two reasons for that.
14:00Number one, the the deficit is now so big.
14:03I mean, it's in contrary to what he said, he was going to go
14:05shooting for three arrows.
14:06Right. Which is a 3% of GDP deficit by 2028.
14:10Fitch just said we're going to run a 7.4% deficit
14:14this year, 7.4% deficit next year.
14:17It's going in the wrong direction.
14:18So number one, the deficits are so big, it's arguable exactly what the rate is.
14:24That would allow
14:26pensions and insurance companies to buy it all.
14:29But the bigger dog that has not barked
14:33that I is starting to kind of you know yep.
14:36Around the edges
14:38is there have been some people Nick Nemeth has done
14:41really good work on what's going on in private credit and the illiquidity of it.
14:45Couple other folks have done the same, and in particular, pointing to how deep
14:50the US insurance industry is in private credit
14:55in terms of a percentage of their assets and why this matters as it relates to
14:59the Treasury market is part of the charm
15:02of private credit, is
15:05they are having
15:07delinquency slash asset quality issues,
15:10but they don't have to take the marks because it's private credit.
15:14As long as they don't sell and force a mark.
15:19And so I think one of the big dogs
15:22that doesn't bark around this move at the long end of the Treasury market
15:26and the rest of the world's sovereign bonds, is that they are a sign
15:31that private credit is worse than people understand, because if
15:38insurance companies could sell
15:41and it's I want to say
15:44to Nick Nemeth, work is like 11 to 15, maybe 16%
15:47of total assets of the US insurance industry.
15:54Life insurance is
15:57if they could sell that without
15:59taking a catastrophic loss and therefore hit to capital
16:04to buy treasuries, they would rather own treasuries at 5%
16:07all day long than private credit.
16:09The fact that they're not doing that tells you
16:14that the problem in private credit is way worse than anybody thinks.
16:18And the and the
16:22the reaction to that would be exactly what Lynn said, which is best,
16:26and having to react to the long and faster than expected,
16:30because it would suggest
16:34that if credit quality
16:38in private credit is way worse than people are letting on,
16:41then there's basically no price at the long end
16:44that's going to pull pensions and insurance companies out
16:47to buy the long end, and you run the risk of 484968.
16:54And if I was him, that would scare me to
16:57death, and I would do exactly what he's doing.
16:59And I think that's what he's facing is ultimately
17:02the center of it is private credit
17:06and the illiquidity of private credit
17:08to be able to get out of it without taking a catastrophic mark.
17:11And by the way, when I say catastrophic mark, what
17:14Nemeth work has pointed out is like they could sell, take the mark,
17:17but then all of a sudden, literally, it would chew up
17:21most of the life insurance industry's capital.
17:24Now your life insurance is insolvent. Now what?
17:26Well, guess what they're going to sell to raise capital treasuries.
17:31They turn sellers of treasuries if they have.
17:33So there's this
17:35I think there is unspoken.
17:37It's unspoken. It's the dog that is embarking.
17:39There's a Mexican standoff kind of problem in the reflexivity,
17:44the interplay between private credit,
17:47insurance companies,
17:50long end of the Treasury market, and they don't know what to do.
17:54And there's there's no hap like Ted Lynn's
17:57point there so far, very soft versions of yield curve control.
18:00It's much,
18:01really much more like Operation Twist, you know, done by the Treasury than than
18:05yield curve control per se.
18:06But it's the reason for doing it is the same reason you're there
18:10eventually going to have to do yield curve control, which is, oh,
18:13we don't like the price to long.
18:14And because we can't afford the price, the long and the price at the long
18:18end will trigger a Western debt death spiral.
18:21That's why they're doing it.
18:22And that's it's this Mexican standoff around private credit insurance.
18:27And the long end that I think is super interesting
18:30in the context for why did Besson react so fast?
18:35Lynn, I want to get your thoughts on just as a quick aside,
18:37I don't know why, but it kind of reminds me
18:38even of things that I've heard regarding the US housing market
18:40right now were people that bought and got a mortgage in, like the 2021 era
18:44at these low interest rates, don't want to sell their house
18:46because they don't want to get a new mortgage.
18:48They can't put it in the US. They didn't know that.
18:49I thought it was just a Canadian thing, and you'd have to
18:52then refinance it like 6.6 or whatever the 30 year is right now.
18:55So Lynn, with regards to this idea of private credit,
18:58kind of keeping them in a standoff, your thoughts?
19:01Yeah, I think there's a lot of merit to that.
19:03Yeah, there's there's a challenge.
19:04Of course there's there's liquidity and solvency,
19:06which often get conflated in the media.
19:08And you can have two problems at the same time in different magnitudes.
19:11One thing that there's no doubt about is that there has been liquidity challenges.
19:15You'll see a headline like, you know, X billions want to withdraw
19:19from private equity or private credit fund XYZ.
19:22And they have to say no to most redemptions.
19:25And of course, that
19:27in sensationalized headlines will get conflated with solvency.
19:30But ironically, the way that that works is actually closer,
19:35closer to full reserve banking, which is that they don't, you know,
19:37when when you when you lend to a bank with demand deposits, you can supposedly
19:42pull your money out at any time, even though they're using it
19:45for some percentage of the liquid loans, longer
19:48duration loans with private credit, you know, your your pensions,
19:53your insurance
19:54companies, your wealth, individuals, family offices, you're lending and you're
19:57signing up up front saying that there's no guarantee of liquidity, that, you know,
20:01they'll try to do, you know, quarterly liquidity where they can, but they have to
20:05they have to sell some of their assets if they want to exceed that.
20:08And it's not you know, it's not like a businesses like, you know, payroll.
20:13It's not a person checking account.
20:14It's these entities kind of savings.
20:17And so they, you know,
20:18they run into liquidity challenges that they try to withdraw too much too quickly.
20:22And of course, underneath that, especially on the margins,
20:25we do see solvency issues in some of these troubled areas.
20:28It's still unclear how big some of the solvency areas could be.
20:31And that actually does limit some of these funds.
20:35And of course, there's there's fractional reserve balance sheets like banks
20:40that have a lot of flexibility based on what regulations allow them to do.
20:44I mean, if you want banks to buy more treasuries,
20:46there are mechanisms that they can they can pull to make that happen.
20:49Same thing with the central bank, obviously.
20:51Whereas insurance and pensions
20:54fairly kind of honest balance sheets in a way that basically
20:57if they if they want to buy something, they have to sell something else.
21:00They can't just, just kind of lever indefinitely with insurance companies,
21:03you know, for example, you have a float, you invest the float.
21:06If you're a pension,
21:07you invest them when it comes in, you invest it, you know,
21:10they have a certain amount of leverage that they can that they can dabble in.
21:13But they, you know, they're more limited than banks.
21:15Their when you don't have foreigners buying treasuries on net.
21:18I mean, you know, you'll see the nominal number
21:20inch up over time mostly from foreign non-government entities buying
21:25but on a percentage of total treasuries kind of being issued.
21:29Foreigners just aren't buying nearly enough.
21:31Which means more more of it has to be funded domestically.
21:35You have a central bank balance sheet Hawk ostensibly in charge of the fed.
21:39Now, who would prefer not to just blow out the fed
21:42balance sheet and say, no, you know, now I want to, you know, I'm a dove now.
21:45So, you know, on the on the paper, he wants a smaller balance sheet.
21:49Foreigners are buying insurance companies.
21:52Obviously they have the whole private credit issue we just talked about.
21:56Banks are buying, but you know, their balance sheets
21:58don't have endless capacity unless you do, you know,
22:01some degree of kind of supplemental leverage ratio
22:04reductions further that they're already done and things like that.
22:08And so I do think that they're getting squeezed now,
22:10you know, I don't know how acute it is
22:11because again, there's no there's no move index issue.
22:15There's no major liquidity stress.
22:18We've had what is so far been a pretty orderly degradation
22:22of the global bond market.
22:23I mean, it's like it's like the the move over many months,
22:26like the change in yields over many months has been significant.
22:29But it's it's kind of insta long.
22:33And so it is interesting that they're kind of jumping in so quickly.
22:38And of course some countries have other levers
22:42they can pull, like if you're a Japan and you're a really big creditor nation,
22:46you know, they they have these huge government pension funds
22:50that they used to invest more domestically in a little bit foreign.
22:54And now they have a huge swath of that as foreign assets.
22:58And they're one of their nuclear options is they can say, okay,
23:01we're pulling some of that capital back, like if the yen gets disorderly, if the
23:05if the Japanese bond market gets disorderly, they can say,
23:08well, we're going to pull some of that foreign capital back.
23:11And, you know, we're talking very large amounts for them.
23:14And of course the marginal dollar coming out doesn't affect market cap.
23:17It has a disproportionate effect on market capitalization.
23:20So they can pull money out so they can into Japan.
23:22And that can be a really big factor.
23:25Whereas the US is a debtor nation we are constantly relying on for
23:29you know, we're sending out our money in trade deficits,
23:32then the rest of the world is buying our assets with those trade deficits.
23:36So we don't have this like gigantic pot of money that we can just, just pull in.
23:40And so that is one of the challenges.
23:44And, you know, it gets really awkward when,
23:47you know, the the end of the world is not that things break.
23:50It's just that that you have like the central bank has to come in
23:54and start buying bonds and has trouble explaining why,
23:58that that happened is really
23:59fun time on social media, watching people work through that.
24:03The Bank of England in 2022 had literally
24:07they had a speech on balance sheet reduction that they had to cancel
24:11due to the guilt crisis and then temporarily increase
24:15their balance sheet instead.
24:16Now, to their credit, they eventually were able to reduce it for a period of time.
24:20But it's just the optics of having to do that were awful.
24:23And if you have a so-called kind of balance sheet hawk in charge, that if the
24:28if the market does get a liquid, I mean, they're not going to let it stay a liquid.
24:31So, you know, they
24:33they would find themselves in a rock and a hard place with,
24:35of course, the heart, you know, the heart of the spectrum.
24:37Being able to control
24:39and kind of the middle of the spectrum would just be the balance sheet
24:42increasing despite inflation still above target and then saying it's,
24:46oh, it's only for technical reasons or, you know, it's x, y, z.
24:49And of course the softer ones.
24:50What we have now, which is, you know, this,
24:53this basically Treasury operation twist, which is that, you know,
24:56they're willing to buy back longer duration securities by issuing T-bills
25:00and or drawing down the
25:02traditional account a certain extent without really a particular crisis
25:06to point to.
25:06And just saying this is kind of what we're doing right now until the midterms.
26:37Luke, I want to get your response to that.
26:38And there's a few things I want to add in there.
26:40But I do want to add
26:40I want to ask a bit of a weird question because it hit my mind,
26:43and I'm sure there's a good reason why it doesn't necessarily exist.
26:45I was not following the Japanese
26:47bond market at all, so I wasn't aware of how low those yields were.
26:50My immediate thought was maybe it's just because of capital controls
26:53or something, but is there like a you a yuan not yuan?
26:57Yeah, yuan carry trade.
26:58Because I was thinking if you have lower rates in China,
27:00would that actually pull demand away from the Japanese debt?
27:04Know there's the yuan has got a strict capital controls on it.
27:08Okay. Yeah. know that's.
27:10Yeah.
27:11The Japanese bond market is ultimately like Len said this this plays into the US
27:15net international vessel position, which is, you know, foreigners own
27:19$65 trillion gross, 20 to $23 trillion net in dollar assets.
27:24And so ultimately, if Japan has a problem and Besson doesn't fix the problem, then
27:29Japan will start pulling their money out of the US dollar asset piggy bank,
27:34sell dollar assets by yen assets or by N.
27:38Yep. his credit.
27:40And that's that's exactly.
27:42Yeah, that's exactly right.
27:44Continue with that too.
27:44I'm curious then what you think Warsh is going to do coming up here.
27:47Because last time I looked at CME futures, it looks like we're getting a rate hike
27:51in about two weeks time here.
27:55Do you think he's going to do it.
27:56Where do you
27:56where are you
27:57viewing basically the relationship between the fed and the Treasury right now.
28:00And if he's actually going to bring up rates.
28:03I don't think he's going to raise rates. Really.
28:05No Kevin Warsh is is not a hawk Kevin Warsh.
28:11You know go back to his December 2018
28:13op ed that he wrote with Stan Druckenmiller fed tightening.
28:17Not now that's the name of it.
28:19And in it they were begging Bay Ying
28:23in all caps begging for the fed
28:26not to hike rates anymore because bank stocks were 15% off the highs.
28:30And even though employment hadn't fallen, which is a lagging indicator,
28:33as they acknowledge in it.
28:34But, you know, you were starting to see some slowdown in the economy.
28:40What what do I think was might have been happening?
28:44What I think was happening with that op ed was Druckenmiller was offsides and
28:49was, I believe at the time was he was close with Druckenmiller.
28:53But if not working with him, I don't know his career path intimately, but
28:59in offsides and I think they were trying to get stand back on sides.
29:02And so it's really interesting to me this week.
29:04What did what what did Besant say about Druckenmiller
29:09I didn't catch that one. to yesterday?
29:11He came out and said Druckenmiller offsides.
29:13And yeah, that's why he wrote that this would be the I, I had pretty good
29:18pretty good account that Druckenmiller was offsides in the fourth quarter 18.
29:22And that led to the op ed and that influenced fed policy in a way.
29:25We go and now here we have second instance of it.
29:27According to best we'll see.
29:30Worse isn't going to hike rates.
29:32He's not he can't.
29:33And the reason I say that is
29:36us true interest
29:37expense, which is gross interest plus entitlements plus Veterans affairs
29:43and 105% of US receipts
29:47through fiscal third quarter of 2026.
29:50And they are growing 7.5%, while receipts are growing 4%.
29:56He hikes rates.
29:58True interest expense is going to be 107% of receipts
30:03growing 8 to 9 while receipts grow three.
30:06He hikes again.
30:07They're going to be ten 110% of receipts growing ten
30:11while receipts are growing two this is this is.
30:14And by the way every everyone on Wall
30:17Street says we don't have a debt problem
30:20because we owe our debt in our own currency, but we don't.
30:24We have a
30:27entitlements $100 trillion plus in entitlements.
30:30That is three plus trillion dollars a year.
30:33When you look at Social Security, Medicare, Medicaid
30:37and Veterans Affairs, those are in a hard currency.
30:41So we're spending 60, 60% of receipts
30:45nearly in on, in on Medicare, Medicaid,
30:49Social Security and Veterans Affairs, which are all inflation adjusting.
30:54You know, we don't owe my parents, you know,
30:56we know my dad a payment for Medicare.
30:59We owed them a knee.
31:02We owed them diabetic medicine.
31:05All of that stuff is a hard currency, hip sneeze, doctors time.
31:09It's all a hard currency.
31:10The more we print, the more the price of those things go up as we're all seeing.
31:13And so to me,
31:16this is like the elephant in the room that no one wants to talk about.
31:20And this hole, is he going to hike? Is he not going to hike?
31:24Beasant has
31:24a debt problem today acutely.
31:28Number one, his interest and interest like obligations are 105% of his receipts.
31:33And they're going to access receipts today.
31:35And if worst hikes,
31:38they're going to run faster.
31:39And as receipts are going to fall that's going to blow out.
31:42That in turn is going to reverberate into dollar up, long term rates up,
31:46which is then going to reverberate back into his interest,
31:49like obligations rising even faster than his receipts.
31:52Now, in a context of 120%, that the GDP, in a context
31:58where his long end domestic foreign buyers aren't buying enough,
32:03the foreign buyers that are there are hedge funds,
32:05and they will only buy as long as volatility is low.
32:07And the foreign central banks, who are very patient,
32:10haven't bought a treasury
32:11at the long end from him and bought a Treasury net at any duration,
32:15but certainly not at the long end in 12 years going on 13 years.
32:20And so his sort of last remaining patient buyers,
32:24the domestic industry for life insurance and pensions,
32:27they're jammed up in private credit because the fed hiked rates.
32:30There's there's no price a long term treasuries
32:33where they can take the mark of sell down private credit.
32:36And so he's got a non-linearity facing him at the long end.
32:40And so when I see the picture of worship and Beasant getting on the plane to go to
32:45weren't talking about the freaking Yankees.
32:48Right. We have it on record, right?
32:49What did what did say to.
32:51Pulte?
32:55I will punch you in your effing face.
32:57You want to step outside?
32:58I'll punch you in your face.
33:01Are your credibly credible rumblings that that took a swing at Elon
33:04Musk under Doge?
33:08I think, hey,
33:10this is what we used to call the sales desk a hey mother conversation.
33:15Hey, mother, you aren't going to raise rates in September.
33:19You aren't going to raise rates, ever.
33:22That's what I think was set on that plane together.
33:25And then they got off and they fixed their hair and
33:31I got of it.
33:31Lynn I want to get your response if you agree.
33:33Were you disagree.
33:34And I also just want to highlight
33:35like even as a beginner who wants none of this monetary policy
33:38or things going on, I do find it just incredibly entertaining.
33:40I just think he's a wonderful character
33:42in this weird drama that we're all going through.
33:43So lend your your thoughts, please.
33:46Yeah, I agree with that one.
33:47So yeah, in general.
33:49So my my kind of view and research has been
33:52my base case is for 0 to 1 hikes
33:55basically that if we get the one would be like kind of symbolic to say he did it.
33:59And so I kind of don't
34:02really take a stand on what's going to happen 25 basis points.
34:05But in general, the issue is that when you get to this far
34:09in fiscal dominance, rate hikes don't solve the problem.
34:13Everybody has their mental model of the 70s
34:15when we had lending driven inflation.
34:17So it was fractions of banking primarily responsible for the money supply growth.
34:23You had
34:23baby boomers entering the home buying year having their peak credit formation.
34:27You had pretty low debt to GDP, public debt to GDP.
34:30So if you raise interest rates
34:31like Volcker did, really high, you do a couple of things.
34:34One is you you bankrupt like Latin America.
34:36So you reduce their oral consumption at least more. For the US.
34:38It's kind of the brutal real politic of it.
34:41But then domestically, you do slow down
34:43lending at a much bigger rate than you blow out the fiscal deficit.
34:47When you have debt to GDP that low and you have lending that high.
34:50So you're actually tackling the core issues.
34:52In the modern times, it's not that bank lending is super high.
34:56It's pretty benign.
34:58Instead, it's that physical driven inflation and raising interest rates.
35:02When you have like, like loose get all those inflexible spending,
35:06you don't you don't change like Congress doesn't make decisions
35:10because, you know, industries are 5% instead of 4%.
35:13And then in addition, when you have over 100% of GDP
35:17and you raise interest rates, you blow it.
35:19Interest expense, which ironically for some entities is spendable
35:22money that you're actually stimulating some, some entities.
35:25So on the receiving side of that, you know,
35:27it's baby boomers that have money market account, for example.
35:30It's like they they get a raise if you raise interest rates.
35:33So I think they're aware of that.
35:35So basically the broader question is whether or not initiates are even a tool
35:39at this point.
35:40I think that's that's the uncomfortable question for,
35:42for Wall Street and and for the government as a whole.
35:45So what's that line like below my line?
35:47Is that was that the
35:50Below my level.
35:52When we talk
35:52about 25 or 50 basis points, it's like we're not in monetary dominance.
35:56We're in fiscal dominance.
35:57I think a much bigger question is what a crack spreads look like.
36:01You know, three, three months from now or six months from now.
36:04We talk briefly. You mentioned oil in the beginning.
36:06You know, all never went up to 150 or $200 a barrel like people feared.
36:11But we do have record high crack at diesels they're now right diesel the 185.
36:17basically, you know, we have
36:19the bottleneck ended up being in refineries at the moment.
36:23And so gasoline and especially diesel
36:26are priced as though all itself is over 100.
36:30Just because the gap between what all costs
36:33and what the actual refining product costs is, is higher than average.
36:37It'd be even worse, of course, if all is self than blew out.
36:40But you know, putting that aside for a second, you know,
36:43like what is on the top of my mind, you know, some months from now, it's okay.
36:46What's happening with with fiscal deficit, that's still going to be big.
36:49It's always going to be big.
36:50Nothing stops that train. What happens with Iran?
36:53What happens with oil? What happens with refined products?
36:56What do those spreads look like?
36:57What are the what's going on there?
36:59That's a bigger question to me than 25 or 50 basis points from the fed.
37:03And so it's kind of like, like an engineering terms.
37:07You'll put like a bear around it and say, like,
37:09here's a tolerance that we don't really have to devote too much attention to.
37:13And for me like 25 basis point questions, it taking up so much air time.
37:18And it's just it almost doesn't matter because the numbers are outside of
37:22that band. You know,
37:24GDP deficits is a
37:26much bigger topic than if he's going to toggle,
37:30you know, interest rates, because we're just so far
37:33down the line of fiscal dominance that it almost doesn't matter.
37:37And the broader question, though, I think it's and this is, you know,
37:40perhaps why is acting so early here before any signs of trouble
37:44is that there is this kind of dawning realization of Wall Street
37:48about fiscal dominance, you know, back, I mean, Luke.
37:52Luke and I were talking about this for for many years.
37:55It used to be fringe.
37:56And over time, like my my contacts on Wall
38:00Street are kind of increasingly saying, I mean, this is understood.
38:04And you'll have like big research firms, big,
38:07big pension funds, big investment banks putting out reports about this.
38:12And so things that were kind of on the,
38:14on the periphery become more like acknowledged.
38:16And part of what holds this together is perception and sentiment.
38:21The idea that that okay, we have a problem right now, but it's temporary.
38:25It's okay once this thing resolves, you know,
38:28once the fed regains credibility, then long end yields will go down.
38:32There's this kind of like credibility loop that people kind of like cope.
38:36It's like as long as, you know, as long as, you know, we figure out
38:39the temporary things that we can get the things back on track.
38:42And there's like a pretty kind of,
38:46like loose
38:47perception that if you get a past certain critical point,
38:51you know, if you've got people that manage to trillion dollars
38:53that suddenly see the things like that I do like in terms of if they
38:56if they suddenly wake up and agree with me one day,
38:58whether I'm right or wrong, if they just agree that I'm that the way
39:02I'm doing it, then nothing stops is deficit
39:05and they're in charge of $1 trillion balance sheet.
39:07I mean, then you got a problem, right?
39:10And so they don't really want that cascade to happen.
39:13They want to keep the idea
39:15that that there's always some kind of plausible reason why
39:18we can get this back under control, that AI is going to be so productive.
39:21Then we're going to have a big deflationary sink and absorb all of this.
39:25Or, you know,
39:26stablecoins are going to actually come in and save the day, for example.
39:30And the best ones, of course, always have a grain of truth to them, right?
39:35That you don't you don't point to, you know, what aliens are going to do.
39:38You point out to something that actually like intelligent people can say, okay,
39:41we have a list of things here that if they go right enough,
39:45then you know, things are fine and we can get yields down.
39:48And none of this has to kind of slowly spiral out of control.
39:52And I think that's what what best is trying to to manage right now.
39:56Interesting. Yeah.
39:57I want to get your take on the idea of like,
39:58because I'm thinking about if everybody they should
40:01if everybody agreed with you to I'm pretty sure.
40:03Wouldn't that mean
40:03they're just going into hard assets and getting out of any debt right away?
40:08Well it raises
40:09an interesting question and I think it's something that people
40:12think they have more time than they do on this.
40:14And I'm not saying it's next week or two years.
40:17I mean, it could be, I don't know, it could be five years, ten years.
40:19But Jim Rickards wrote, I can't remember which of his books it was,
40:23but he opened it up with a scene of a meeting that he sat in,
40:29and I believe
40:30it was during the great financial crisis, or maybe shortly thereafter.
40:34But the point of it was this
40:37Treasury's got a direct line into Blackrock, per
40:40the consigliere of one of the top execs
40:44at Blackrock, according to Jim Rickards.
40:47And Rickards goes on to say that in a crisis, Treasury
40:50can pick up the phone, make one call and lock down 5 trillion of capital now,
40:55which is Blackrock.
40:57That's it.
40:58No sales and the rest of the market would follow.
41:03so to me there's this view of like
41:07well I don't have to worry about it yet.
41:09I'll worry about it when I worry about it.
41:11And when I look at it
41:11and go lay out everything we've laid out, I lay out we're already beyond.
41:15We're past the point of no return.
41:17They have a Weimar gold reparations problem.
41:20I'm not saying we're going to go Weimar,
41:21not say we're going to hyper inflate, but I,
41:22I am saying the United States has a Weimar gold reparations.
41:26They owe more money than they are taking into receipts
41:29in a hard currency that inflation adjusts
41:32today.
41:36It's only
41:36a matter of time to Lenz point until people running trillion
41:40dollar balance sheets get that, and when they do,
41:42they're going to go to hit the cell button.
41:44And it's not going to work like it didn't work like the by button stopped
41:48working at Comex at silver in 1980 with the hunt brothers.
41:54And then whatever your allocation is
41:57to everything bonds, stocks,
42:01gold, bitcoin that's going to be your allocation.
42:05You're not going to be able to move.
42:07And then they're going to close things down for two weeks three weeks.
42:10And when they reopen you will own what you own at the new allocation.
42:16And I have two dear friends that emigrated here from Ukraine, American citizens.
42:21Now they've told me how this goes, which is we remember 19,
42:25I believe it was 1998.
42:27We had enough money in the bank to buy five cars.
42:30We were wealthy.
42:31My dad was a doctor. They closed the bank on a Friday.
42:33They reopened it two weeks later.
42:34And the money we had in the bank,
42:36we got it all back and it bought us a month's worth of groceries.
42:39When people that are running trillion
42:42dollar balance sheets internalize enough that they realize that there's
42:47no stopping this train, and that we're already past the point
42:50of no return, barring a productivity miracle.
42:53And so that might be your trigger of like, oh, if AI starts to break, then, oh,
42:57then the whole thing might that could get really fast.
43:00And you go, there isn't going to be a shift, an orderly shift, or even a
43:07one month shift of trillion dollar balance sheets in the golden Bitcoin.
43:11They'll shut the markets and then they'll reopen them
43:14two weeks later and Bitcoin will be where it is.
43:17Gold will be where it is.
43:19Stocks will probably reopen gap higher treasuries will
43:23have lost
43:24immense amounts of value relative to those assets and life will go on.
43:29This has happened over and over and over and over and over
43:33everywhere in the world, basically, except America.
43:37And so Americans who are
43:40listen, I'm an American, I love America.
43:41We're the most ethnocentric, hubristic people in the world
43:45because it's never happened to us.
43:47We're sure it won't happen. And yet.
43:49Look, I don't know when it's going to happen,
43:51but the math is telling you it's going to happen.
43:53Could it be next week? Sure.
43:55Could it be ten years? Sure.
43:56Could it be 20 years?
43:57Sure.
44:00But that's how it's going to go.
44:03They will just.
44:03They'll just lock it down.
44:04And it was when I read that book again, I think it was in an 8 or 9.
44:09Maybe it was 11.
44:09Rickards book, he flat out says a Blackrock exec,
44:12one of the top execs was told by Treasury they had the
44:15they had the program in place 20 years ago, nearly.
44:21If we need to, we can pick up the phone
44:23and we can stop you from selling everything we can stop.
44:26They will just run, you know,
44:28think about what Lynn said before about private credit.
44:31We want 3 billion. You can't have it.
44:34They'll do it to everything.
44:36And you know they can't do it to everything forever.
44:38But they'll do it to everything for two weeks,
44:40and then we'll get out the other side of it.
44:42And that the GDP will be 20%,
44:46down from 120%.
44:47It'll be,
44:49you know, and you know, the money that you used to buy
44:52five cars will buy a month of groceries.
44:54Have a good day.
44:55And when I asked my Ukrainian friends, how did people that own gold and silver do?
44:58Obviously this is pre bitcoin.
44:59How'd they do?
44:59He said oh they were fine.
45:01Nothing changed for them.
45:03That's how it's going to go.
45:05Unfortunately like we're past the point of no return.
45:43Then I want to get your response before I shifted.
45:45Golden Bitcoin.
45:47Yeah, I mean there's there's two main ways it can happen.
45:49It can happen in these non-linear events where there's a, there's like a bank
45:53holiday, a reset and just, you know, like you have an extra zero on stuff
45:58And there's kind of the, the slow spiral type, which is,
46:02I mean, you know, where I am official inflation is 15%.
46:06And it's just like it's a normal Wednesday.
46:08It's just like that's that's how it goes.
46:11You have to save in things that are not cash.
46:14And it's just the economy is.
46:17I mean, that would sound shocking to an American or a Canadian
46:20or, you know, people in Europe or Japan,
46:23but but after you pass initial shock, people adapt.
46:27That's how things go.
46:29And so you can have this, that, that's where it comes down to trying
46:34to predict policy decisions, which is that kind of the natural state of things.
46:39They can keep doing small things,
46:41you know, if the if the bond market goes a liquid,
46:43they can buy $100 billion of bonds and, and say it's a technical reason
46:48and just kind of finagle stuff for a period of time and go
46:51get it back on track for a period of time and just kind of keep it going.
46:55And you have this.
46:57But then month after month, FOMC meeting, after FMC meeting, you have to explain
47:01why you're buying bonds with above target inflation,
47:05which gets old after a period of time and you your credibility degrades.
47:09Then you get that you know there's trend dollar
47:11balance sheet saying maybe we have to do something different.
47:13And part of it is that you have real politic in play, which is that, you know,
47:18the the people in charge of Japan's, you know, gigantic pension fund.
47:22One of their considerations is relationship with the US.
47:26So one is it's not just like a strict personal
47:30optimization, that's part of it.
47:32Then it's also, you know, to what extent we want to risk our relationship with the,
47:36you know, one of the largest economies in the world and a long standing friend
47:40and all the benefits that come from that and sometimes the drawbacks that come from
47:44that.
47:45And, you know, if things get bad enough, then that calculus changes.
47:49And that's how you get kind of more rapid changes.
47:51And the fed has to say, oh,
47:52instead of buying 100 billion, we have to buy a trillion.
47:54Kind of like what happened in Covid.
47:56We have to come out with a comical amount of purchases to to fix the problem.
48:01So yeah, you can get these kind of more gradual ones.
48:03You can get these abrupt ones.
48:04My, my default is always to look out for the gradual ones.
48:08You know, the nonlinear ones are hard to predict.
48:10Like Luke said, you want to be positioned ahead of time.
48:13I mean, that's why I've I've been a long standing fan of,
48:16you know, some at least some percentage of self custodial assets, you know, have,
48:21you know, real estate's not mobile, but you know, your real estate
48:24and you have portable things
48:25like gold and bitcoin and so forth, and you have assets.
48:29And then of course, you have your stocks.
48:31You have other things like that that are more like account based.
48:34But there is a value in bearer assets.
48:37And you don't have to be a, you know, people
48:41say, well, that that'd be a Duma perspective.
48:43Well, again, I mean, you know, right now in a place where the 15% inflation, it's
48:47things that sound like Dumouriez are just a normal Wednesday in other countries.
48:52And to lose point like people in certain countries,
48:55if you own gold or bitcoin and you're just like, yeah, that was crazy.
49:02Yeah.
49:02It's Thursday.
49:04Yeah.
49:04And and so
49:07there's different levels of duma ism, right?
49:09It's just like you own scarce assets, you position with this stuff in mind,
49:14and then you kind of do your best to go about your day.
49:17And, and it's not always about worrying.
49:19It's just about owning scarce things, you know, trying to avoid scarce
49:23things that are temporarily in a bubble
49:25because even a good thing can get over priced from time to time.
49:28If everybody likes at the same time and you
49:32and you try to go about your day and then you worry about other things
49:34some extent, like what jurisdiction you're in, you know, where do you live?
49:37Where do you work for other people?
49:39Like what citizenships or, you know, where can you live if things get weird?
49:44And so you kind of go up the ladder of things, you can control position
49:49and then try to try to go about your day and just realize that,
49:53you know, the world, people get through crazy events.
49:57I mean, you know, there's there's certain
49:58horrible, horrible events that can happen, but anything short of the worst stuff,
50:02I mean, people are adapt.
50:05And, you know, just the last five, ten, even 40
50:08years are not necessarily the map for what the next five, ten, 40 years looks like.
50:12Well I think too you want to look when you're looking for
50:16sort of crazy stuff is they can kick
50:20the can where they as long as they need to when they start running
50:26into physical constraints is when the illusion begins to break.
50:30Right? When when the spell begins to break.
50:33So when you have President Trump come out and say, I'm
50:37going to sell 300,000 pounds of beef at a loss, he's
50:41the president who's MAGA running Mamdani sell groceries at a loss to the
50:48People need to pay attention.
50:50Why is he doing that?
50:52is when you see things like that, when you see him
50:55come out and sound like Elizabeth Warren and about,
51:00hey, you evil refiners, I like you, but you're overcharging people.
51:05Well, then stop supplying the Ukrainians with frigging
51:09targeting directions and missiles to hit Russian refinery.
51:12Right?
51:12Like Besson's up there today, saying the refined products are up
51:16because the Ukrainians are hitting Russian
51:20refineries, and it's causing a global supply shock.
51:24You're supplying the weapons, you're supplying the targeting.
51:27Like, don't like don't Pete on my back and tell me it's raining.
51:30But when you see these inconsistencies in the physical world, these are warnings.
51:37And it doesn't mean, again, doesn't mean it's happening tomorrow or
51:41next week or even next year.
51:44But the longer they go on,
51:47even the dumbest American will go even the most MAGA mind.
51:51I'm not saying people might go dumb, but I'm just saying the most rabid.
51:55When you're
51:55when you are rabid and dogmatic, you're indistinguishable from being done.
51:58When you were the most rabid, dogmatic Trump supporter going,
52:02you know, like some of you seen some of these interviews
52:04with beef ranchers, they're we I love this guy.
52:08And like, what is he doing?
52:09This is not only he's hurting my living, but it's not economic.
52:12He's literally following them.
52:13Downey's economic policies, these are the clues
52:17of, you know, these are the cracks in the facade
52:21you know, because the paper world,
52:23they can, you know, is a perfect example.
52:27Part of the reason why crack spreads are so high
52:29is because they've been to manipulating oil. They have been
52:32there have been a number of different ways they've done it.
52:34Right. You're running down the SPR is a way of manipulating.
52:37Well, yes, that's what it's there for. Okay, fine.
52:40I also hear credible rumblings.
52:42There have been, you know, and actually this was alluded to by the Iranians
52:45multiple times, including last week, you know, last week, whatever his name.
52:50Or whatever point, you know,
52:55we know which futures Jane Street was selling, you know, at your behest.
52:59Scott Best, why don't you do something about that?
53:01You know, so I've heard other things like that type of thing.
53:05Right. So they are doing what they can in the market.
53:08They can do, but they they can't do as much in the refined products.
53:11It's a physical issue.
53:14You can short refined products.
53:15It's not nearly as deep as as crude oil, but in the end of the day
53:19it's a supply demand thing, right?
53:21I can't fill my wife's truck up with paper frigging gasoline.
53:25And I can't put I can't.
53:27I got three boys that are over six feet tall.
53:29They don't eat paper beef.
53:31As it turns out, they actually eat actual beef.
53:34And so it's that physical world.
53:38When you start to get the inconsistencies with the narrative,
53:42where you don't know which lie is
53:46the one that brings down the whole thing.
53:49You just know that one of them will, and it's a straw
53:53that broke the camel's back kind of a thing. Luke.
53:56All right.
53:57I know we sold around 95.
53:59We're talking about positioning ahead of the crisis.
54:01We're bouncing up a little bit here.
54:03Are we back in Bitcoin.
54:05I never sold all of it.
54:06I just sold from being what I thought was, you know, for a 51 year
54:11old man who thought it was, the price is going to drop a lot.
54:17It was way too big.
54:18And so, yeah, I still own, you know, call it mid-single digits
54:23in of liquid net worth and bitcoin.
54:26I've been adding back a little bit cautiously.
54:31Simply because I,
54:33you know, I it has bounced back a bit,
54:36but I still think that
54:39this non-linearity we talked about as it relates to bonds.
54:42Right.
54:43You know, to Lynn's point about things going in, in, in,
54:47you know, sort of gradual, I think we're dangerously close to a,
54:54you know, ten year at five, you know, for eight,
54:59four, nine, five, five and a half, six, seven, seven and a half.
55:03And then they really got to do something.
55:06And again, I've said it before, I think I'm,
55:09you know, it's very possible I'm way too cute.
55:12I also think if we get A23 week
55:16period, one month period where the ten year goes from for 8 to 7.
55:21I think I'm going to be able to buy
55:23back everything I sold more,
55:27cheaper than where we've seen it trade this cycle, and I
55:31would be aggressively buying on that because we know what the you know,
55:35and if I'm wrong or I'm going to be wrong because I my,
55:38my conviction is increasing, we're going to get that air pocket
55:40because again of the, the debt where we are with the fiscal situation
55:44today in terms of the interest like obligations relative to receipts,
55:48where we're seeing supply chains globally, inflation is only going up from here.
55:52And then this non-linearity of private
55:55credit insurance, long end foreigners, right?
55:59I mean, the Saudis come out this week.
56:00They're borrowing $8 billion like they were supposed to be investing
56:04$400 billion here.
56:05Now they are competing with peasant for capital.
56:07So that's I that's where I'm at on Bitcoin.
56:11So love it as a as a neutral digital reserve
56:15asset for the people still own some might be being too cute.
56:19But I think we're going to have a momentary bond market rupture
56:23sometime in the next 2 to 3 months.
56:25And I think there's a high risk of it.
56:29There's an above normal risk of it. Right.
56:31So I would I wouldn't say there's a tornado coming.
56:34I would say I'm looking at the conditions and going, it's not a tornado watch,
56:38it's a tornado warning. It's not a bond market watch.
56:40It's a bond market warning.
56:41The conditions are here for the ten year to go from four, 8 to 7 like that.
56:45And I think if I
56:46if I'm right,
56:48then I think Bitcoin is going to trade much lower than most Bitcoin bulls.
56:50Think for a moment.
56:52And for those that don't care about that volatility that's I totally get it.
56:57But I would be aggressively buying on that downside.
57:01That's that's where my head is at the moment.
57:03Beauty Lynn your fastest elevator pitch on where Bitcoin is right now.
57:07Yeah I think that's certainly a possibility.
57:09I think I just, I just I wait to wait that possibility somewhat differently.
57:12And I just, I don't really trader on that possibility.
57:15I think my to the extent
57:16that I am aware of that possibility, I just have cash like that.
57:19I maintain some like a nonzero degree of liquidity.
57:23I don't like cash.
57:24You know, my, my,
57:26my preference would be to have just enough for the checking accounts.
57:29But I, you know, I always have kind of more cash than I need for nonlinear
57:33kind of deflationary shocks like that or like air pockets.
57:35I don't really try to trade around it when I want to trim out of Bitcoin.
57:39I usually sell a treasury company at three times.
57:41Nav you know, I'll
57:42I'll happily take profits there when they when they get kind of silly priced.
57:46I don't really sell
57:46cold storage bitcoin or you know physical gold and things like that.
57:50And so I do think that the bitcoin charts looking a lot better now.
57:55So putting aside something like an air pocket
57:58I mean I think it's I think it's putting in a bottom.
58:00I try not to say what is what is a pico bottom versus, you know,
58:03what's happening there.
58:05I agree with checkmate, which is, you know,
58:07just ask yourself if you're in the bottom decile or not. Really.
58:10Like, are you in? Is fast money out?
58:12Is that all in AI or you know, what kind of what are the metrics look like?
58:15I've been very comfortable with that.
58:17I think, you know, for a period of time, even gold got ahead of itself.
58:20I mean, the RSI was was just very overbought.
58:23And my view was it's not in a bubble.
58:27It just
58:27it just went from undervalued to like somewhat
58:30more in the ballpark of reasonable very quickly.
58:32And so that that takes a period of time for the market to digest that.
58:36And I think the correction has been healthy.
58:39So I've studied long term bull on on both Bitcoin and gold.
58:42And I think they're both looking better here than they were a
58:46few months ago I would say.
58:49Where can I go to follow you.
58:52Thanks for having me.
58:53And Luke we're going to go to find your stuff.
58:59If you enjoyed this episode, Luke and Lynn like subscribe.
59:01All that fun stuff.
59:01It really does help us out
59:02and check out the previous episode with Michael Sullivan.

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