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Speaker 1: Hello, and welcome to another episode of the Mark mass Show.

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Speaker 1: We're always talking about the decentralized revolution, the way the

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Speaker 1: world is changing, and of course you knew that, you know.

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Speaker 1: I like to bring to you some education to help

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Speaker 1: change the way you think about money, some of the

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Speaker 1: latest breaking news headlines, and some interesting guests. And I

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Speaker 1: have a returning guest, one of your favorites, one of

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Speaker 1: my friends, Joe CONSORTI. He helps me out with some

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Speaker 1: research on my YouTube videos if you're watching those on

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Speaker 1: my main YouTube channel, Mark Moss, and I have him back, Joe.

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Speaker 1: Thanks for joining me today.

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Speaker 2: Absolutely good to chat with you again. Mark.

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Speaker 1: Yeah, man, I always love talking to you. You're a

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Speaker 1: wealth of information, you know. So I kind of want

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Speaker 1: to run through where we're at. You know, we're in

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Speaker 1: this kind of weird situation, and I want to I

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Speaker 1: want to.

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Speaker 3: I want to spend some time.

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Speaker 1: Digget into that kind of like where we're at and

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Speaker 1: where kind of we're going. I got to spend some

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Speaker 1: time with with Nick Batia from your team out in

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Speaker 1: Austin last week and talk to him, so we'll see

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Speaker 1: see how much you line up with him. But let's

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Speaker 1: start kind of at the top and what I want

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Speaker 1: to talk about is the.

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Speaker 3: Big news that.

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Speaker 1: I think I think is bigger than some people think

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Speaker 1: for some reasons. And that's the kind of the slap

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Speaker 1: across the face, maybe that se that the SEC got

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Speaker 1: from the judge or the unanimous decision from the judges.

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Speaker 1: And you know, on one hand, it opens up the

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Speaker 1: door for potential ETFs, but also it also shows like

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Speaker 1: a string of incidents where the SEC is actually kind

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Speaker 1: of getting put back into their place as well. So

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Speaker 1: I think there's kind of two things going on. How

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Speaker 1: are you reading that?

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Speaker 2: Yeah, so this is kind of a landmark decision, even

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Speaker 2: though it may not seem like it right now. So

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Speaker 2: essentially what happened was that Gray Scales GBTC this fund

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Speaker 2: this it's been a closed end trust now that means

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Speaker 2: they're much higher fees and not all investors can participate

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Speaker 2: in this, and Gray Scale has been petitioning to turn

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Speaker 2: that into an ETF. An exchange traded fund is far

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Speaker 2: lower fees and it's far more open for all of

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Speaker 2: that institutional capital to get SPOT one to one exposure

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Speaker 2: to bitcoin. Now, the SEC blocked Grace Scale's conversion from

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Speaker 2: a closed end trust to a SPOT ETF and gray

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Speaker 2: Scale in response sued the SEC. Now what has happened

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Speaker 2: is a court has ruled in favor of grace Scale,

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Speaker 2: so potentially they won their lawsuit against the SEC where

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Speaker 2: the SEC was blocking that conversion, and they cited it

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Speaker 2: being arbitrary and capricious because there are several bitcoin futures

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Speaker 2: ETFs that have already been approved, so institutional players are

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Speaker 2: allowed to gain futures exposure to bitcoin, but not spot exposure,

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Speaker 2: which is less leverage and arguably more safe. And so

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Speaker 2: the court ruled in favor of grace Scale, which is sensible,

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Speaker 2: and it's a landmark case because now the SEC is

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Speaker 2: backed into a corner. Certainly there are probably more tricks

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Speaker 2: up at sleeve that it can use to delay and

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Speaker 2: create other grounds to deny spot ETF applications. But now

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Speaker 2: there is precedent that the SEC needs to take spot

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Speaker 2: ETF application seriously, which could be huge for institution size

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Speaker 2: inflows into bitcoin. Now there is a seventy five percent

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Speaker 2: chance per Bloomberg analysts, that GBTC or other spot ETFs

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Speaker 2: for bitcoin get made in the United States before the

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Speaker 2: end of the year, and the ninety five percent chance

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Speaker 2: that it happens before the end of twenty twenty four.

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Speaker 2: So right now, the highest likelihood that we get a

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Speaker 2: SPOT ETF on the market as there ever has been.

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Speaker 3: Yeah.

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Speaker 1: Now, I'm just gonna admit to everybody listening that I'm

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Speaker 1: not an English major and I didn't really know what

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Speaker 1: that word capricious really meant, so I had to go

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Speaker 1: look that up earlier. But you know, when I think

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Speaker 1: about this, it fits it kind of perfectly, because the

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Speaker 1: line of thinking has been that the SEC has approved

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Speaker 1: Bitcoin for futures, which are but they haven't approved it

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Speaker 1: for spot and so the difference is the SPOT ETF

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Speaker 1: would actually buy the physical or it's digital, but whatever,

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Speaker 1: they'd buy the asset for the fund as opposed to

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Speaker 1: futures are just betting on the price and correct me

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Speaker 1: if I'm wrong. But basically, the ruling of the SEC

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Speaker 1: has basically said that because we don't know how much

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Speaker 1: fraud may or may not be out there in the system,

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Speaker 1: manipulation and who knows what finance is doing with wash trading,

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Speaker 1: et cetera, since we don't know if that price is real,

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Speaker 1: we don't want to allow the SPOT. But my thought

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Speaker 1: process is, what difference does it make whether you're trading

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Speaker 1: on Spot or on the futures, you're still trading off

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Speaker 1: of the price.

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Speaker 3: And that seems like that's sort of what the judge

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Speaker 3: had said.

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Speaker 2: Right exactly. You know, essentially the future's vehicle is just

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Speaker 2: a vehicle that trades off of the price of Spot byquin.

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Speaker 2: And so if the worry from the SEC, which is

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Speaker 2: the reason they denied the Spot ETF application, was that

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Speaker 2: the price would be manipulated, then by that logic there

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Speaker 2: should be no futures ETFs, but there already are. And

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Speaker 2: so the district court judge was able to highlight that

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Speaker 2: and cite that as the main reason and correctly, in

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Speaker 2: my view, is the reason that denying the Spot ETF

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Speaker 2: was a bad move considering what they had done before

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Speaker 2: by approving the Futures ETF.

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Speaker 3: Yeah. So yeah, so that's what I liked about that.

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Speaker 1: And again, like I said, it's even bigger than that

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Speaker 1: in a sense where like it kind of shows a

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Speaker 1: string where maybe the SEC is kind of get put

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Speaker 1: back in their place.

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Speaker 3: So we'll see.

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Speaker 1: Now, before we started recording, you said that, you know,

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Speaker 1: per Joe Kalasari, who's also on your team, I believe

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Speaker 1: that maybe if the SEC really doesn't want to lose,

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Speaker 1: they might have another trick up their sleeve. I want

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Speaker 1: to ask about that, but before before we even answer that,

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Speaker 1: they can still go and appeal, which I think they're

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Speaker 1: going to do. So they can still go and appeal this,

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Speaker 1: but then I think if they lose that appeal, then

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Speaker 1: they have like another nuclear weapon.

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Speaker 2: I think you're saying yeah, essentially, So what Yo Carlos

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Speaker 2: Sari highlighted was that essentially like last ditch effort, the

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Speaker 2: thing that they can do is that they go back

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Speaker 2: and they retract their ruling the SEC. That is, they

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Speaker 2: can retract their their approval of futures ETFs. Essentially, this

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Speaker 2: is the way that they could play hardball with gray

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Speaker 2: scale and really deny spot ETFs from coming to the

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Speaker 2: market at least for US several more years. By retroactively

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Speaker 2: denying these prior applications for futures ETFs even though they're

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Speaker 2: already trading, even though they're already h you know, tens

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Speaker 2: of millions of dollars worth of liquidity flowing through these instruments,

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Speaker 2: the SEC can essentially retroactively deny these futures ETFs, thereby

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Speaker 2: stripping away the reason that the court uh gave Grayscale

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Speaker 2: to win here. Right, So, in so many words, this

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Speaker 2: is the SEC's way of playing hardball. Is by making

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Speaker 2: it so the legal precedent for why there should be

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Speaker 2: spot etsy, they can basically retroactively remove that and make

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Speaker 2: it all the more harder for these companies like Grayscale

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Speaker 2: to find a way to get these things approved.

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Speaker 1: Now, this is where we dip into opinion here, So

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Speaker 1: take it for what it's worth. But Joe, why would

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Speaker 1: they want to do that?

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Speaker 2: Why would they want to do that? Well, for whatever reason,

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Speaker 2: whether it's.

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Speaker 1: Gary, you know, we don't know, right this is it's

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Speaker 1: just a guess, But why would they want to exactly?

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Speaker 2: Yeah, totally a lot of conjecture here, But in my opinion,

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Speaker 2: they they see players like Binance, and they're worried that

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Speaker 2: a lot of the uh big, a lot of bitcoin's

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Speaker 2: price is propped up on fraud, you know, whether it's

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Speaker 2: whether it's illegal wash trading, whether it's uh you know,

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Speaker 2: some other measure. The SEC, if they're being honest, they're

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Speaker 2: probably they're they're worried that these large exchanges that service bitcoin,

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Speaker 2: that services spot bitcoin price are fraudulent, Right, that's that's

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Speaker 2: the A side reason, and the B side reason is

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Speaker 2: there may be some entities, whether it's at the government,

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Speaker 2: the Federal Reserve, some other shadowy, lurking entity that has

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Speaker 2: to do with the United States Government or the Federal Reserve,

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Speaker 2: that is whispering in the SEC's ear basically telling them to,

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Speaker 2: you know, not approve this at all costs. Now, why

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Speaker 2: there would be some kind of institution that doesn't want

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Speaker 2: capital allocators in the United States to be able to

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Speaker 2: allocate to bitcoin. It's anybody's guest, right, But considering that

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Speaker 2: there are tens of trillions of dollars worth of US

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Speaker 2: treasuries that are getting issued over the next decade, you know,

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Speaker 2: fifty five billion or fifty billion worth of new debt

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Speaker 2: that's coming online every single day. To my eyes, the Treasury,

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Speaker 2: the US government, the Fed, they probably want capital allocators

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Speaker 2: to be buying those so interest rates don't send through

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Speaker 2: the stratosphere and the US government can fund itself instead

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Speaker 2: of bitcoins. So that could also be a reason. But

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Speaker 2: of course, just conjecture.

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Speaker 1: Just sure, well, I would go for option two if

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Speaker 1: I was going to put my base case. And the

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Speaker 1: reason why is because I mean cold on. They're concerned

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Speaker 1: about potentially wash trading in the price being propped up,

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Speaker 1: sort of like how JP Morgan traders just went to

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Speaker 1: jail for manipulating the gold price. Like we see prices

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Speaker 1: of assets are manipulated all the time, across all different

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Speaker 1: types of asset classes, across all types of spectrums. Notorious

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Speaker 1: short sellers who see news articles to like bring you know,

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Speaker 1: bring the price of price, you know, stock prices down,

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Speaker 1: things like that. So that just seems like the least likely.

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Speaker 1: That's obviously what they're saying. I just think that's the

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Speaker 1: least likely. I would go for door number two if

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Speaker 1: I was going to choose. But talking about big in

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Speaker 1: this etf, I think there's a bigger picture at play,

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Speaker 1: and I'm curious your take if you really think that

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Speaker 1: maybe bitcoin is kind of taking a backseat to the

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Speaker 1: bigger macro economic picture, and so I want to dig

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Speaker 1: into that. But before we do, if you're just tuning in,

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Speaker 1: you're listening to the Mark Moss Show, sitting down with

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Speaker 1: Joe CONSORTI talking about the macroeconomic landscape in the United

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Speaker 1: States and for the world, and maybe where that drags bitcoin.

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Speaker 1: So we're gonna cover all that more.

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Speaker 3: But we're gonna take a quick break, so don't go away.

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Speaker 3: We'll be right back. We'll be back in a second.

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Speaker 1: Don't go away, all right, welcome back. If you just

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Speaker 1: tune in, you're listening to the Mark mass Show. I'm

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Speaker 1: sitting down with Joe Consorti and we're talking about we

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Speaker 1: were talking about bitcoin in this ETF and the SEC decision,

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Speaker 1: and now we're I want to ask you, Joe, do

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Speaker 1: you still think at this point bitcoin is pretty tied

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Speaker 1: into sort of the global macroeconomic picture, and that's really

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Speaker 1: in the driver's seat of what's going on.

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Speaker 2: I think so. I think it's totally bold into the

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Speaker 2: macro picture. Obviously, you see these pumps and dumps here

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Speaker 2: and there off of bitcoin centric news, But at the

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Speaker 2: end of the day, bitcoin is a macro asset, and

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Speaker 2: it's a macro asset that's really very very tiny, and

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Speaker 2: therefore it gets thrown around in the waves of this

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Speaker 2: big macro ocean of liquidity. The reason I feel so

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Speaker 2: comfortable saying this is because the price of money is

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Speaker 2: that an all time high, well not an all time

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Speaker 2: high and all time high for my lifetime certainly, but

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Speaker 2: at the very least a decade, if not multi decade high.

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Speaker 2: You know, money has never been so expensive, and also

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Speaker 2: the rate of contraction of money supply is at its

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Speaker 2: deepest contraction since the early stages of the Great Depression.

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Speaker 2: So if you think about it that way, if you

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Speaker 2: think of bitcoin as this asset that's meant to absorb

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Speaker 2: all of this x less liquidity, but all of a

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Speaker 2: sudden that access liquidity is being drained like an absess

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Speaker 2: then Bitcoin really doesn't have much of a reason to

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Speaker 2: skyrocket into the stratosphere. So from a macro perspective, I

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Speaker 2: think it's really influencing Bitcoin heavily. Of the downside, those

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Speaker 2: are the headwinds facing bitcoin, whereas things like ETF approval,

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Speaker 2: those Bitcoin native aspects, as well as bitcoin supply schedule

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Speaker 2: the amount of bitcoin being issued getting cut in half,

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Speaker 2: that eventually will play positive rowan biitcoins price action. But

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Speaker 2: I think those negative forces of money supply contraction and

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Speaker 2: interest rates are really what are pushing Bitcoin down now.

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Speaker 1: I know you know you pay attention to liquidity, and

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Speaker 1: I think maybe you tweeted it out yesterday or day

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Speaker 1: before about just how liquidity is retreating kind to the

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Speaker 1: point you said sort of at the fastest rate in.

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Speaker 3: History, and that is true.

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Speaker 1: But at the same time, we still have a lot

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Speaker 1: of liquidity in the system because we had you know,

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Speaker 1: between the FED and between fiscal and monetary inflation, we

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Speaker 1: had about eleven trillion pumped into the system in about

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Speaker 1: two years, and so that's still sort of sitting there,

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Speaker 1: it seems like, And that would be my base case

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Speaker 1: as to why equities are holding up so strong in

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Speaker 1: the face of this rampant rate increase, while at the

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Speaker 1: same time the bond market is telling us there're certainty

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Speaker 1: you're coming, but equities are still ranging new all time highs.

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Speaker 3: First of all, if you.

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Speaker 1: Can want to comment on that, and then second of all,

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Speaker 1: if that, if the answer is yes, you think maybe

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Speaker 1: that could be part of it, then why has bitcoins

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Speaker 1: sold off so much? Wall equities have been able to

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Speaker 1: continue to rally.

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Speaker 2: I think that is part of it if you look

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Speaker 2: at it from obviously, we talk about growth, and we

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Speaker 2: talk about the rate of change, right m two the

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Speaker 2: rate of changes its deepest negative in almost one hundred years. Okay, great,

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Speaker 2: but to your point, this is just a mean reversion, right,

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Speaker 2: there's a rate that the money supply goes up, it

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Speaker 2: goes up into the right, but then all of a

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Speaker 2: sudden in twenty twenty there was this huge bazooka of

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Speaker 2: money that was blasted into the system and it went

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Speaker 2: like this. So now the process we're going through right

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Speaker 2: now is just a reversion down back to that historical

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Speaker 2: rate of growth. And so for that reason, that could

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Speaker 2: be the reason that there is still ample liquidity in

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Speaker 2: the system and you haven't seen a huge explosion in

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Speaker 2: things like major equity indexes just yet. And as for

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Speaker 2: how that's impacting bitcoin, I think it just comes down

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Speaker 2: to a behavioral shift in investors following that monetary bazuka.

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Speaker 2: I think there was a great deal of hysteria that

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Speaker 2: came into the bitcoin market during twenty twenty, twenty twenty one,

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Speaker 2: and of course into twenty twenty two, and I do

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Speaker 2: think a lot of that hysteria is moving away. One

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Speaker 2: the reason I think this d risking came for bitcoin

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Speaker 2: first prior to equities is because, like I said, it's

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Speaker 2: higher beta, a lot more leverage in bitcoin right now.

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Speaker 2: Leverage is propping up the market more than it ever

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Speaker 2: has over spot buying. But also it's very ill liquid

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Speaker 2: right compared to things like the S and P five hundred.

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Speaker 2: So as investors d risk, I have a feeling because

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Speaker 2: spot buying is virtually non existent in bitcoin right now

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Speaker 2: and it's a high risk asset.

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Speaker 3: They move.

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Speaker 2: The liquidity moves from that asset first, Whereas the S

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Speaker 2: and P five hundred is still able to be supported,

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Speaker 2: particularly on strong relatively strong earnings growth over the last

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Speaker 2: couple of quarters. Earnings have really done well, and so

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Speaker 2: equities are still being supported. I think the tide will

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Speaker 2: turn there based off two factors. One really attractive rates.

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Speaker 2: I may think the US treasuring with the amount of

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Speaker 2: debt that it's issuing is super irresponsible, but the reality

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Speaker 2: is investors love when there's higher and higher yielding debt,

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Speaker 2: and so as debt continues to be attractive, investors will

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Speaker 2: move away from equities. But I think the nail in

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Speaker 2: the coffin for the S and P five hundred eventually,

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Speaker 2: which will lead it to follow bitcoin, is when earnings

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Speaker 2: start to disappoint, and for now that's not going to

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Speaker 2: happen until corporate debt has to roll over, which hundreds

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Speaker 2: of billions of dollars worth of corporate debt is maturing

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Speaker 2: the end of this year. But primarily twenty twenty four

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Speaker 2: and twenty twenty five. Those are the two years to

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Speaker 2: watch where earnings really start to deteriorate and the S

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Speaker 2: and P five hundred snaps back to reality. Could happen

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Speaker 2: before that, could happen during that, but I think eventually

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Speaker 2: the S and P five hundred will follow Bitcoin and

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Speaker 2: its de risking pattern here.

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Speaker 1: Yeah, I love that point that you right in the

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Speaker 1: beginning about the M two supply. While it is falling

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Speaker 1: at the fastest rate in one hundred years, to your point,

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Speaker 1: it's falling back to the mean. It was sort of

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Speaker 1: like I was talking about before previously, not today, but

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Speaker 1: on another video. But oil prices and all these headlines,

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Speaker 1: oil prices are plunging.

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Speaker 3: They're plunging. They're plunging.

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Speaker 1: Yeah, they plunged all the way back to where they

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Speaker 1: were pre the little spike that we had, you know,

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Speaker 1: during the war with Russuro broke out, and so it's

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Speaker 1: like important to understand the direction and the speed, but

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Speaker 1: also sort of understand where that mean averages as well.

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Speaker 1: I guess that's what you're saying. Yeah, yeah, so liquid

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Speaker 1: is plunging, but it's still pretty high, which is why

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Speaker 1: stocks are still doing pretty good now. A lot of

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Speaker 1: it has to do with, to your point, like the

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Speaker 1: direction that we're going, and so all eyes are on

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Speaker 1: dro and Powell ahead of the FED, trying to tell

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Speaker 1: us where the price of this money is going to go,

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Speaker 1: where it's going to end up. They had the meeting

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Speaker 1: last week in Wyoming. It seemed to me it was

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Speaker 1: what we call FED speak, a lot of kind of

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Speaker 1: talking out of both sides of your mouth, like, hey,

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Speaker 1: we're kind of waiting and watching. We could do more

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Speaker 1: if we need to. We don't know if we will,

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Speaker 1: because we have to be prepared for either way. Is

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Speaker 1: that sort of what you took out of it? Do

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Speaker 1: you think it was sort of like evenly hawkish and

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Speaker 1: dubish at the same time.

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Speaker 3: It is.

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Speaker 2: Ultimately, the FED needs to straddle that line between not

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Speaker 2: spooking the markets and creating this, you know, the pushing

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Speaker 2: the wealth effect on the other.

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Speaker 1: But a lot of times they're trying to really project

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Speaker 1: out in advance what they're going to do because they

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Speaker 1: don't want to spook To your point, they don't want

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Speaker 1: to spook the markets. Typically they say, like before they

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Speaker 1: started raising race, they announced several months before they were

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Speaker 1: going to do it before they did, so sometimes they're

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Speaker 1: trying to kind of lead you. So are they leading

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Speaker 1: this into neutral territory?

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Speaker 2: It seems like it. The FED does what's called Ford guidance,

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Speaker 2: which exactly like you said, they don't want to spook

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Speaker 2: the markets, and so they kind of tell you ahead

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Speaker 2: of time exactly what they're going to do. It's all

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Speaker 2: about setting expectations and keeping to them. And they're kind

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Speaker 2: of setting the expectations for that they're going to be

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Speaker 2: on hold, right, And the reason being, Jerome Powell said,

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Speaker 2: as is often the case, we are navigating by the

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Speaker 2: stars under cloudy sky. That was a quote from him.

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Speaker 2: That's kind of disconcerting from the guy who's setting the

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Speaker 2: price of money for the entire United States and all

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Speaker 2: of US dollar capital markets. But essentially what he's saying

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Speaker 2: is that the FED has two tools. Okay, it has

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Speaker 2: interest rate setting and it has its balance sheet. Right,

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Speaker 2: it can influence rates, and it can buy stuff with

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Speaker 2: his balance sheet or the money printer, right, and these

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Speaker 2: two tools, both of them work with long and variable lags.

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Speaker 2: It's a phrase that Jerome Powell has said multiple times,

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Speaker 2: which tend to be about eighteen months or longer. And

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Speaker 2: so now that we're about eighteen months away from the

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Speaker 2: fed's first rate hike, these lags are finally trickling down

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Speaker 2: from the Fed's monetary gavel to actually tightening financial conditions.

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Speaker 3: And so when he.

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Speaker 2: Says we're navigating by the stars under cloudy skies, essentially

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Speaker 2: he's saying, yeah, we were using this business data, these tools,

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Speaker 2: but now we're entering into a realm of uncertainty. So

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Speaker 2: now that the lags are finally hitting, we're very uncertain

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Speaker 2: about the outlook. And so he's kind of he's setting

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Speaker 2: the expectation that we're now entering the period where things

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Speaker 2: are going to start to get Harry and Pal just

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Speaker 2: said it in a very overly poetic way. So that's

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Speaker 2: what I think I got out of Jackson.

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Speaker 1: Hole reading the tea leaves. If you're just tuning in,

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Speaker 1: you're listening to the Mark Mass Show. I'm sitting down

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Speaker 1: with Joe CONSORTI talking about the state of the FED,

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Speaker 1: the economy of the markets, and where we're going.

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Speaker 3: I gotta take a quick break. We'll be back with

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Speaker 3: more in a minute. Don't go away, all right, Welcome back.

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Speaker 1: If you're just tune in you're listening to the Mark

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Speaker 1: Moss Show. I'm sitting down with Joe Consorti from the

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Speaker 1: Bitcoin Layer. They put out amazing data every single day.

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Speaker 1: There is a free newsletter and a paid newsletter.

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Speaker 3: Check that out.

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Speaker 1: We'll put it in the show notes down below the

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Speaker 1: Bitcoin Layer. But Joe, back to where we were talking

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Speaker 1: about before. We were talking about this meeting that the

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Speaker 1: FED had last week, and he wants to read the

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Speaker 1: tea leaves. He wants to read the stars as an astrologer. Now,

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Speaker 1: I guess tell me why the you know, you talk

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Speaker 1: a lot about treasury yields. The treasury is this sophisticated market, right,

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Speaker 1: Why are the two and ten so important for us

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Speaker 1: to watch?

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Speaker 3: The two year yield and the ten year yield? And

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Speaker 3: what are they telling us? Right?

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Speaker 2: So, the two year and the tenure yield are two

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Speaker 2: of two interest rates within the US treasury market. Now,

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Speaker 2: the US treasure market is so important because almost every

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Speaker 2: major financial institution, trading country company all around the world

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Speaker 2: they hold them, and so they're really really important. And

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Speaker 2: because they're held by everybody, they have all this liquidity.

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Speaker 2: Then they are used as a benchmark rate for the

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Speaker 2: global economy. Right, so the two year yield is used

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Speaker 2: for borrowers who are borrowing on like a really short

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Speaker 2: time frame, whereas the ten year yield is used for

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Speaker 2: borrowers who are borrowing on a very long time frame. So,

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Speaker 2: for example, business loans right, business loans are often written

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Speaker 2: at a spread to the ten year US treasure yield.

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Speaker 2: And the two year yield is so important because it

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Speaker 2: really influences the rate that financial institutions can get they

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Speaker 2: have to pay out on their deposits, and they also

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Speaker 2: can get at short term money facilities if they mark

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Speaker 2: their money risk free elsewhere. And so these two rates

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Speaker 2: really impact the price of lending and the amount of

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Speaker 2: lending that happens here in the United States and in

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Speaker 2: the global economy at large. So both of them are

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Speaker 2: very important for global growth, and both of them, by

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Speaker 2: the same token, are very important for inflation because obviously,

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Speaker 2: you know, when when interest rates are very low, people

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Speaker 2: can borrow cheaply, chances are they're going to go out,

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Speaker 2: they're going to spend that money they borrow. Pushes price

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Speaker 2: inflation up. But the reverse of that, the flip side

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Speaker 2: of that is when interest rates are very high, chances

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Speaker 2: are a lot of a lot higher quality borrowing is

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Speaker 2: going to happen, and a lot less borrowing is going

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Speaker 2: to happen, right, And so the reason that watching two

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Speaker 2: of these things, these two things so closely is pretty important,

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Speaker 2: particularly the tenure yield, is because the tenure yield is

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Speaker 2: the most used benchmark rate for the global economy, and

436
00:20:55,560 --> 00:20:58,320
Speaker 2: the tenure yield for the last five years, five six years,

437
00:20:58,600 --> 00:21:02,960
Speaker 2: have been underneath the rate of inflation. It has been negative, right,

438
00:21:03,040 --> 00:21:08,520
Speaker 2: So said differently, you can borrow right essentially at a

439
00:21:08,560 --> 00:21:11,440
Speaker 2: negative rate, and so this has caused all this cheap

440
00:21:11,480 --> 00:21:14,880
Speaker 2: borrowing to proliferate around the world because if you're not borrowing,

441
00:21:15,040 --> 00:21:17,480
Speaker 2: you're losing money, right in a very backwards way. That's

442
00:21:17,480 --> 00:21:21,560
Speaker 2: what negative interest rates do. And so that's what's happened

443
00:21:21,560 --> 00:21:24,359
Speaker 2: for the last five years. But now we have the

444
00:21:24,480 --> 00:21:28,440
Speaker 2: highest real rates in fifteen years, still technically not above

445
00:21:29,080 --> 00:21:32,440
Speaker 2: the or just peeking their head above rather the inflation rate,

446
00:21:32,760 --> 00:21:36,160
Speaker 2: but the highest real rates in ten years, fifteen years rather,

447
00:21:36,520 --> 00:21:39,040
Speaker 2: And that's pretty substantial, right, if you go all the

448
00:21:39,040 --> 00:21:41,040
Speaker 2: way back to two thousand and seven, two thousand and eight,

449
00:21:42,280 --> 00:21:45,360
Speaker 2: that's when that's with the last time that we had

450
00:21:45,520 --> 00:21:47,960
Speaker 2: the level of real rates that we have now, and

451
00:21:48,000 --> 00:21:50,879
Speaker 2: so that's going to really restrict the amount of borrowing

452
00:21:50,920 --> 00:21:53,240
Speaker 2: that happens here in the United States and the global economy.

453
00:21:53,680 --> 00:21:57,040
Speaker 2: And when businesses can borrow, they have to borrow less,

454
00:21:57,480 --> 00:21:59,120
Speaker 2: they have to borrow at a higher rate. That means

455
00:21:59,160 --> 00:22:03,400
Speaker 2: they scale back their operations, they turn less profitable, eventually

456
00:22:03,440 --> 00:22:05,560
Speaker 2: they have to fire people. And so this is very

457
00:22:05,560 --> 00:22:07,960
Speaker 2: significant because it's sort of a very it's a slow

458
00:22:08,040 --> 00:22:12,000
Speaker 2: motion stranglehold on global growth. And that's what's happening right

459
00:22:12,040 --> 00:22:15,639
Speaker 2: now with particularly the ten year yield, but also the

460
00:22:15,640 --> 00:22:17,760
Speaker 2: two year yelds. So that's why they're so key to watch.

461
00:22:18,000 --> 00:22:20,639
Speaker 2: Its so key to understand that these rates being at

462
00:22:20,640 --> 00:22:25,159
Speaker 2: their highest level is a big headwind for global economic activity.

463
00:22:25,640 --> 00:22:31,159
Speaker 1: So I'm seeing two different conflicting messages. So one not

464
00:22:31,240 --> 00:22:34,120
Speaker 1: from you, but from the market. So one, we're clearly

465
00:22:34,119 --> 00:22:37,720
Speaker 1: in a bowl market. Technically above twenty percent, we're in

466
00:22:37,760 --> 00:22:41,440
Speaker 1: a bowl market until otherwise. I mean, that's that's kind

467
00:22:41,440 --> 00:22:41,800
Speaker 1: of the way.

468
00:22:41,760 --> 00:22:42,119
Speaker 3: I see it.

469
00:22:42,480 --> 00:22:43,959
Speaker 1: Kind of to the point we had all this liquidity

470
00:22:43,960 --> 00:22:48,160
Speaker 1: put into the system, the markets went up. I think

471
00:22:48,200 --> 00:22:51,080
Speaker 1: another thing that happened is when the banks fell into problems,

472
00:22:51,080 --> 00:22:53,960
Speaker 1: the Fed jumped in with the BTFP, which basically signaled

473
00:22:53,960 --> 00:22:56,639
Speaker 1: the FED put was in place. We also saw the

474
00:22:56,680 --> 00:22:59,520
Speaker 1: FED jumping open up liquidity lines with lots of other countries,

475
00:22:59,600 --> 00:23:02,800
Speaker 1: signaling the FED put is in place and still active.

476
00:23:04,119 --> 00:23:08,040
Speaker 1: We're strongly in bull market territory right. Nasdacs up twenty

477
00:23:08,040 --> 00:23:10,600
Speaker 1: five percent, SMP's up sixteen percent, Dow Jones up nine

478
00:23:10,680 --> 00:23:13,480
Speaker 1: percent just since March of twenty twenty three, when the

479
00:23:13,480 --> 00:23:14,520
Speaker 1: banking crisis happened.

480
00:23:14,560 --> 00:23:15,720
Speaker 3: So we're that's bullmarket.

481
00:23:16,600 --> 00:23:19,919
Speaker 1: I saw on the monthly mac D it issued a

482
00:23:19,960 --> 00:23:23,760
Speaker 1: buy signal, which historically is very strong. It's happened three

483
00:23:23,760 --> 00:23:26,440
Speaker 1: times lows of twenty nineteen, twenty sixteen, and the COVID

484
00:23:26,440 --> 00:23:30,400
Speaker 1: twenty twenty lows, and we're below the two hundred day

485
00:23:30,480 --> 00:23:34,040
Speaker 1: moving average. So those are like bicycles in the market.

486
00:23:34,119 --> 00:23:36,600
Speaker 1: Now the treasuries show a different picture, and they show

487
00:23:36,640 --> 00:23:40,000
Speaker 1: that recession's coming. Right, So like we have this like

488
00:23:40,080 --> 00:23:42,560
Speaker 1: contradictory picture, these conflicting signals.

489
00:23:43,400 --> 00:23:45,040
Speaker 3: The S and P I mean.

490
00:23:44,960 --> 00:23:48,159
Speaker 1: About fifty seven percent of the markets waiting are in

491
00:23:48,240 --> 00:23:50,359
Speaker 1: an up trend, which is like pretty big deal. But

492
00:23:50,400 --> 00:23:53,520
Speaker 1: like I said, the treasury market is really bad now

493
00:23:53,720 --> 00:23:57,200
Speaker 1: when the when we saw last week, we're trying to

494
00:23:57,280 --> 00:24:00,399
Speaker 1: understand like what investors' concerns are and like are they

495
00:24:00,440 --> 00:24:03,439
Speaker 1: more concerned about inflation or deflation. Seems like kind of

496
00:24:03,440 --> 00:24:06,360
Speaker 1: like two sides that we're looking at. And when we

497
00:24:06,440 --> 00:24:13,520
Speaker 1: saw the we saw the treasuries drop, then stocks took

498
00:24:13,560 --> 00:24:16,560
Speaker 1: another bounce higher, So it seems like there's still sort

499
00:24:16,560 --> 00:24:20,320
Speaker 1: of in this risk on worried about inflation view. How

500
00:24:20,320 --> 00:24:23,199
Speaker 1: do you reconcile that contradictory view of what the markets

501
00:24:23,200 --> 00:24:25,439
Speaker 1: are telling us and what the treasure you're telling us.

502
00:24:26,760 --> 00:24:30,080
Speaker 2: Yeah, it's certainly interesting. I mean, treasuries are really signaling

503
00:24:30,080 --> 00:24:32,520
Speaker 2: by all accounts, recessions in the way if you look

504
00:24:32,560 --> 00:24:37,400
Speaker 2: at both of the bigger, the more relevant yield curves,

505
00:24:38,000 --> 00:24:39,919
Speaker 2: the difference between the ten year and the two year

506
00:24:39,960 --> 00:24:41,879
Speaker 2: treasure yield and the difference between the tenure and the

507
00:24:41,920 --> 00:24:44,879
Speaker 2: three month treasure yield, both are extremely inverted and that

508
00:24:44,920 --> 00:24:48,840
Speaker 2: shouldn't happen. That means the price of borrowing is higher

509
00:24:48,920 --> 00:24:51,359
Speaker 2: than the price that you can lend at right of course,

510
00:24:51,400 --> 00:24:54,400
Speaker 2: for banks that borrow short and lend long, that destroys

511
00:24:54,440 --> 00:24:56,840
Speaker 2: their whole scheme. And when the yield curve and verse,

512
00:24:56,880 --> 00:24:58,760
Speaker 2: that really means recessions on the way, because it means

513
00:24:58,760 --> 00:25:01,280
Speaker 2: that credit growth is is about to go in the

514
00:25:01,359 --> 00:25:04,080
Speaker 2: in this in the toilet as banks lend out far

515
00:25:04,160 --> 00:25:06,359
Speaker 2: less money because the way that they do business doesn't

516
00:25:06,359 --> 00:25:10,199
Speaker 2: work anymore. And so the treasury market, what the treasure

517
00:25:10,240 --> 00:25:14,120
Speaker 2: market is saying totally contradicting the way that equities are behaving.

518
00:25:14,400 --> 00:25:16,840
Speaker 2: Equities are ripping right, just like you said, bull market,

519
00:25:17,200 --> 00:25:21,159
Speaker 2: bull market until proven otherwise. Nobody looking back at the

520
00:25:21,160 --> 00:25:22,760
Speaker 2: start of this year, at the end of last year

521
00:25:22,920 --> 00:25:24,960
Speaker 2: would have predicted that the S and P five hundred

522
00:25:25,000 --> 00:25:28,000
Speaker 2: would be up and threatening new highs, nor would they

523
00:25:28,000 --> 00:25:29,720
Speaker 2: predict that the Nasdaq will be doing the same.

524
00:25:30,080 --> 00:25:32,359
Speaker 1: And so I don't know if that's true, Joe, because

525
00:25:32,640 --> 00:25:35,280
Speaker 1: shout out to Nick over at your team. I had

526
00:25:35,359 --> 00:25:38,359
Speaker 1: him on last fall and he said his base case

527
00:25:38,480 --> 00:25:40,960
Speaker 1: was the Fed, we don't have a big crash coming,

528
00:25:41,000 --> 00:25:43,679
Speaker 1: and and the Fed kind of pulls this off. I

529
00:25:43,800 --> 00:25:45,840
Speaker 1: made some videos also kind of saying the same thing.

530
00:25:45,920 --> 00:25:49,240
Speaker 1: So shout out to Nick and uh, maybe he didn't.

531
00:25:49,280 --> 00:25:51,240
Speaker 1: He didn't say new all time highs, but he said

532
00:25:51,280 --> 00:25:53,159
Speaker 1: that he didn't. His base case was not a big

533
00:25:53,240 --> 00:25:54,919
Speaker 1: crash coming. And so that's sort of where we're at.

534
00:25:54,920 --> 00:25:56,440
Speaker 1: But anyway, keep going phenomenally.

535
00:25:56,480 --> 00:25:58,480
Speaker 2: Yeah, so your base case, next base case. And when

536
00:25:58,520 --> 00:26:00,879
Speaker 2: I say nobody, I mean myself. I certainly was not

537
00:26:00,920 --> 00:26:06,600
Speaker 2: predicting that equities would be behaving this way. So essentially,

538
00:26:06,720 --> 00:26:09,159
Speaker 2: you know, what we're seeing is is totally diverging paths

539
00:26:09,200 --> 00:26:11,840
Speaker 2: between what raids are saying and what equities are doing.

540
00:26:12,040 --> 00:26:15,280
Speaker 2: And in my opinion, it boils down to at least

541
00:26:15,280 --> 00:26:16,800
Speaker 2: part of it, I think the line share of it

542
00:26:16,800 --> 00:26:20,080
Speaker 2: has to do with the way that companies refinance their debt.

543
00:26:20,320 --> 00:26:22,879
Speaker 2: In twenty twenty and twenty twenty one and even the

544
00:26:23,119 --> 00:26:26,040
Speaker 2: beginning of twenty twenty two, when rates were still held

545
00:26:26,080 --> 00:26:28,040
Speaker 2: so artificially low, there were a lot.

546
00:26:27,960 --> 00:26:30,240
Speaker 1: Of not being impacted by these rate increases.

547
00:26:30,320 --> 00:26:32,960
Speaker 2: Yet that's right exactly. They were able to refly lower

548
00:26:33,119 --> 00:26:35,840
Speaker 2: just like people who just like you know, my father

549
00:26:35,880 --> 00:26:37,800
Speaker 2: who was able to refi his mortgage at two and

550
00:26:37,840 --> 00:26:40,800
Speaker 2: a half percent, caught the absolute bottom. He's unaffected by

551
00:26:40,840 --> 00:26:43,240
Speaker 2: these these changes and mortgage rates, And the same thing

552
00:26:43,560 --> 00:26:47,320
Speaker 2: for corporate barwers. They refied when rates were basically zero

553
00:26:47,440 --> 00:26:49,840
Speaker 2: after the FED shot them down to zero post COVID,

554
00:26:50,119 --> 00:26:52,000
Speaker 2: and so they're unaffected by these rate hikes, and so

555
00:26:52,040 --> 00:26:54,320
Speaker 2: it becomes a question of when does this corporate debt mature.

556
00:26:54,680 --> 00:26:57,520
Speaker 2: That's when we really start to see underperformance. And so frankly,

557
00:26:57,560 --> 00:27:00,840
Speaker 2: the yield curve can remain inverted without uninverted, yields can

558
00:27:00,880 --> 00:27:03,320
Speaker 2: stay right where they are before we see any kind

559
00:27:03,320 --> 00:27:07,440
Speaker 2: of corporate weakness and until until then, raids can continue

560
00:27:07,440 --> 00:27:11,440
Speaker 2: signaling recession, and equities can still doing, uh, continue doing well.

561
00:27:11,480 --> 00:27:14,360
Speaker 2: It all boils down to companies being able to who

562
00:27:14,480 --> 00:27:16,000
Speaker 2: refinanced much lower.

563
00:27:16,480 --> 00:27:18,960
Speaker 1: Yeah, yeah, great, great summary. I want to dig into

564
00:27:18,960 --> 00:27:20,480
Speaker 1: that a little bit more. I have some questions on

565
00:27:20,520 --> 00:27:22,320
Speaker 1: my own. I got to take a quick break. If

566
00:27:22,359 --> 00:27:24,680
Speaker 1: you're just tune in you're listening to the Mark Moss Show.

567
00:27:24,880 --> 00:27:27,879
Speaker 1: I'm sitting down with my friend Joe CONSORTI. He helps

568
00:27:27,920 --> 00:27:29,520
Speaker 1: me out a lot. He also is part of the

569
00:27:29,560 --> 00:27:31,920
Speaker 1: Bitcoin Layer. You should definitely check that out. They put

570
00:27:31,960 --> 00:27:34,040
Speaker 1: out daily news if you want to get your finger

571
00:27:34,080 --> 00:27:36,120
Speaker 1: on the pulse of the market, the Bitcoin Layer.

572
00:27:36,280 --> 00:27:37,760
Speaker 3: I've got to take a very quick break. We're going

573
00:27:37,800 --> 00:27:40,520
Speaker 3: to come back. We're going to talk about timing.

574
00:27:41,560 --> 00:27:43,680
Speaker 1: Uh the see I see if our crystal balls are

575
00:27:43,680 --> 00:27:45,120
Speaker 1: clear at all, We'll talk about that in a minute

576
00:27:45,240 --> 00:27:47,040
Speaker 1: and how we can kind of reconcile this and move

577
00:27:47,080 --> 00:27:47,560
Speaker 1: forward with it.

578
00:27:47,720 --> 00:27:49,000
Speaker 3: Be back with more in a minute.

579
00:27:49,080 --> 00:27:51,320
Speaker 1: Don't go away, Beer back, all right, welcome back. If

580
00:27:51,359 --> 00:27:53,240
Speaker 1: you're just tune in, you're listening to the Mark Moss Show.

581
00:27:53,240 --> 00:27:55,919
Speaker 1: I'm sitting down with Joe Consorti. It's an analyst with

582
00:27:56,000 --> 00:27:59,280
Speaker 1: the Bitcoin Layer with amazing macro research. Check them out

583
00:27:59,320 --> 00:28:03,600
Speaker 1: the Bitcoin Layer. So, Joe, we are talking about reconciling

584
00:28:03,640 --> 00:28:05,760
Speaker 1: that the markets ripping to new all time highs and

585
00:28:05,800 --> 00:28:07,920
Speaker 1: being or close to and being in a bull market,

586
00:28:08,280 --> 00:28:11,719
Speaker 1: and then Treasury is showing that recession is coming. And

587
00:28:11,840 --> 00:28:13,840
Speaker 1: the one thing that I always say over and over

588
00:28:13,840 --> 00:28:15,720
Speaker 1: and over again every time I'm at a conference whatever

589
00:28:15,920 --> 00:28:19,600
Speaker 1: is like we may hear conflicting views, and the question

590
00:28:19,720 --> 00:28:22,080
Speaker 1: I think that always clarifies that is what is the

591
00:28:22,119 --> 00:28:25,840
Speaker 1: timeframe we're talking about? And so you kind of summarize

592
00:28:25,840 --> 00:28:27,439
Speaker 1: that at the last before I took the break, and

593
00:28:27,480 --> 00:28:29,960
Speaker 1: you said and that that was the point I was

594
00:28:29,960 --> 00:28:31,240
Speaker 1: going to bring up what you said it, but that

595
00:28:31,560 --> 00:28:35,199
Speaker 1: yield curves signal a recession is coming every time, but

596
00:28:35,960 --> 00:28:38,320
Speaker 1: yield curves can stay inverted for a really long time

597
00:28:39,040 --> 00:28:41,320
Speaker 1: and they could even become more inverted than they are now.

598
00:28:42,080 --> 00:28:44,200
Speaker 1: And so that is the question. So it's like sort

599
00:28:44,240 --> 00:28:47,000
Speaker 1: of like the Treasury is the markets are ripping to

600
00:28:47,080 --> 00:28:49,080
Speaker 1: new all time highs on their way to new all

601
00:28:49,120 --> 00:28:51,560
Speaker 1: time highs, while the Treasury is signaling recession, but that

602
00:28:51,560 --> 00:28:55,840
Speaker 1: recession could be one, two, three, five, ten years out. Now,

603
00:28:56,080 --> 00:28:59,360
Speaker 1: one of the things that you're saying is that you

604
00:28:59,400 --> 00:29:02,440
Speaker 1: know the corporate you know, homeowners aren't really affected. They

605
00:29:02,480 --> 00:29:05,600
Speaker 1: locked in low rates. Corporations aren't as affected because they

606
00:29:05,640 --> 00:29:07,960
Speaker 1: locked in low rates. But when those have to start

607
00:29:08,000 --> 00:29:11,360
Speaker 1: being rolled over, that could be a big problem. And

608
00:29:11,440 --> 00:29:13,440
Speaker 1: so that kind of gives us a little bit of

609
00:29:13,520 --> 00:29:15,840
Speaker 1: view into when we can see when treasures have to

610
00:29:15,840 --> 00:29:17,640
Speaker 1: be rolled over, when bonds have to be rolled over,

611
00:29:17,680 --> 00:29:18,920
Speaker 1: corporate bonds have to be rolled over.

612
00:29:19,840 --> 00:29:21,040
Speaker 3: But then we also.

613
00:29:20,840 --> 00:29:24,920
Speaker 1: Have to think that you know, man, Joe, I became

614
00:29:24,920 --> 00:29:26,560
Speaker 1: a goldbug in two thousand and eight. I realized it

615
00:29:26,600 --> 00:29:28,800
Speaker 1: was Fiat money that was the problem. That's when I

616
00:29:28,840 --> 00:29:31,320
Speaker 1: really got super interested in all this FED stuff. And

617
00:29:32,120 --> 00:29:34,680
Speaker 1: you know, I had been a real estate guy and

618
00:29:35,400 --> 00:29:37,680
Speaker 1: I got just you know, shellacked in two thousand and eight,

619
00:29:37,760 --> 00:29:39,560
Speaker 1: and you know, I wanted to get back in and

620
00:29:39,600 --> 00:29:43,520
Speaker 1: start building again. And around twenty thirteen, twenty fourteen, I

621
00:29:43,560 --> 00:29:45,240
Speaker 1: had enough money to do it, and I was kind

622
00:29:45,240 --> 00:29:46,960
Speaker 1: of wanting to do it. I just I enjoy it.

623
00:29:47,320 --> 00:29:49,240
Speaker 1: But I kept thinking that the market was going to crash.

624
00:29:49,240 --> 00:29:50,720
Speaker 1: It was going to crash, it was going to crash.

625
00:29:50,840 --> 00:29:53,600
Speaker 1: They didn't fix anything after two thousand and eight. You know,

626
00:29:53,720 --> 00:29:55,840
Speaker 1: the bank it's even a bigger problem this today. I

627
00:29:55,840 --> 00:29:57,560
Speaker 1: don't want to get in the same problem that I

628
00:29:57,640 --> 00:29:59,400
Speaker 1: was before. So it's going to crash correct, And here

629
00:29:59,400 --> 00:30:01,920
Speaker 1: we are. And what I've come to learn after this

630
00:30:02,240 --> 00:30:05,800
Speaker 1: time is that it's really hard not to underestimate the

631
00:30:05,840 --> 00:30:08,120
Speaker 1: tricks that the FED has up their sleeve. So we

632
00:30:08,320 --> 00:30:10,600
Speaker 1: have seen the Feds. You know, the commercial real estate

633
00:30:10,640 --> 00:30:14,200
Speaker 1: market is a disaster, the bonds, etc. There, But we've

634
00:30:14,200 --> 00:30:17,400
Speaker 1: seen the FED just take mortgage backed securities and just

635
00:30:17,400 --> 00:30:19,240
Speaker 1: put them on their balance sheet. And so why wouldn't

636
00:30:19,240 --> 00:30:23,000
Speaker 1: they do that again? We've seen the FED by corporate bonds.

637
00:30:23,440 --> 00:30:25,800
Speaker 1: Why wouldn't they just do that again? How do you

638
00:30:25,800 --> 00:30:26,440
Speaker 1: think about that?

639
00:30:26,920 --> 00:30:29,000
Speaker 2: Just like you said, the yield curve can remain inverted

640
00:30:29,440 --> 00:30:32,400
Speaker 2: for a very long time, year or several years, and

641
00:30:32,440 --> 00:30:34,560
Speaker 2: nothing can happen but in the lead up to two

642
00:30:34,560 --> 00:30:38,680
Speaker 2: thousand and eight, the yield curves was inverted in September

643
00:30:38,760 --> 00:30:40,920
Speaker 2: or July of two thousand and six, and it didn't

644
00:30:41,000 --> 00:30:44,160
Speaker 2: uninvert until September of two thousand and seven. So these

645
00:30:44,160 --> 00:30:46,160
Speaker 2: things can stay inverted for a long time. And right

646
00:30:46,200 --> 00:30:49,520
Speaker 2: now we were not even approaching the one year mark.

647
00:30:50,400 --> 00:30:52,240
Speaker 2: We're coming up on it in a couple of months

648
00:30:52,280 --> 00:30:55,120
Speaker 2: of the yield curve being inverted. This can stay the

649
00:30:55,160 --> 00:30:58,280
Speaker 2: case for a while and until firms actually have to

650
00:30:58,320 --> 00:31:02,200
Speaker 2: refinance and a recession begin rearing its head, which is

651
00:31:02,520 --> 00:31:05,360
Speaker 2: really where the alpha is. The alpha is when is

652
00:31:05,400 --> 00:31:09,160
Speaker 2: this going to happen. There's six point three trillion dollars

653
00:31:09,200 --> 00:31:13,760
Speaker 2: worth of outstanding corporate bonds that are maturing now through

654
00:31:14,200 --> 00:31:17,400
Speaker 2: this time in twenty twenty five, and so it becomes

655
00:31:17,400 --> 00:31:20,040
Speaker 2: a matter of at what point does the tide shift

656
00:31:20,080 --> 00:31:23,360
Speaker 2: to those mare majority of firms having to downsize, lay

657
00:31:23,400 --> 00:31:26,760
Speaker 2: people off, or do they have cash piles on hand

658
00:31:26,880 --> 00:31:28,760
Speaker 2: that can that can stave off a lot of this

659
00:31:29,040 --> 00:31:32,560
Speaker 2: this necessary downsizing, And then it becomes a question of okay,

660
00:31:32,640 --> 00:31:35,960
Speaker 2: if that does happen, and if commercial real estate, which

661
00:31:36,000 --> 00:31:39,280
Speaker 2: is its whole in a whole manner of you know,

662
00:31:39,680 --> 00:31:43,520
Speaker 2: a really awful situation. Record high vacancies and metro and

663
00:31:43,600 --> 00:31:49,640
Speaker 2: non metro areas, record high delinquencies. Over sixty percent of

664
00:31:49,680 --> 00:31:53,320
Speaker 2: the past due loans this year are unpaid, or the

665
00:31:53,720 --> 00:31:55,360
Speaker 2: commercial real estate loans that are set to be paid

666
00:31:55,400 --> 00:31:58,040
Speaker 2: this year are unpaid. It becomes a matter of what

667
00:31:58,040 --> 00:32:00,680
Speaker 2: what's the FED gonna do? Just like you said, there's

668
00:32:00,760 --> 00:32:04,480
Speaker 2: precedent before that the FED will just buy these distressed assets.

669
00:32:04,600 --> 00:32:07,400
Speaker 2: They've bought mortgage back securities before when the residential real

670
00:32:07,520 --> 00:32:10,920
Speaker 2: estate market was going up in smoke and people were

671
00:32:10,920 --> 00:32:12,760
Speaker 2: defaulting back in two thousand and eight, two thousand and nine,

672
00:32:12,920 --> 00:32:15,440
Speaker 2: all the way through twenty thirteen. And then they bought

673
00:32:15,440 --> 00:32:17,680
Speaker 2: corporate bonds before too. They did in two thousand and

674
00:32:17,720 --> 00:32:19,600
Speaker 2: two thousand and one, they did it during the Great

675
00:32:19,600 --> 00:32:23,760
Speaker 2: Financial Crisis. And now they set up a facility bank

676
00:32:23,880 --> 00:32:27,920
Speaker 2: term funding program just another acronym for cankicking, where they

677
00:32:28,640 --> 00:32:32,520
Speaker 2: it's a loan facility, right, loan facility that's temporary, temporary,

678
00:32:32,600 --> 00:32:37,240
Speaker 2: probably gonna be permanent, where banks who incurred all these

679
00:32:37,320 --> 00:32:40,280
Speaker 2: losses on their treasury holdings because of the Fed's interest

680
00:32:40,320 --> 00:32:43,680
Speaker 2: rate hikes can bring their distressed assets their treasuries to

681
00:32:43,720 --> 00:32:46,160
Speaker 2: the FED and receive one dollars. So these treasuries one

682
00:32:46,200 --> 00:32:48,120
Speaker 2: from a dollar to sixty cents, they bring them to

683
00:32:48,160 --> 00:32:50,520
Speaker 2: the Fed, they get one dollar in return, wipe away

684
00:32:50,560 --> 00:32:53,280
Speaker 2: their losses. Chances are I think a lot of those,

685
00:32:53,400 --> 00:32:55,520
Speaker 2: a lot of similar facilities are going to get set up.

686
00:32:55,680 --> 00:32:59,840
Speaker 2: For commercial real estate loans, that go sour. For corporate bonds,

687
00:33:00,160 --> 00:33:03,240
Speaker 2: goes sour if a market is deep and liquid enough

688
00:33:03,440 --> 00:33:05,880
Speaker 2: to the point that if it's being used as collateral

689
00:33:05,960 --> 00:33:11,240
Speaker 2: and the it's devaluation, right like corporate like commercial real estate,

690
00:33:11,240 --> 00:33:14,440
Speaker 2: like corporate bonds, that threatens the stability of the global

691
00:33:14,480 --> 00:33:17,280
Speaker 2: financial system. Defense just going to make a facility for

692
00:33:17,320 --> 00:33:20,560
Speaker 2: it and make all those losses completely go awhy, just

693
00:33:20,560 --> 00:33:21,840
Speaker 2: like it did with you as treasuries.

694
00:33:22,440 --> 00:33:25,280
Speaker 1: Yeah, when I was at the conference this last week,

695
00:33:25,360 --> 00:33:28,240
Speaker 1: I was with Preston Pish and Tour to mister and

696
00:33:28,520 --> 00:33:31,560
Speaker 1: Tour said, what he's doing now is he's putting all

697
00:33:31,600 --> 00:33:34,800
Speaker 1: his charts and he's using the denominator instead of USD

698
00:33:35,160 --> 00:33:40,200
Speaker 1: as a CRB commodities. And if you look at the

699
00:33:40,360 --> 00:33:44,280
Speaker 1: SMP priced in CRB, it shows a completely different picture.

700
00:33:44,960 --> 00:33:47,400
Speaker 1: The market has crashed, it has not come back near

701
00:33:47,440 --> 00:33:50,440
Speaker 1: all time eyes. You can Preston said, you know, he

702
00:33:50,520 --> 00:33:52,200
Speaker 1: likes to do it divided by the M two and

703
00:33:52,240 --> 00:33:53,920
Speaker 1: so you can also price it, you know, by M

704
00:33:53,960 --> 00:33:57,920
Speaker 1: two as well, and you'll see that we're actually still

705
00:33:58,000 --> 00:33:59,400
Speaker 1: down from the year two thousand.

706
00:34:00,080 --> 00:34:02,240
Speaker 3: Is pretty interesting. So it's important to.

707
00:34:02,320 --> 00:34:05,680
Speaker 1: You know, get something to measure in that's not as manipulated.

708
00:34:06,440 --> 00:34:08,919
Speaker 1: I got about two minutes left. I'm just curious. So

709
00:34:09,480 --> 00:34:13,080
Speaker 1: taking this into consideration that we've unpacked it and sort

710
00:34:13,080 --> 00:34:16,880
Speaker 1: of on this point where we could stay inverted for

711
00:34:16,960 --> 00:34:19,560
Speaker 1: another year and still be within norms or six months

712
00:34:20,080 --> 00:34:22,600
Speaker 1: and even longer. I mean, we're in uncharted territory. They

713
00:34:22,600 --> 00:34:24,600
Speaker 1: could keep buying it down. They're already engaged in some

714
00:34:24,600 --> 00:34:27,520
Speaker 1: sort of manipulation anyway, and they could set up even

715
00:34:27,520 --> 00:34:33,040
Speaker 1: more funding programs like BTFP. You know, you know, your

716
00:34:33,080 --> 00:34:36,880
Speaker 1: Peter Schiff or your Harry Dent Junior or Mike Malone,

717
00:34:36,920 --> 00:34:38,400
Speaker 1: and you know the system is going to crash. And

718
00:34:38,440 --> 00:34:40,840
Speaker 1: I think we can all say that with certainty. But

719
00:34:41,080 --> 00:34:43,400
Speaker 1: it could be one year or one hundred years, probably

720
00:34:43,440 --> 00:34:45,640
Speaker 1: not one hundred, but it could be you know, one

721
00:34:45,719 --> 00:34:48,080
Speaker 1: or five or whatever. So how do you move forward

722
00:34:48,160 --> 00:34:50,920
Speaker 1: in the face of that, you take it sort of

723
00:34:51,000 --> 00:34:53,719
Speaker 1: day by day as it is, or you know, do

724
00:34:53,760 --> 00:34:56,000
Speaker 1: you sit out and just wait for the inevitable crash

725
00:34:56,040 --> 00:34:56,440
Speaker 1: to happen?

726
00:34:57,440 --> 00:34:59,319
Speaker 2: Right, I think there are a couple of things that

727
00:34:59,360 --> 00:35:01,959
Speaker 2: people can begin to do, and it's it's all really

728
00:35:01,960 --> 00:35:05,319
Speaker 2: a process. I think, you know, dumping one's networth into

729
00:35:05,320 --> 00:35:07,160
Speaker 2: one thing or another thing is in savvy. But I

730
00:35:07,160 --> 00:35:11,000
Speaker 2: think recognizing the trend and identifying where we are, identifying

731
00:35:11,000 --> 00:35:14,399
Speaker 2: the risk factors, and where we're gonna be. Then if

732
00:35:14,400 --> 00:35:18,560
Speaker 2: you begin scaling into certain positions now because you recognize

733
00:35:18,640 --> 00:35:20,600
Speaker 2: where we're going to be, you know, it's it's much

734
00:35:20,640 --> 00:35:22,680
Speaker 2: more fruitful than just sitting on your hands. And so

735
00:35:22,760 --> 00:35:25,319
Speaker 2: I think given the fact that real rates are at

736
00:35:25,360 --> 00:35:28,880
Speaker 2: fifteen year highs, I think the way that you play

737
00:35:28,880 --> 00:35:32,360
Speaker 2: this is by scaling into US treasuries, both on the

738
00:35:32,360 --> 00:35:37,160
Speaker 2: front end and the long end, where you're getting more duration. Ultimately,

739
00:35:37,560 --> 00:35:42,280
Speaker 2: with this huge deluge of issuance from the treasury five

740
00:35:42,400 --> 00:35:46,319
Speaker 2: billion dollars a day in new issuance through you know,

741
00:35:46,400 --> 00:35:49,480
Speaker 2: over the next decade, completely there is no debt ceiling anymore.

742
00:35:49,800 --> 00:35:52,560
Speaker 2: With that heightened issuance comes higher and higher yields and

743
00:35:52,600 --> 00:35:55,520
Speaker 2: Eventually it's going to be a point at which investor

744
00:35:55,640 --> 00:35:59,319
Speaker 2: capital those yields are just too damn attractive, and it

745
00:35:59,360 --> 00:36:01,840
Speaker 2: sucks capital away from other assets, and it sucks capital

746
00:36:01,840 --> 00:36:05,320
Speaker 2: away from those risk assets, right, whether it's huge and

747
00:36:05,360 --> 00:36:08,239
Speaker 2: liquid things like NASDAK and the SPA five hundred or

748
00:36:08,320 --> 00:36:10,560
Speaker 2: things like bitcoin, which we've already seen suffer. And so

749
00:36:10,600 --> 00:36:12,080
Speaker 2: I think the way that you play this is by

750
00:36:12,160 --> 00:36:15,479
Speaker 2: recognizing eventually there's going to be a downturn. The whole

751
00:36:15,520 --> 00:36:17,759
Speaker 2: system probably isn't going to collapse because the FED won't

752
00:36:17,760 --> 00:36:19,640
Speaker 2: allow it. It is too many tools in its chest

753
00:36:19,719 --> 00:36:21,759
Speaker 2: and too many new ones that can create at the

754
00:36:21,800 --> 00:36:24,520
Speaker 2: drop of a hat. It won't allow a recession to happen,

755
00:36:24,560 --> 00:36:27,360
Speaker 2: a major global recession. But I think some kind of

756
00:36:27,400 --> 00:36:32,239
Speaker 2: economic downturn is undeniable, right, And I feel that as

757
00:36:32,239 --> 00:36:35,480
Speaker 2: investors begin to recognize that, as yields become too attractive,

758
00:36:35,800 --> 00:36:40,400
Speaker 2: this de risking impulse will completely subsume market liquidity and

759
00:36:40,600 --> 00:36:44,239
Speaker 2: people will flood into those more safe haven assets. So

760
00:36:44,280 --> 00:36:46,480
Speaker 2: I think things like monetary metals like gold that are

761
00:36:46,520 --> 00:36:50,760
Speaker 2: proven risk off. I think things like US treasuries, certain

762
00:36:50,880 --> 00:36:54,839
Speaker 2: high grade corporate bonds those are more marginally attractive now

763
00:36:54,880 --> 00:36:56,960
Speaker 2: than they were. So those are the things I think

764
00:36:57,000 --> 00:36:59,600
Speaker 2: are savages scale ends you. I don't think having a

765
00:36:59,600 --> 00:37:01,680
Speaker 2: position and the S and P five hundred is bad because,

766
00:37:01,719 --> 00:37:06,000
Speaker 2: like I said, this phase of bond saying one thing

767
00:37:06,080 --> 00:37:08,120
Speaker 2: different from stocks that can go on for a while

768
00:37:08,239 --> 00:37:11,680
Speaker 2: until the reality of corporate maturity comes due. So I

769
00:37:11,800 --> 00:37:15,320
Speaker 2: still think having a position in risk indices is good,

770
00:37:15,600 --> 00:37:17,239
Speaker 2: but I think it's about time for people to start

771
00:37:17,280 --> 00:37:21,080
Speaker 2: considering scaling out and moving into risk off assets as well. Yeah.

772
00:37:21,120 --> 00:37:22,360
Speaker 3: Great, great, great breakdown.

773
00:37:23,239 --> 00:37:25,080
Speaker 1: That's what we got for you today. Thanks so much

774
00:37:25,120 --> 00:37:27,640
Speaker 1: for listening. Give me a shout out on social media,

775
00:37:27,719 --> 00:37:29,520
Speaker 1: let me know what you think. Until next time,