Forward Guidance: The Market Is Rotating Faster Than Policy Can Keep Up

Transcript

I'm actually pretty cautious here. I I was very aggressive to start the year on on some of these themes and it's played out well. But I I do think we're still yet to see the the economy really catch gear. So, I'm a little nervous this run it hot is maybe ahead of its skis a bit. I think what's happening is the consumer was so beaten up. We were talking about the end of last year like they're going to have to do something. This K-shaped economy can't last or social contracts unraveling. And I think the message was clearly got through. Well, that's the thing too is to keep in mind is when we stimulate Main Street. Main Street doesn't own financial assets. So, you know, you can stimulate the financial markets, you can stimulate real household consumption and Main Street and those are two different things. So,

it's almost like careful what you wish for. Quick shout out to today's sponsor, Katana. We'll hear more about Katana's 1 billion cat campaign later today, but for now, let's get into the episode. Hey everyone, quick disclaimer before we get into today's episode. Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guests and I may hold positions in the companies, funds, or projects discussed. Welcome back to another Forward Guidance Roundup edition [laughter] with your host Quinn Thompson and Tyler Neville.

>> You sound like an AM radio host. >> Faces for radio. Hey, it's me, Felix. Welcome to Forward Guidance. Another episode Canadian. This is me. [laughter] >> We are back without our our preferred slides, share and and host as they are on a Blockworks offsite doing talking business. So, Tyler and I are taking over for the week. How's your week going, man? >> Uh, not bad so far. It's uh a little colder here in Austin. It's like uh woke up. was like 35 degrees outside, but it gets warm midday. It's like 70, so can't really complain.

>> January is great, though, because you get this start to the year and then like three weeks in it's a surprise Monday holiday to kind of like ease us back. >> Oh, yeah. >> You got any big weekend plans? >> Um, you know what? I don't think so. Yeah, we're we're just kind of laying low. We went we went to the beach for uh New Year's, so I don't know. Traveling with three children is something else. >> Yeah. Yeah. and day at school. Well, we uh we got a full slate, I think, of of things to talk about. We want to talk about Fed. Every week there's something about the Fed to talk about. Uh pretty a lot of action in the markets. Bitcoin woke up. We got crazy [ __ ] happening in Asia with Japan, Korea, stock exchanges.

Um a bunch of different rotation, stocks stocks bonds commodities metals. Uh, so >> feels feels good time to be talking. >> World Series of Macro right now. I have to say that like there's crazy stuff going on. The world is changing so fast. We got metals in a crazy bull market. We got I don't know, Japan basically fiscal foot on the the gas. All things are firing, which makes me a little concerned in the short term. But let's get into it. I I think we were just chatting a little bit before, but I I I think both of our heads are are starting to scratch about near-term caution. Um I know you had some slides on that and maybe we could walk through and then,

you know, I'll add where I can. >> Yeah, why don't we start with, you know, 42. So, this is just sentiment surveys, just something to keep in the back of your mind. Bullish sentiment rose to the highest since November of 2024, while bearish and neutral sentiment fell. So obviously everyone is seeing this. Uh if you go to slide 43, this is a Goldman uh client poll which shows bullishness at levels seen only three other times in the past decade, which is also kind of concerning. Um in two of those instances, markets experienced a correction within three months. You know, it's it's hard to call these perfectly, but there's definitely some

euphoria. A lot of great news has come through and it really feels impenetrable. We've had credit spreads basically collapse and financing costs have gotten really nice. And then here's another one from Goldman. If you could go to slide 51. Their risk appetite appetite indicator has accelerated to the 96 percentile reading historically, the highest level since early 2025. At these levels, small pullbacks tend to be more frequent and outsized equity returns are rare. So, you know, you also have systematic investors when you the VIX is low, they relever, they've gotten fully invested. So, there's a lot of things that can go wrong here,

especially in a buyback blackout period that just just be aware that even a hint of bad news can cause an asymmetric, you know, leg down. And the interesting part is that certain sectors are not experiencing that. This is more from like an index S&P QQQ level which is really fascinating and I think we're seeing a lot of rotations in the market. >> Yeah. And why that matters is because, you know, at these record all-time high concentration levels of of mag 7 big tech in the S&P, then you start getting these effects that are are marketwide versus like you said, there's beneath the surface sectors popping off left and

right. And one of those, you know, it's it's evident in the correlations, the one and three month correlations of of the indices, the stocks that comprise them are at like sort of record low levels, which also is a sign that it's sort of um you know, the the money already flowed to the big names and now it's kind of flowing out to the to further out the curve and has in the past preceded pullbacks. I think one of the things I've been thinking about is how oddly similar but different the setup is, you know, just to one year ago in January. And what I mean by that is you have Meg7 concentration back to the highs that it feels like deja vu because

early 2025 I was pounding the drum from December 24 to early 2025. I was saying this is a problem for the market. these names are are kind of fully loaded and you have t headwinds and so if those fail the market's kind of not going to go up anymore and that played out uh and it's sort of happening again where we've been saying for a while that there's problems with with how mag 7 are are trading and it's continued to lag while everything else is ribbed. The difference is at the time last year small caps and sort of real world economy stuff were were still in the gutter. You you also had you didn't have breadth making new highs. You didn't

have this broadening out this main street. And so a big tell last year was small caps fumbling since their peak in November through December through January and then you know kind of rolling over over with the rest of the market. Here you have small caps and all these cyclical sectors breaking out while big tech is lagging. And so I think you know what that tells me is a bit of a changing of the guard and and it it's amusing how quickly the run it hot broadening out thesis is caught and and these moves have been quite strong to start the year. So I I look at it like all right you you have the Russell up like eight days in a row or something

like that. It's it's kind of vertical on a daily chart and you have the big tech names petering out and so where's the next leg up come from because you know there's probably not much juice up in the the Russell from here short super short term and you know it doesn't look like big tech wants to do anything and so the next step might be down together. You know what's interesting is like you said about last year is large cap tech we thought was kind of topping out last year and the big difference is they weren't doing crazy cap X spend as as crazy as it is now and I think the financing costs of all that is probably going to hurt cash flow a little bit and

people are probably seeing oh the relative growth here and if you look out as far as the eye can see is probably gonna be better in other sectors. So, you know, one of the that was dead all of last year was consumer and we've seen the XRT kind of rally here. I think what's happening is the consumer was so beaten up. We were talking about the end of last year like they're going to have to do something. this K-shaped economy can't last or the social contracts unraveling and I think the message was clearly you know got through and so the liquidity is kind of pumping a little bit more for different sectors of the economy now and you know two two great charts to show you on that one. Uh this

is uh chart 52. This is the city uh stimulus basket which basically is a collection of names leveraged to low and middle in consumers in the consumer discretionary spend. You can say it's just up and to the right. Looks like it's breaking out. And then if you go one further, this is from um John Kinsky at BTIG, but we got a breakout in the restaurant index, which is, you know, obviously like huge, hugely levered to the the lower and middle income consumer. So those are two to put on your radar of like, you know, these things are rotational. If if it was a really a credit crisis in the

large cap tech, I think you would see credit spreads widen. And maybe we should just show credit spreads here, which is kind of interesting. This is uh slide 48 from JP Morgan. You can see the high yield credit spreads currently, this is top left corner, are at 308 basis points, which is kind of wild. In a in a recession, you know, those hit 971 basis points on average. In a nonrecession, it's at 493 basis points. So like and then look at this post GFC low is 296 basis points.

So it's is within spitting distance on high [clears throat] of of complete lows. So a lot of this stuff is rotational. It's not saying the fangs are going to be out of business. There's it's not going to be an implosion etc. It's this is a rotation and there could be a little VIX spike as you know you get a deleveraging because it's so concentrated. But I I don't think these businesses are are going away. It's not like the business models are are screwed or anything. >> No, I I agree. I think it's actually setting up for probably a continued sort of like low vol environment. We I mean, like you said, there's going to be bouts of of volatility. I I would actually maybe long be a little long volatility

here, but but overall from a structural perspective moving forward, like you said, it's like this is I thought a good chart this week. There's a book from Apollo kind of breaking up out MAG7 and S&P big tech um and the the earnings rise in in large companies the green S&P versus Russell >> is you know that those jaws that's like that's the whole like Trump winning the midterms basically that those jaws have to close if if if they want to do well and here's the other one sales growth in tech versus other S&P sectors similar similar deal um >> sustainability of that outpacing and so to your point it's Everybody's been selling Main Street for two years because it's been in a

recession and and all of a sudden, you know, headline after headline over the last two weeks is has sort of been the opposite. And I think what this is is like a oh [ __ ] we need that some of that exposure. And you've seen things I've been cruise liners have done well, jets um ETF has done well. Some of these more consumerlin, you know, you think when when everyone gets 2,000 in stimulus, what are they going to be spending on? This episode is sponsored by Katana. Katana is a DeFi first chain built for deep liquidity and real yield by redirecting chain revenue [music] back to active DeFi users. The 1 billion KAT campaign is live. bridge and deposit directly into vaults [music] in one

simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. [music] Follow the link in today's show notes to get started. >> And tax breaks. You know what else is kind of just a um I guess a a moment is Trump actually putting the 10% interest rates on credit card issuers? Like there is definitely a a moment to shift moving towards the the consumer here. they're they're catching the message that you have to do something. And the other thing is large cap tech spend the the the costs for the data centers are increasing electricity costs and we got Microsoft to essentially say okay we're going to cover that like increased cost for the

consumer. So you can kind of see all these things collide when you when you centralize something so much that the large cap tech bros just like own everything and create dystopia. Now it's their it's I think their their pound of flesh needs to be taken to for the for the good of the overall system is is my guess is what's kind of going on here and that's why we're seeing the rotations now and hopefully in six months things will be a little bit more balanced. Yeah, I I thought it was interesting how little response there was from anyone regarding those announcements on the data center stuff because >> yeah, >> I I I had actually I don't know if I put it out yet, but I had written something about the the direction of travel and

political winds around AI. And if you go to B uh Bernie Sanders, Elizabeth Warren, AOC, the go to their Twitter profiles, top three, five most recent tweets, you're going to find something about AI and data centers because >> uh electricity costs have been the hottest component of CPI for the better part of the last year. And so it is actually affecting people and that's >> not even, you know, we're not even close to being through the electrification of the data center pipeline. >> Yeah. Yeah. And >> so that's something that Trump has to balance between, you know, his his stimulating and and supporting the AI verse versus, you know, Main Street and figuring out a way to get get bills down like because that, you know, he's been

attacking oil prices to to some degree of success. And a a really big thing would be electricity costs. >> Yeah. And then so you you get to a lot of these things where the the amount of scale this is a great chart to show for this is go to slide 44. This is the uh the performance of all the credit card issuers since Trump imposed that like you know he didn't impose anything. He's just kind of talking about it and you the economy is so imbalanced that and it's so centralized that politically he can just make a comment and have this effect on the marketplace which is just wild. And same with you know the the data center

electricity. We're at this point where you're kind of I know the left talks about Trump being like a dictator, but like Biden would have had this power too or whoever is president next is probably going to have this power because things are so centralized that you have to even out the economy or it turns into like fourth turning just tearing tearing itself apart. So where I until the nominal growth or GDP growth actually kicks up and I think that's why space is really interesting like all the space stocks are ripping is because they need new economies of scale to have GDP growth and have the middle class grow again and I think they're trying to stew that with a lot of like new frontier you

know industries. So we need that to come to fruition so that we don't kill ourselves and and the system doesn't break. >> Yeah. One more chart on on this topic I think um I I thought was interesting. This just shows sector positioning between cyclicals and and uh tech and there's normally not this ridiculous of a of a jaws and dispersion showing you know how this big bounce over the last few weeks into into cyclicals is has come from a very very low place. And I would say that this is coming without the economy really catching yet in terms of of of you know the run it hot narrative sounds really good but the labor market data is

still sort of meandering weak. The wage data is still is still pretty pretty bad and and deteriorating. So you're not seeing like >> an extreme uptick in um in growth metrics yet. This was another interesting one I thought was the um from Goldman their their prime book semi semis and semis equipment percent of um total exposure we're had yeah >> records even above concentrations of of um the mid 2024 when Nvidia and all all the AI sector popped off. So it this is also an interesting divergence to me because you're you're seeing you know mag 7 roll over the hyperscalers

but you're seeing the the semis and semis and semis equipment continue to just blow off basically despite what I would consider you know their their biggest customer is mag 7. So that that that's not great and and aside from that is the data center bottlenecks. We're sort of getting into these uh this period of time where the capex is coming so hot and heavy that we're getting into the resource the transformers the you know the copper is is is becoming more widely talked about bottlenecks for this buildout and eventually that has to hit the backlog of how quickly you can order and deploy >> yeah the chip than everything else. I mean, we saw this, this was interesting,

um, on TSMC today. The earnings were so good and I think the CFO said, where did I put that chart? Um, this is slide 50. The CFO said it sees 56% or higher sustainable margins over the long term. And you can kind of get a sense of this. This is pretty impressive for a company of that size to consistently have margins that large. And it just gives you a sense of the size of how big this capex buildout is for AI. And to your point, like if you're long this stuff, I don't know how you you you got to ride it until you get a data point that kind

of says it's rolling over. And right now it's it's not at all. And it's that's fascinating. And to your point, I think you said last week you were like you you have to you don't have to ride the the ones that are doing the super leverage. You ride the supply and demand bottlenecks. And if you look at certain parts of the energy market, the utilities, um the the chips, that's where the supply and demand bottlenecks are. And you have to like open those up with huge amounts of capex. And I I think that's that's the easy the easy trade going forward. Um with less downside, >> the political angles, you know, it's

seeping into everything and and people have a difficult time talking about nuance. But I think it's funny because you know many regards Trump is you know it's the horseshoe effect where you know a lot of these things he's announced particular are closer to the Warren and Sanders AOC camp and like the the banning institutions from the housing market the uh credit card cap you know um and you know very sort of socialist or at least you non capitalist is taking government stakes in companies which we're seeing across the board the the 25% chip sales tariff to the government and so it's sort of interesting because the the extreme capitalism has led to

this where they're basically approving the monopolies in the AI sphere because they've they've China everyone used to you know scream about China being you know not not conforming to to the west and it's almost as if China has built such a threat at at least as perceived in the to our industry that now we're actually mimicking them by by just moving closer to state supported >> centralized stuff. So >> yeah, >> it's it's a weird weird world. >> It's so weird. It's so weird. And you know I there is an argument I have to say this on the credit card issuer thing. I mean it's very polarizing, right? like on one side you want free

markets and whatever but one great one is like some I forget who tweeted they're like well if you take away you know all the the interest at 30% like then all the high-end customers aren't going to have access to their you know airlines and points and credit card lounges and I was just like do you know how pompous and ridiculous you sound right now >> the point of the policy >> like it's literally just taking from one section society. The other I'd rather live in a society that's like not egregiously [ __ ] over the lowest end with like insane rates. I mean, this is just my personal preference. I feel like I feel like 30 if you're talking 30 to 40%. You're just making people bankrupt.

Like that's insane. Like that's not even I I guess you could say it's market rates or whatever, but like take away my points. I'll I'll I'll gladly like help help someone else out, you know, who who needs it. But like I don't know that I just think when you get to that level of interest rates on credit cards, I think that's >> it should be rebranded as financial jail. Like it's it's not a credit card. Yeah. It's it's not a it's not a suitable form of financing. No one there's nothing anybody in the world can do to afford a 28% of cost to capital, let alone a minimum wage.

>> How do you grow your way out of that when when GDP is at 3%? like your wages, you know, you don't you're just you're making everyone else you're creating a more I guess divisive political environment. And so that's where my head always goes. But then at the on the flip side, I got to tell this story. I used to have this barber in San Francisco and like he couldn't survive because it was San Francisco and he's like, "Oh, you know what I do is I just I just take out a credit card and then I max it out and then I just don't pay it." And and then and then I was like, "Wait, you just don't pay your bills?" And he goes, "Yeah, I don't pay it." And then they call me and they ask for all the money.

And then I'm like, "I didn't you know, I can't I can't pay it back, so I default." And they send me a they send me a credit card the next six months. So they just keep doing it. I was like, "This is how our system functions is you just you like they're both, you know, they're both criminals and you're just like >> true. Playing the game. And it's well and the endgame is like who who owes has the most debt is the government. And this is why you know at the endame I got to mention the Ponzi scheme and why America is I hope everyone knows like the have I been proven remotely right at this point where Japan can't stop. They have to take out the fiscal. They have to do the debt. They have to keep liquid liquidity

liquidity spiggots going. It's it's incredible all of the the things they've come up with and they keep coming up with because the debts are so huge and I don't know may I think the draw downs are going to be small here in in the next year or so until until you see that the the credit problems but it's the it's on the government balance sheet. I think that's the biggest point is that, you know, they're the ones bailing themselves out continuously and and then you just get hopefully you get a boom in innovation and productivity in the meantime.

>> I should bring that chart for next week, but it's um the balance sheet leverage across households, corporates and are actually delevered to very very low levels. But then you have the the government sovereign balance sheet which is at record sort of uh leverage levels. So that's that total crowding out. I think um >> one chart I wanted to show and and just as a topic for discussion is >> is the forward outlook on rates. And I I think this is really interesting because so there's a Fed meeting at the end of this month, two weeks uh on the 28th and then you have skip Feb, March, April, skip May, and then June. And Powell's

last meeting is is as we know it today at least unless a new chair doesn't get confirmed would be in April and the new chair takes over at the June meeting. Um, so the thing about to me about the run it hot narrative and it's obviously taken hold very quickly this year as everything's ran is a key component is monetary policy supporting this fiscal boom in excess and um you know we all believe I would say most it's it's consensus let's just say that that when Trump's guy gets in there you know you're going to have pressure on on them to ease. I mean, Moran wants to cut 150 bips, you know, and we'll see who the

chair is, but but when you look out at the the horizon, we're actually the market is not expecting another cut under Powell's tenor. And that opens up to me what what I think is still, you know, a a like I said, kind of weak labor market and potentially still weakening you. Wages are not adding any inflationary pressure. or energy is sort of just chopping around and um and you have housing that's kind of negative for the CPI in the next number of months. So inflation is unlikely to spike. So you could get this situation where there's a bit of a liquidity pocket you know to the point of some of the you know positioning is is pretty maybe stretched here as well. Um where it's like oh [ __ ]

we're we're going to run it hot but the Fed isn't cooperating for four months so what do we do? So, I'm I'm pretty >> intrigued to watch how this plays out, especially like you said in a corporate blackout window these last two weeks. >> Um, you know, you have some pretty big treasury auctions, so it it's going to be >> fun to watch. I'm actually pretty cautious here. I I was very aggressive to start the year on on some of these themes, and it's played out well. Um, but I I do think we we're still yet to see the that the economy really catch gear. So, I'm a little nervous this Run It Hot is maybe ahead of its skis a bit.

>> You had a great point um about on Twitter you said one of the reasons that Powell didn't ease was because the tariffs were inflationary and so if the tariffs go away does that mean they're deflationary and that you can ease more? And so we haven't seen that in that chart you're you're showing is, you know, if the tariffs do go away, what happens? like you're the Fed is caught between a rock and a hard place cuz then do you do you raise rates because growth is better like or do >> Well, that's that's what I think it it highlights a a flaw in their in in them not incorporating everything into their outlook because because this past year

the the fiscal pressures on growth have been so substantial with cutting the the deficit growth. It's it's the the deficit is not shrinking but it the the growth of it is. Um and and then the immigration which is obviously a huge demand crush and tariffs which have have shown to be a demand crush. And so they they haven't really talked about that stuff too much or at least given it as much credit as they have the inflationary scare. And so now you're in the situation where a lot of these negative growth headwinds are are subsiding into an election year that everyone expects to be riddled with stimulus and progrowth measures while this tariff thing. But to me, I don't

know. I'd be curious your thoughts on that if you have any in particular about the Supreme Court decision. But you I don't know if anyone really thinks there's a world where Trump like they just walk away and say, "Okay, they struck the tariffs down. we're we're done here. Like I think tariffs are going to be in place to some degree no matter what. He's going to use them as the carrot and the stick approach no matter what. So I kind of don't know how big of a event this this ruling is. I don't expect them to put the US into a disadvantaged position of having to raise a bunch of capital repay it. It seems just sort of like a nothing burger to me. But maybe it surprises. Yeah, I think if you get them striking it down and you get a near-term blowoff top in

consumer stocks and but they'll come out and they'll say they'll figure some executive back way of doing things. I'm guessing like you can do a lot of things with politics. I tell you that much. [laughter] >> We've learned that. >> And so I I don't think he's just gonna roll over. We know this guy's very uh aggressive in terms of policy. He he generally gets what he wants. >> Shout out to today's sponsor, Katana. [music] Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed [music] back to DeFi users. Incubated by Polygon Labs and GSR. Katana is launching with notable ecosystem [music] of primitives, assets, and partners like Morpho,

Chainlink, and more. Katana's 1 billion KAT campaign is live. Bridge [music] and deposit directly into Vault in one simple click and start earning immediately on your Ether, Bitcoin, [music] USDC, and more. Follow the link in today's show notes to get started. >> One interesting thing is this. Go to 40 slide 47. It's like this isn't stopping the capex boom. We finally have, speaking of like longer term growth, it it feels like there's now you get better financing costs on the debt side and it feels like there's actual things to start investing in like data centers and space like there's there's real economies emerging here in AI that you

can there's a story around that you can potentially grow new parts of the economy. And so it's it's really reassuring to see this kind of take off again. Like look what after after uh you know 2021 we we basically just saw the capex bust and we're slowly taking off again. So I don't know that self-reinforcing growth hopefully it just keeps going here and um it's good for American the American frontier. Well, this is really interesting because it's hard to have a nominal recession when these numbers are doing this and you actually you might expect to even see it increase with the because there's the 100% permanent capex expensing in

the OBB um which is a huge corporate incentive. So, um I mean this that just goes to show with credit spreads where they are nominal rates, you know, hovering kind of lower areas, the the credit markets are open completely and continue to be. So, which is just mind-blowing to me because like in my mind I'm like why would I ever buy a bond personally? But like you have all these different business like strategies like insurance and pensions and endowments like all these big institutions. You're almost like taking an L for the next generation in some ways. So I talk a lot of crap about these institutions but at the same times

they're if they can finance our our new industries going forward like I guess I'm kind of all for it. Maybe that's just the generational like curve we're on is they keep doing the same things and it's finally not working in their favor. Like if you're Harvard and you've been buying bonds for god knows how long and now you have a negative real return and they just keep doing it and but they're financing you know some some new industries. I'm fine with that. Boomers boomers too. So maybe this is where the boomers and insurance companies get all screwed.

>> I think it was on here where I was talking about how I mean intertwines with what we were just saying about how corporate and household balance sheets are the most delevered they've been in in decades. And so the problems at the sovereign so in a sense like investing in high yield credit where you're earning a spread albeit the spread is is relative to historical terms is not great. And I think a big part of that is because supply has been so low. you've had all this capital chasing it. So that's what what one thing people might not appreciate is that we could have a boom year, but the supply of credit could overwhelm, you know, investor appetite for that credit because I would rather be

invested in corporate. I mean, if if if fiscal and monetary policy is at the the place to not allow recessions to occur, then I would much rather be It means the corporate sector is always backstopped by the government versus versus so again it's it's all the problems show up at the sovereign level before they show up at any corporate private sector level and so you're >> if you can bond low what's what's so interesting is I I look at first thing in the morning I work look at bond volatility I look at FX volatility and because those two things >> it's just like a flat line and that that's what they're stifling they're stifling like actual in the fiat

currency system is stifling volatility so that you can kind of like jimmy the GDP to pay off all the the debts. That's really the name of the game is just stifle bond and currency vault so that things are somewhat copacetic. And I think if anything's going to derail it, it's going to be geopolitical. And I know we're going to get like a freakout at some point and maybe it's this Iran thing. I don't know. But those things are just so hard to predict, but it usually happens when everyone's fully invested. So that's where >> Yeah, exactly.

>> You got to be a little protective when at this particular point. But speaking of which, I do want to go to like, you know, one thing we have actually kind of nailed is the metals in in Bitcoin. I think is we're now seeing a little pep up in the corn. What what's your read there? And you know, at the end of the year, I was like, this is this is the time to take a stab. You had a lot of tax loss selling. You had a lot of weird divergences happening with OGs. Like, it could have been a charitable trust thing that a lot of the OGs were selling, but they've stopped selling.

And now we've gotten this like little pop here. Do we catch up to the medals move or what's your read? >> I've played it a couple times actually. I sold like 94 and then rebought 90 and because I I just I don't think we're we're in the conditions yet for a full-on bull market in crypto again. I I think um you like if you still look at some of the higher beta stuff like Robin Hood and some of these they still look pretty leaky. momentum assets are still aren't I think you need a a a ball event or something to to sort of stimulate what the next leg of liquidity is going to be. But that said, it I don't think it's it's the laughing stock anymore

either. I don't expect uh some selloff with the same velocity that we saw late last year to happen again. So maybe relative to like mag 7, it's bottomed. Um, but I'm just given, you know, the dollar's peeking out here in and short-term rates um are as well, which I'm not particularly bullish on. do think you know the front end still comes down again this year but but um I don't love you know after this I was long and I I dris the last two days because I think it's it's really hard for it to persist in in a way that defies stocks for too long. Um, that said, I'm not like

shorting it or bearish because I do think, you know, there's there's some positive news with the clarity stuff, which didn't I don't think is going to get through in in its current form. But, so I I I was bullish for a for a bounce and and now I'm going back to the sidelines to to watch. You know what I think happened? This is I mean no one really has given me a great answer on this so this is just me macro intuiting but you obviously had the K-shaped economy a lot of OGs were selling for for god knows what reason could have been tax related etc but you had a lot of tax loss selling in the end of year I also think

the treasury companies were like the greatest short for the pod shops you know these things were issuing equity. They were arbing and they had a premium to mnav. I think all the pod shops got on it. Some you know these dinners you get all these guys that they have the same idea and they just push it to such an extreme. So they I think they were long software stocks short Bitcoin and then you know they obviously had a lot right. I mean, the premiums came down and and now what we're seeing is like the treasury companies are kind of perking up here and they're not going down anymore. And the volatility has all been reset. Like everyone that had the

longaul treasury company trade on in 2024 is now probably out. All the volatility has been reset there. No one's issuing convertibles anymore to buy there. there's not like a lot of capital markets activity until we get, you know, that fall spike and I then you get that reinforcing fall spike to the upside and it's it really is way more of a but my point being is I think there was just it was a massive trade in the fourth quarter to to smush the premiums of these treasury companies. you had a lot of weird other incentives going on into year end and now it's you know you get the squeeze in in the beginning of the year as these things reverse like we saw

softly apploving was a momo stock that they were all riding to the upside that thing's now you know got smashed and you saw the corn run and you also saw the corn run and it's correlated to the the lowerend consumer too which is kind of fascinating with this the the tax benefits coming so there's a lot of interesting kind kind of dynamics happening here. I'd be really excited if if it caught up with the metals because I think the metals trade is just it's so secular. Like >> I agree. I >> it's we we didn't invest in this stuff for 20 years. There's there's no metals people on the street. This there there's hilarious conversations where you know everyone that was you know they usually

put like a young guy in a sector that's beaten up. It's like you're the hedge fun guy. Okay, we're going to move you from software to metals. And I think we're just in the stage where it's like, oh, we need a metals guy. You know, we we need a commodities guy. We got to hire some of those people. And so now all the pensions are like, oh, well, this is outperformed enough where now we have to have an allocation to it. And so you you have to basically you're moving these giant aircraft carriers slowly into these new sectors. And I don't know, we I I I think it'll probably happen with with crypto as well eventually, but maybe that's a a futuristic story, but we'll see.

>> Yeah, like I said, I I just I think it will um there will be an massive money printing event again, but we're we're not on the doorstep of it in my opinion yet. I think we I mean, let's see when let's see how the Fed stuff shakes out. there's a lot of bumps bumps to be had on on the short journey to April and the next, you know, next Fed chair. So, I I think that's going to be interesting because there the dollar appears to be in sort of at least a near-term bullish trend. Um maybe maybe it gets seem to get smacked down every time it does this, but there will be a point where um you know if if you think of Trump as

this elephant sitting on the Fed pressure to to cut like that's sort of a ceiling on the dollar and and that's when you get that next big leg lower in the dollar is when I I think you would see um Bitcoin really really take off again. But but how that comes about and when is is still uncertain to me. >> You really need for for global investors to repatriate from the carry trade in the US like all the foreign money here. You really need a really bad data point from the AI world to make it seem like it's not coming. And in fact, we got the opposite. That claude thing was pretty pretty cool. And I don't know, it's keeping up. I I posted a chart about all

the revenues of Open AI and anthropics, etc. because like they're actually still going and I know it's circular in a lot of these things but until you get the moment where it's like oh [ __ ] this isn't coming to fruition I don't think those global foreign investors just you know pull their trillions of dollars of capital from US markets because where are you going to invest like are you going to invest in Chinese AI like may but like I I I I think we're, if you talk about why America has won historically, it's because it's a little bit more free market. Um,

so I that's kind of my read of what causes the bust. >> Yeah. Speaking of Well, I think an interesting point on um on all this and we mentioned it earlier was just Japan. So, I posted um >> I'll pull up a chart here. I posted uh earlier this week, pretty ridiculous uh in Korea where the stock the stock market is up >> uh the same amount in the last year as the basically the last like 15 16 years and >> this all that's pretty high, right? Is it the >> Yeah, it's well it's a lot it's a lot of AI related stuff and Japan. And I don't

have a chart here, but but um Japan Japan's equity market's been on fire. And you know, there's there's a number of things going on there with with a very stimulative uh new leader and calling snap elections to try and really cement that agenda. But the yen and people are talking about it uh is back to its sort of this range high around 160. And you would think that, you know, they already have inflation in Japan.

You'd think they would defend this again. The interesting part I I think is that every time the yen has been, you know, at that weak 160 level, you've had the the DXY, the dollar index sort of at local highs, too. And here it is going to show, you know, the DXY is sort of a it's bas it's it's a weird index. is basically just develop markets. Um, so that that's going to be interesting. I guess I guess all eyes on the BOJ meeting this this month because if they if they don't do anything this time, they're they're sort of giving the green light for for the end to just implode and and that's probably a pretty pretty riskon thing.

>> Yeah. >> But if they do something, >> capital flows thinks that >> is probably happening in >> Yeah. where you get and a lot of it is it's a generational change. Like you had you need the stock market to go up to reinvest in new businesses instead of just when you have a bond market bubble. It's really like monopolistic and you're you're bailing out old people instead of young people in a in a lot of senses. It's like playing not to lose. So now that that money is coming out of the the Japanese bond market, it's going into more risk forward things. It's probably what's going to happen here eventually, too. Um, and and maybe that's what the markets are front running on the equity

side of things is just we figured out, oh, they're going to keep the bond and and FX low so that we'll just ride the equity market because it makes no sense to own debt. And what is debt? What is debt? I don't know. The dollar's been weak uh and lost value, but but it's uh it's a different the the yen is in a a league of its own. So when you plot some of these metals and things, secular inflation protection assets priced in yen, it's absolutely ridiculous. Yeah. So >> well, that's where a lot of the demand is coming from, right? So you're you're [laughter]

I don't sav bonds there that has to go. like why haven't we had a big pullback in metals is because everyone all the old people in Japan have owned bonds for 30 years. That's got to go somewhere eventually. >> We know the endgame is the the endgame is the the deterioration of the value of the currency. I guess it's um something that didn't get so reported. I think that was interesting to me was Bessent sort of made some noise that he was not too too fond of of the perceived dovish dovishness out of out of Japan policy makers because the problem that that you risk if they don't they don't hike is their bond markets start selling off

they're one of the largest holders of US assets >> they they have to sell sell US treasuries to defend their currency you start getting the contagion of higher yields >> so I I do think that's interesting Because on the one hand, you're like, "Oh, okay." If they're Sorry, >> I said it's going to be managed because if it goes too far too soon, the V controllers have to come in and stamp the V out. >> Yeah. It on on one hand, you say, well, you know, if they if they just stay dovish, their their currency implodes and everything price anomaly goes goes up. But if and I guess the bond market's, you know, just doing what it's been doing, but that that's where you risk like an event like that. But it

seems there's enough eyeballs on it for now that it's it's no it's not going to provide any crazy surprises. But I'm I'm I think it's something to watch because to me, you know, that that's they need to do something. And so the other alternative is global central banks to pivot dovish and they all just continue debasing together and that that would presumably stop the you know decline as well. So um we'll see. Yeah, there >> it's the end. This is the macro endgame.

It's so exciting to watch, but you gota you got to expect anything can happen. Yeah, it's it's a long year till November and uh it feels like it feels like there's there's more agreement than I recall in recent recent years around the path and and accepted narrative I would say around the run it hot Trump stimulus and like sort of reaceling growth which almost makes me nervous in a way because Q4 when when if you you know November December like around when yields were bottoming and you know these things hadn't ripped yet like it was it felt comfy to say like oh I think midterm year I think you know

small caps you know we were saying small caps over mags I think that pair is 15% you know metals you know cyclicals energy stocks and now yeah it's just it it's >> yeah we need some we need some more data points and I'm afraid the the politicians are going to start pushing against a lot of this stuff and because they they can't have people making money too easy. >> Yeah. Well, that's the thing too is to keep in mind is when we stimulate Main Street, Main Street doesn't own financial assets. So, you know, you can stimulate the financial markets, you can stimulate real household consumption in Main Street and those are two different things. So, it's almost like careful what you wish for type of deal because,

you know, in 2022, Main Street had one of their best years ever. And >> yeah, Stemi basket. The city stemi basket. It's kind of >> Yeah, we we'll have to keep keep eyes on it. >> Yeah, remind me of that. But uh dude, what do you what do you got going? Uh where where in the world is Quinn Thompson right now? >> Not much, man. Just uh moving to a new place in in Florida in Miami and uh so I'll be doing that over the long weekend. >> I used to go down the Builtmore Hotel had this giant pool and I would go have brunch by the pool on like a Sunday and then go hit golf balls at the driving range. It was like that was like the most calming thing ever in the winter time. Oh my god.

>> The weather here's I was explaining it to to someone that it's like I'm from the Midwest and and so I was like this is like a the best September day in the Midwest where it's like 50 60s the the winters here just like beautiful. Um and and we actually got uh I'm not a a youth fan necessarily. I I cheer for them, I guess, living there. But but big national championship game on Monday, so that'll be really good environment. Yeah, >> that's right. Yeah, the U >> Miami, too. So, it's a home game. >> When I was down there, they had a rough couple years. That was that was 2008, 2009. It's probably changed massively.

That's >> Yeah. I mean, they're in the they're in the ship, so we'll see. >> Yep. All right. Let's go. >> Let's go you. All right. >> All right. Good. Uh, hope we get Felix back here next week. >> Sounds good, brother. Take care. Bye, man.