106. Signs of Life, Bonds Coming On-Chain, China Reopening, & "Phygitals" - Transcripts

January 13, 2023

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Transcript

Welcome, ladies and gentlemen, dgens and dgennets to another episode of the Alfalfa podcast. We are four radically moderate entrepreneurs and investors swimming in the messy gray ocean, serving up alpha in money, politics, and life. We are Nick or Bonnie, Eric Johansson, Steven Cesaro, and I am Armon Asadi. All links at alfalfapod.com. Make sure to hit subscribe wherever you are listening or watching on YouTube, and follow us on the socials. And most importantly, hop in our discord to join the community for the after party and more alfalfa.

Oh, yeah. He's gasoline.

I know your gaslighting face. All of this is at me, by the way. It must be. I don't remember.

What would you say that I said that triggered you so much now Steven's very upset?

That's my favorite part.

Anyway, um, so let's do talking like just lines for like, yeah, I make bad decisions. If you're a bad person, it doesn't matter if you go outside and punch that little dang face. Sounds kind of reasonable. I don't know. I disagree with it.

It was kind of like, yeah, make bad decisions. It doesn't matter. If you go.

Freedom isn't free. Freedom isn't free. I have no idea. You were so funny.

Holy shit.

You were so funny.

Holy shit. Caliston Bagel and the Discord put together a hell of a clip of Steven talking to Steven. And we're gonna put it up on the Alfalfa YouTube channel for everyone to enjoy. But it was a pleasure watching that. I think when I watched it, I lost my breath.

I couldn't, I couldn't shit. Caliston Bagel. I couldn't breathe.

This is a laughing story. Breathe, this is a laughing story. I'm responsible for at least seven views. You've been pretty watching. One of the only things I'm allowed to watch. So can't watch anything else. Yeah, thank you, Caliston Bagel. That was one of the best laughs I've had in weeks. Good belly laugh. Yeah, if you wanna see it, check out our YouTube. It's absolutely hilarious. And yeah, I think you might have a career in podcasting honestly.

I sure hope so. It's basically what I do for a living at the moment. That was so good. What was the song you were singing?

Imagine, I can't watch anything else, yeah.

Yeah, that was basically what I do for a living. I'd imagine, obviously. That was John Lennon.

No, it's not the Beatles, it's John.

No, it's not Lennon. Okay, okay. It was imagine, I didn't know what you were saying. It just sounded like you were talking to,

like singing to yourself. I don't know. I think I was pretty in key to be honest. I played it in the office multiple times for everyone. They're like, who's this guy? I'm like, it doesn't matter.

Just watch. So we have a new content style. We're experimenting with experimenting. We're iterating. We're evolving. How would you guys describe this next iteration for the audience?

We decided that the essence of the podcast wasn't that we like talk about these three specific different things, but rather that we sort of have this dichotomy where we kind of go hard and figure out how to make it. But then we also like to have a couple drinks and just talk about the moon or whatever. And the idea was to make it sort of mimic the workweek more. So we want to have like the kind of morning, let's get after it coffee episode, and then the let's unwind at the bar, have a couple drinks, just talk about whatever thing. So we're going to switch to a two episode format where we, we stay like kind of money, business, finance, investing, whatever you want to call it focused. And then we just, just talk about whatever the heck we want. Uh, in the other

one, back to the Wednesdays, back to the old Wednesdays free for all discussion of all the things.

Yes. Yeah. Okay. I like it. But, but, but this is going to involve the money pot coming out on

Mondays now for the podcast listeners, right? Yeah. People listening on Apple listeners,

right? Yeah. People listening on Apple. The idea is that we'll still be recording on Wednesdays, right? We'll record both. We'll record the, uh, this happy hour style episode. It'll be released on Friday and then we're going to actually invite people to join us. We think we'll do this, uh, on YouTube live on Friday mornings. So we'll be drinking coffee, getting after it. We'll record

this live. You can come join us live, catch it early. And then what happened over there? That was the 1400 chirp. Let's go.

That was a side of David Hoffman can join us live. Let's go.

Oh, that was David Hoffman can join us live on Friday. And then that episode, if you didn't catch it live, we'll come out on the podcast on Monday. So Mondays and Fridays on the pod.

That's a tentative plan. Yep. I did evolving. I feel good about this direction. Yep. I did evolving. I feel good about this direction. I did set up a computer to stream. So hopefully the fifth time is that it's, it's an old computer, but one that I used to use to play. Like when I

had a really bad video game addiction, it's, uh, I got the hardwired internet. It's got,

it's got, it's got 64 gigs of Ram. It's got a six core processor. It's 64 gigs. Yeah. It is

it's beastly act to the, you know, sounds like a beastly act to the, sounds like a staking machine,

rocket pool machine. Yeah. I was actually thinking about, yeah, I was actually thinking about, yeah, it's a desktop. Okay. That's what you need. There we go. So you've had this. You're ready to

go. Yeah, I think so. All right. I'm a little, yeah. Cautiously optimistic. Okay. So I feel good about this. Um, we're excited for the next evolution of the pod. And, um, so we're here,

we're in the money episode. Um, let's get into it. We are in the, we doing an alfalfa round. Yeah. Well, let's just share it. We'll just, whatever, whatever we've got. I got a few things. I pulled something from the monthly 42 macro video. I thought it was interesting. I just toss it out there. It's not like a necessarily like a trade, but I thought it was interesting. So here's some data on a real estate building permits minus 22 year over year percent decline.

Housing starts minus 16% decline year over year, pending home sales minus 37%, existing home sales minus 35%, minus new home sales minus 15%. The new home of the home builder ETFs over the last three months plus 15 to 20%. So it seems odd. Seems out of whack. Why? I don't know. Maybe it's that the, uh, D cell, the decline is decelerating. Does that sound right? Like it's a slower pace, slower velocity of decline. Uh, I don't know, but it seems way out of whack to me.

Like why are people longing home builders when this is clearly like maybe you'd probably have to look at the home builder chart. Like did they front run that move? Like, and totally anticipated

this decline and then it didn't come in as bad as expected. Right. Right. Or, or the whole markets in like a Goldilocks phase, which I'm sure we'll talk about at some point today. And they're just taking the ride along with it, but they shouldn't be. That'll be a good theme for today. So, um, yeah, Goldilocks is a good, good theme. Um, anyway, I thought that was interesting. And then another thing I pulled from it was, uh, net liquidity over the next, um, few months throughout Q one kind of looks roughly flat. So also maybe a, a Q for a little Goldilocks theme we'll talk about later. So anyway, that was the two things I thought were pretty interesting from this weekend

that I saw from a macro stuff. They're just taken today. So, um, yeah, Goldilocks macro stuff.

I definitely want to dig into the liquidity more. Cool. Yeah. Anyway. Yeah. Anyway. Anyone got

anything else? Yeah. I got some stuff. Um, it's kind of like a discussion point though. I feel like, yeah, I mean, what I was thinking about today and this randomly came up in the discord and it reminded me of, of Armon as well. We were, we were talking about how expensive it is to like process all the data required for, you know, doing these machine learning algos. Um, and then it reminded me of like all the, uh, kind of decentralized computing tokens that we lost our ass on back in like 2017 or whatever, uh, you know, the golems and the RLCs of the world and everything. So I was thinking like, is, is that going to be a narrative at some point? I'm not saying they'll work, but is, is that going to be a trade narrative, like decentralized computing to power all the processing of AI on the, on the blockchain? Yeah.

Yeah. I mean, uh, your, your engineers have talked about using

old ETH mining rigs to, yeah, it's kind of what you guys are doing, right? It's kind of what you guys are doing, right? Like you're using these like idle GP GPUs, right? And using them to

process your stuff. Yeah. And he has them in his office, but the idea is that we can be more decentralized and have them in different locations that people can run for us. And we would just rent from those people without ever even needing to take ownership. And if we ever have one of these rigs go offline, there's another one there. So there you go. You have all these, you know, you don't have a single point of failure, which is awesome. But what's the narrative? What could

the narrative look like? The narrative looks like, Hey, we need GPUs to do all this. That maybe they're actually starts becoming like a worldwide shortage or something where people think there's going to be a shortage. And then everyone's like, what do we do? And then we suddenly realized, Hey, I remember all these coins that were, we're doing this. Um, the most interesting one to me was a token. I, I almost traded the last bull run and I remember it cause I didn't buy it. And then it did like a, it did like a 10 X and 18 days. Um, it's called render. It's got like all it's, they got great websites got all like the, it's got like JJ Abrams on it. Like all the advisors,

you know, it's just really nice, really nice pump, uh, scheme there. Amazon web services to like do Yeah. Yeah. Well, like, cause a lot of people aren't running their own GPUs, right? They'll like hire another company to do it. So it's like, so it's like the cloud.

I mean, so chat GPT is running on Azure as do video video.

Yeah. I mean, so chat GPT is running on Azure as an example.

Maybe we'll talk about, you know, their, their investment in open AI point, but yeah, for

Steven's question, like, why would, uh, is that how you pronounce that? How do you pronounce it? Azure?

Let me get some of that Azure.

It sounds so much better in my head. Sure. Like lead someone to go away from that model. It's like, because it's too expensive.

Yeah.

It sound so much better in my head. Cause thats too expensive. Okay. Yeah. Yeah. The idea of that it's too expensive and somehow we could do cheap here, to be fair, to be, uh, up front here. I'm not saying that this will work. No, no.

I'm trying to play it through the narrative as well. Like what would the narrative be? It's like, that's too expensive or that's too centralized. You know, there has to be some narratives.

I think it's a cost narrative with this stuff.

Hey, but why would, where does the decentralization can happen?

decentralized come in as a need because to me it makes it more expensive it's one of those things where you like slap a blockchain on it when it's not

required yeah yeah I agree it probably doesn't need a token but I don't know maybe it does maybe you could bootstrap GPUs onto your network with the token you give them some rewards and it's kind of like what helium does with their thing

which also probably won't work but yeah I mean maybe or you're like there there literally is like a supply chain issue they just can't be made anymore for any reason and you're like calling all home gamers that's gonna need your compute and we'll pay for it because we just can't actually physically make these things maybe requires that that's all bolt something I don't know so that's the only thing I can think of but it's a narrative yeah I'm sure someone's so we

feel on it on Z yeah well I mean to answer your question specifically I think who the fuck knows what the next narrative is gonna be no one can predict I know like I just want to find them yeah it's more about just jumping on them

once they start going I think I know but like I just want to find them yeah at high scale cost is definitely a factor for a lot of these companies so I could see it really like pushing forward like even for us like to run the same thing on GPUs is about one tenth of the cost versus to run it on Google or IBM or AWS

but you're using their out-of-the-box service you're talking about running your

code on a GPU versus their out-of-the-box but no you can run AI they have GPUs that you know in the cloud still cheaper still one tenth of the cost holy shit yeah they're like you're running you're running your model yeah infrastructure Wow so and and speed and scalability you can only scale so much you can only have again using like steno's example like how many concurrent transcriptions could I run at the same time with one cloud platform there's a limitation if I had a decentralized fleet of GPUs there's no limitation so how you would you apply

that to this narrative you know could be interesting holy shit yeah they're

like you're running yeah infrastructure Wow there's a limit I'm gonna I'm gonna put it in my little stupid ideas board that I have and I'll move it up near the it'll just just sit there I'm just gonna keep thinking about it yeah all right

thanks guys it's scratched we get any other money alfalfa well speaking of narratives that we maybe jumped on was giving a shout out to Jam croissant because I closed out all my shorts prior to this chomp I went long I was hesitant to go long in this environment and I'm hesitant to like follow a freaking pastry for my patience but I I bought some they're up we're happy everything's moonie tell me what you bought cuz you bought some goodies oh yeah well we talked about in the lounge a little bit or maybe it was in the money channel I was going back and forward the Rizzi saying like okay so if you believe this guy you believe that like the flow the like options flows is gonna change the dynamic to be more bullish how would you express that view and and he was throwing out ideas like going long volatility and I was like well what's gonna moon the hardest I think just like high beta stocks and then how do you get sort of more action on that is like the 3x leverage version and then buy options on that so that's what you did that's what I did I'm like

levered to the gills on this thing and they're just ripping the allocation some goodies that's what you did I have a target what

expiration did you buy by the way I don't know how I bought you know how I bought your jam croissant expiration which is like the jam 13 no no jam croissants is a Feb Feb 15 oh sorry I was like whoa you are crazy no I think

there I think Feb 14 or 15 is the Friday Op-Ex and that's uh sorry I was like whoa you are so if this thing's working out so well can you remind us of like

what the expectation for the well like I just don't know how much faith I put into his exact date so far he's been right but like is this gonna continue to

just does he say continue till mid-February is that what he's saying

yes I mean we talked we've been talking about this for a while I think it's an option it's an options it's a pure options flow play that revolves around these like big Op-Ex dates I guess and and like kind of end-of-year flows that sort of thing how that all integrates and yeah he said Jan 10 we go up and Feb 15 we might go down and he drew an analogy to to the Covid and how that was like basically triggered on the day to one of these big Op-Ex dates and yeah options I guess have really been moving the market for the last year so important to pay attention to I mean pretty good it's Jan 11 and we're pumping hard right now I mean we pumped yesterday we started pumping in crypto like we kind of front-ran January 1st yeah crypto seems to it's get a front run and stuff so yeah so congrats to everybody who made those plays and

followed a pastry to be fair I don't even chance move January 1st to be fair I don't even know what his inputs are into his like thesis you know like I'm

just sort of following him I just I just blindly do everything I like it you're like Drucken Miller you're sizing him up I don't know this trader what the

fuck I'm doing alright cool so she we sure you should you go back to what you you were talking about, you talked about how we might be in a sort of a, I heard this phrase

from Bob Elliott today, actually, he called it transitory Goldilocks. And I love that.

It feels like it. I think that's what we are possibly about to go into with pretty pretty

high. Explain that pretty high. Explain that. Explain that a little bit more. So I don't

know what you're talking about. You're talking about an economy that's low growth, but still positive and kind of higher inflation, but declining. Everything just kind of like feels

in the middle. It's just going to be a little, it's just going to be like, I mean, Goldilocks comes from the, have you seen like the quadrants model? Yeah. It's asset model. You got Goldilocks inflation, reflation and deflation. Right. And they're just, they're just like growth and inflation up or down and the combinations of those two. So like deflation, for example, is a growth down inflation down. Right. And Goldilocks is like growth up inflation down.

That's like mega bull. So we're still growing, but inflation is, we see disinflation, I guess

not. So where do you see a growth coming from in light of like all those numbers you read

off in housing, we're seeing mass layoffs. I think it's still the same growth that we've been seeing the last two years. It just like the effect of the tightening cycle and interest

rates just hasn't taken effect yet. Like, well, it doesn't feel like it has. Right. It has. Right. I mean, this, this, um, God, I forgot who said this, but he was listening to him on, uh, extras on what Bitcoin did oddly enough. Oh, don't hear stuff there. You're on that still. I mean, he has a good guess once in a while. Um, let me guess it's at 17. Wow. You're on that still.

I mean, he is, he, he is a thousand. Yeah. He said inflation is driven the cycle by wage growth. He said nothing about like money supply. He's like, this inflation is like wage growth. And I was like, yeah, I think that's what this is. And wages are still high right now and trending higher. Like the labor market is strong. Like we hear about the tech layoffs and they're like at the top of our mind all the time because we're all focused on Google and Apple and Amazon. Um, but I think if you nuke the entire tech industry, it would only, it would only take employment up by like 0.25% or something. It's like kind of insignificant. Like the biggest chunk of the economy I think is the services sector.

I think it's like 85% of the economy or something crazy. Um,

that's wild, right? And service sector wages are, they're just like up only. Is it over, over 6%, right? Yeah. Growth or no, is that, that's whole, that's entire like employee

compensation is up over 6%, which is mostly made up of services. So, so what this is, it's funny because this is something I was talking about last summer. If you guys recall why I got like Uber long, I thought this was going to happen and I was like a little early to it, but I was like, we're going to get to a period where, because wages are kind of sticky, right? But prices aren't in a lot of these items in inflation, right? You'll get a phenomenon where the prices start dipping back down, inflation goes down, but everybody's still sitting there with their like newly high paying jobs in a tight labor market. And when, what happens is everybody's like real spending power is like actually going up. So real earnings. Yeah. Like real earnings are actually going up right now for like a gigantic swath of the economy. And this is why like, I don't think recession is happening anytime to the end of the year. Maybe, maybe. Yeah.

Maybe end of the year, maybe next year. So if you get this kind of phenomenon going on, like you could see reflation into Goldilocks for like a temporary period where you have like inflation going down while earning power like continues to rise. You could have consumers feeling good spending money and like risk

assets could start going up all while people feel like things are, oh yeah, maybe they're back like that. They're like in their household, their back, you asked how their household's doing. Maybe they're like, yeah, we're kind of fine. But when you ask them like, well, how the economy, they might say, oh, I think it's tanking, but in reality, they still got maybe two to three quarters of gas in the tank to kind of survive. I'll tell you the thing that kind of switched it over for me was obviously the China reopening was kind of interesting, kind of new was coming. But you know, Felix Zulof had said something that I thought was interesting. He kind of assumed that China could not do a bunch of stimulus because it would cause some wacky stuff in the currency markets. And I've seen that as a purchaser. I use Yuan to buy stuff in China. So like the currency changes have a huge impact on how much we pay and how much the factories receive and whatever. So I thought I kind of assumed that that was a good point to me that like they can't provide a lot of stimulus. But I have some quotes here from the I think it's the party secretary of the People's Bank of China confirmed that it was the Chinese Chinese government's priority to convert current total income into consumption and investment to the largest possible extent.

PBOC will use financial policies to boost income and people affected by COVID outbreaks to meet basic demands and enhance consumption. Moreover, the financial sector will develop products that will encourage home and car purchases. Oh, my last lady vowed to ensure monetary policy was more in favor of private firms to support effective credit growth. So they're basically like, we're gonna throw Oh, God, we're gonna throw the book at it. I'm not

this is what this is what last last Oh, God, we're gonna throw the book at it. I'm not This is what this is what's up to me. I mean. I've been taking a break from Twitter. I really want to like, make a bunch of threads and talk about this. Because like, if you look at my Twitter, it probably just like, you could write them. And say, yeah, I don't know. I was just trying to like, take a break. You know, I was like, is this really important?

But like, I was looking back and just like, to me, he just looks like,

You could write them and say, yeah, I dunno, like, I was looking back and we just like right, just package what we talk to each other.

Yeah, I like I saw that I was like yeah, it's it's on now I guess because on top of this like flows We were originally just playing this like flows trade Yeah, that's all I was playing and like some reversion to the mean with it could be bigger kind of nice But now it's like trying to stimulus and now there's like another thing we have to talk about too Which is that there's kind of like this looming? debt crisis on the horizon here in the Well, I don't want to call it a debt crisis a budget. Maybe what you got a budget, budget crisis

Yeah, that's all I was playing. They'd be very kind of nice. But now I

Yeah, I mean it's it's the debt ceiling the debt ceiling

Negotiation that happens every time it comes up and then they just raise the debt ceiling

It's it's a non no that thing. It's not Oh, that's not gonna know that that's clean It's not. No, that's not gonna happen. No, it's not gonna happen this except if you were falling Did you hear it took like some like 13 or 14 votes to confirm the speaker of the house? Okay, imagine that very like benign procedural thing for the most part Turn into a fucking multi-day fiasco now fast forward to the debt ceiling increase. They've already they've already drawn lines The Republicans said we are not gonna raise the debt ceiling unless there are x y and z spending cuts and the Democrats like wait We just wait, we just raised the debt ceiling for your president Trump like three times without Pulling anything back. So you have the far right part of the GOP holding the rest of the House's representatives

Is an hostage? So that's not gonna happen. No, it's not gonna happen this time. You were falling

Okay, imagine that an hostage. Isn't it true that McCarthy and I don't know if this is true I heard this I haven't verified it but didn't didn't he basically allow us some provision where like the far-right Republicans could just

Come in and just take him out what we didn't like what we didn't like one person can can come in and say we want To a vote to remove you and usually I think it's like a majority and you need, you know majority the caucus But anyway, I think this is mostly important But that's one of the rules the most important thing is that in the house the rules are just redecided every Congress Like there's a rules committee that can reset how committees are formed and how voting happens anyway, I think this this the reason this is important for for a money discussion is that You know, it could affect net liquidity, right? Like it could keep Liquidity in in the market if you can't raise the debt ceiling The Treasury may not be able to like and I may get the you know semantics wrong in this But like cannot issue more debt and pull it and suck liquidity out of the economy and put it back into You know the Treasury general account. So interesting little dynamic that might take

Yellen's sort of like front-running that right now, right? Which is why You you mentioned how we're expecting liquidity to remain flat when we should be going down should be going down T right, but actually we're we've like leveled off and we're going flat now and that's cuz Yellen is She's she's draining the account. She's issuing. She's issuing new bills, right? Mm-hmm. And the other reason that's important is that because there's like a shortage of bills There's this negative spread between the Treasury paper and the reverse repo That's incentivizing money to stay in the reverse repo that would otherwise go out into the the t-bills Where it is then kind of used as collateral for leverage and it's just kind of like pro liquidity, right?

I should be going down T

right so as she like alleviates that shortage that spread goes from negative to zero to positive now more money wants to come out of the reverse repo facility and into the Economy where it can sort of like effectively pump assets We've got this kind of like one two three four prong, like kind of bull factor going on here

Yeah a couple months. There was another thing about going back to the China reopening that kind of made me feel this way. So the idea that a a China reopening is not good for the US dollar So just as a reminder When the u.s. Dollar goes down asset prices typically go up when the US dollar goes up asset prices typically go down So if we're thinking this China reopening is bad for the US dollar Then that could leave more room for this Goldilocks scenario that that may last a few quarters. Damn. I had to ask chat GPT why Why that was the case like why would a China reopening be better for the euro and not the dollar and I guess Europe is more reliant on exports and China's, you know, their second biggest trading partner outside the US So them being open is a big freakin deal for the US economy allows the central bank there to kind of tighten policy more Again, you know compared to the Fed. So if the euro goes up, that means the dollar kind of goes down Tighten policy sounds like they're gonna go pretty ease. Well, it's pretty ease Well, sorry the I meant the European central banks because if there's some economic growth They can tighten policy right a little bit. But uh, anyway, so you add up what you just mentioned a dollar potentially declining I Mean here are things that I still hold to be true. I think we will hit a recession I don't think it'll happen until the end of the year. The recession isn't priced in right as of right now and If there is a recession that will mean a lower ETH price than we are now

Yeah, typically prices go lower like several months after the recession begins

It's not like the prices don't don't bottom before recession, right? Exactly so like people think oh if if a recession coming then feds gonna pivot and everything will go up but no like Stock mark goes down a lot during recessions. I think we were chatting that the 2001 recession It was a very tiny decrease in GDP, but the S&P 500 went down like 40 something percent. So Anyway, that's what I hold to be true. Now. That's why I was texting you guys this weekend I was like so I have 15% of the ETH that I want now because you know This thing could move up but as it's as prices moving up. We're at like over 1,400 now I was like man. Should I have a little more? Does that is that a sign that like I should have more than 15% and We were all in varying degrees. You were the heaviest in terms of how much this that you wanted? You were in the lower then you were next then me then you were like, well, I don't I have 10% I want that

Right. No, that's even feels like too much. But now that we're talking about it. It's like I'm not I am NOT long enough

Yeah, so I don't know 15% feels right for me, but I don't know

Yeah, it's like this thing this conversation might changes with all these variables it's sort of like changing my perception of how long this This pump can last because like you said, I was playing until February 15th. It's probably gonna be like

months longer than that all these well, it's interesting because when you look at the chart the 200-day moving average has been kind of like the resistance for the S&P 500 hits And then just bounces right down it's like clockwork I think it's been three or four times hit it so we're at Like thirty nine fifty. I think it's at forty fifty So we're a hundred points away from it and the CPI releases tomorrow. So our next week might resolve this thing home Could just blow it out. Yeah

Yeah, go right past

I don't think CPI matters quite as much as it used to though because I think yeah to the market or to our discussion

Cuz I think we're seeing passes to the market and to especially to it matters to Jerome with the proximate cause now of inflation, I think is like Wages in the labor market so I think he's first and foremost like looking at the labor market like as long as this thing is like juiced like we got to keep and like he did shift a lot of his rhetoric in recent meetings to talking more and more and More about that makes sense

If you're a business owner and you're having to pay increasing wages, you're not going to stop increasing your prices if you can, because your inputs are getting more expensive.

So it makes sense that inflation will continue as long as your input costs. Imagine you're making 8% more every year. If you and everybody else is making 8% more every year, why would you ever expect inflation to go to two? Everybody's just going to be flush with more and more cash.

It's really hard to cut somebody's salary to bring that down.

Which is why this probably only ultimately ends in some sort of recession where there's like this kind of forced layoffs happening and I don't know, I think ultimately where does this end in the near term? There's kind of the big catalyst as the next dot plot meeting, which is in March. That's when all the Fed folk plot where they think interest rates are going to be far out. I suspect, and a lot of people who are smarter than me, that I respect suspect that rates are going to go a lot higher than the market is pricing in right now for a lot longer and that would kind of be the predictable after effect if we end up having this kind of reflationary period where everything just starts going up again. We're going to eventually see probably a balance in inflation and then the Fed just going to have to really come out and lay the hammer down and the harder they have to lay the hammer down, inevitably it's probably going to end in pain but just farther out than we think

right now. That path seems pretty clear. If we have this reflation and they recommit that we are... I think the markets are still pricing in a cut this year? Is that true? Yeah, I think so. And they've said, I mean, it's hard to like, I don't know what more the Fed presidents could say that we're gonna raise it more and not raise this year. So if as long as they keep their credibility intact,

which I think they will after the whole transitory issue. So how about your positioning in the near term? Like you were pretty, you're pretty forward looking with the ADA short. Yeah. And you were like out in the open about that. And now where are you at with that?

I don't know. Like, yeah, no, like I still have it obviously went sideways and just like burnt most of the profits or maybe half the profits. So I might switch it to like a spread trade because I still like it, but I don't want to abandon it. I mean, I think over the year it'll still pay, but maybe pairing it with like long Bitcoin like Steven did in the past is maybe a smarter play and just assume that if everything goes up, ADA is gonna go up less than the market

and play it that way. Play it that way. I don't know if that's true because like ADA has probably gone up a lot more than Bitcoin in this pump. Negative, negative. Wasn't ADA up like 25%?

Yeah, ADA definitely ripped a lot.

Yeah, ADA definitely ripped a lot more than Bitcoin.

Hold on, let me, oh, I was sorry, I was looking at it today. Bitcoin hasn't moved like a ton, which is one of the reasons like, until you see like a huge, I wanna see like a giant mega candle for Bitcoin before we're like, okay, maybe the bull market's back because right now it's just money trading hands. Like one thing I look at a lot, I don't know if you guys look at this, but it's like the total market cap of stablecoins because I wanna see new like cash moving into the system. Otherwise we're just shifting the same money around in some sort of shell game. Like we wanna go back to easy mode, right? That's like trader mode, that's zero sum mode. Like you don't really wanna be in this market aggressively until you're back to easy mode where there's other money coming in.

It's just like up only for everybody. I mean, I think the positioning is just holding still majority cash for the crypto.

Definitely, definitely. I think TLDR for people is like, yeah, like you wanna belong now, cool, enjoy it. I think you probably wanna err on the side of taking profits a little too early. I know that could be painful because sometimes this stuff like really runs up,

but like, yeah. Okay, give a prediction on ETH price at the peak of this little psych, this like mini, mini bullish.

Are you gonna get one too? Are you gonna get one too? Yeah. All right. I'll say 1600, maybe higher, hold on, let me.

Dude, we're gonna get a 1600 by Friday.

Man, 1600, I'll say 1600. Peak. Yeah, in the next like couple months. Yeah. Well, I guess we just talked about this the last two quarters.

Yeah. Who knows?

I think it's. Well, I guess it's the math. We just talked about it. Who knows?

1600. Like 2K is definitely in play. I think your more reasonable target is like 17. I think 17 is the high of the year for ETH, I think. So like, I kind of like. You wanna stay to that?

My wallet wants it to go higher, but my pride. I think you're gonna.

I think 7 pride. 1800 or $1.

I'll go 18, 18. I even think 2K. Like I think, I think 2200. Like I think we could see this like, you know, bull thesis come to play where people believe that like this recovery is gonna be V-shaped like the other ones that they've experienced.

And then they'll just get rug pulled. Well, I do like that this is above, ETH is above that kind of 20 week moving average, a 200 day moving average is kind of meme bands that we talked about. It's definitely a meme. So it feels like almost less risky to buy it.

Sorry, explain the meme bands again.

Like what's going on there? So Benjamin Cohen talked about on his channel like the bull market support panel, the bear market resistance. It's always the 200. It's the 20 week moving average. Oh, 20 week. And the 20 week moving average is currently at 1340. It's important to notice he does look at it on a weekly basis and not the daily. So this whole little thing that we're watching above 1400 could just be a little wick and it could close below it at the end of the week. But basically in the bull markets, it basically goes above it, retests it. And anytime it's above it, it's considered bull mode. And anytime it's below the 20 week moving average is considered bear mode. So we've been below it since the 20.

Man, since ended this end of 2021 roughly. A whole year. We had a few weeks above it or a few days above it.

So this might be like a roughly.

A whole year a little breakout electronic above it. Let's hope. We should also mention that people are maybe going to listen to this on Monday and we have an inflation print. Or maybe on Friday after this conversation,

maybe it's been back. Maybe it's more important.

Oh no. We'll think about it. But this whole thing could be rendered. This is is deliberating this process. I just thought we're just like pontificating before this very big number comes out that could just thred everything.

abilis nesting.

It's deliberating this process. Yeah.

I just thought we were just... Well, most of what we say is wrong anyway, so. that's true.

You just got over saying that you think

that the number is unimportant.

It's unimportant to me, I think.

To the year-long thesis. Yeah, it's important. It's important, but it's not the most important thing anymore, I think. Those are my thoughts. Anyway, do you guys wanna talk about one more thing? You wanna? Can we talk about the Ondo finance thing? Yeah, yeah, let's talk about that and then we'll wrap it. Cause I wanted to touch on this. I think we can talk about the other thing next week. That's cool. It's not time sensitive.

I forgot what the other thing was, but yeah, okay. Yeah, we're just gonna do some NFT chatter. Can we, JPEGs aren't going anywhere. Cool. Yeah, bonds coming on chain. They're there, Ondo finance. I don't know if you guys looked into this. Quick rundown. Little bit, yeah. A hundred came in. So sorry to the minnows out there. I don't know if you're a minnow.

If you've got like 90, it's a lot of money, but it's like, yeah, a lot of money. A hundred came in. You have to KYC, but it's pretty cool. You get access to a three different funds. You get a short-term U.S. Treasuries fund, like a short-term corporate bond fund, and then some sort of like high yield junk type fund.

What could go wrong? Ondo finance. Yeah, yeah. I forgot what the other thing was, but yeah.

Okay.

Just a little bit, yeah. It's so long with that one.

Yeah, yeah, yeah, yeah. Well, we'll keep going. We'll talk about it after.

Yeah, I mean, that's basically the TLDR. Your interest is tokenized, so you get a tokenized representation of your share in it, which is cool, because you could theoretically transfer it. You have to transfer it to other KYC individuals, I think. You can whitelist it for a particular smart contract, so I think there is the possibility that this could become like collateral and certain, which would be great. Like if I could have a like 4.5% yielding like U.S. Treasuries position on chain and then use that as like collateral to do stuff with,

like that is like. This is, yeah, I think this is really cool. I mean, I would prefer it not to be KYC and minimums, and I think that'll eventually happen, but I think in traditional finance, aren't Treasuries the most common type of collateral, because you get an 80 to 90% release against it. You can borrow against, you know, up to 90% of the value of the Treasury, and you still earn interest, so. Yeah, it's epic. We're bringing the most common type of collateral in the trad-fi world to crypto is pretty.

Can I ask a couple of questions about Ondo specifically? Yeah. Is this like only for U.S.-based investors, or is it? I don't. Is anyone restricted?

There is the AML stuff. I don't know. There is the AML stuff, so I don't know if anyone's restricted, but you have to do the anti-money-lawing. Just like that Syria stuff?

Yeah. Okay, just like that Syria stuff? Yeah. Okay. And then, do you get paid coupons in USDC, or?

So you get the tokenized version of this thing, and what they do, as far as I understand it, is they reinvest any dividends. I think those typical ETFs that they're investing in, like, for example, the short-term Treasury one, I think has a monthly dividend, and they're taking that monthly dividend and reinvesting it back in. So basically, you should get more out when you redeem. You should get, it's like a pool. Yeah. And I think that rate is like 4.6%, currently.

Yeah.

And they're taking that monthly dividend a higher pool. Yeah, the top line. And this brings me to one of the downsides of this, so they're basically using other custodians, Like the, for example, the short-term, um, like corporate investment grade fund is like a PIMCO ETF. So they're facilitating you having basically like a tokenized PIMCO ETF. So then you get, so then you get two layers of fees, PIMCOs and all your PIMCOs. Yeah. So you're paying on that one. You're paying 0.35 to PIMCO and another 0.15 on top to Hondo. So you're paying 50 bibs on a bond.

Not ideal bond. So this makes sense. So this makes sense. This makes sense for, um, crypto whales, like early guys that got into Bitcoin and ETH super early, have a ton of money on chain and not a ton of money off chain. That's because like otherwise you would just go to PIMCO.

If they, if they want to, there's a massive market.

There's a massive market in between people who, who have stables. I think they quoted something like a hundred billion in stables, but like, think about it. Like if you want to get yield, the only way is to go into these like Ponzi schemes and try to find the most conservative Ponzi scheme when you might be happy with 4%, um, or you get, I don't think you would even consider putting an ETH and then staking it. That would seem dumb.

I was basically, I was basically the target market for this. Like I have like effectively like a, a doxed wallet that I don't care about being KYC that is like, you know, Uber transparent with taxes and everything. And like, I always just had money sitting in stables and I wanted it there for like the generalized utility of having it on chain. And eventually I just capitulated. I was like, this is worthless. I can't get any yield. And I took it all out like a couple of weeks ago and to put it in like bond ETFs.

I kind of wish, I kind of wish you got the dividends though, um, like paid, like paid out to you, which is, which is fine. Cause they're essentially just taking your stables, turning to cash, putting the ETF right. And then you become,

and then what if it becomes tax advantage in some way? Like if it all recurs to the token, it can probably not, that would be like, like an insane, like multi mega billion dollar loophole if that was like a thing, I think.

So probably not. Oh, it can probably not. Yeah. Well, I, I guess what I'm saying, I just want to be clear. There's no reason to bring in Fiat dollars to invest in this thing. Cause you would, you would rather just do the traditional finance version.

Absolutely. Yeah, absolutely. But yeah, absolutely. Yeah, absolutely. But they're trying to target that a hundred billy. That's just sitting there.

The crypto whales. Yeah. Yeah. It's the first step. And I think like an interesting world where we probably have like a hybrid of like kind of docs, KYC wallets and stuff we want to keep anonymous. And then we'll be able to do stuff that I think has like really high utility on the KYC stuff to us. Like maybe we can tokenize our house and like all of our assets to just do like a lot of interesting stuff with it there. And then also kind of live in like the crypto world. But like, I think it's,

I think it's really cool. I think it's a great step. It's a great step. I have a question. Do you think this makes a new projects riskier or less risky? Cause if you bring a risk free rate of four and a half percent on chain, you know, people who are going to like, say, Hey, invest in my token and get an 8% yield. You'd be like, why? Yours could go to zero, lose 20%, lose half its value.

I get four and a half percent risk free. Smart contract risk here.

Like you could still go to zero with this. True. Yeah. I don't know what the guarantees are on like smart contract.

I see insurance. I see insurance. Yeah. I don't know.

But I don't know, but it's a similar effect. We talked about with the East like a while ago where like, what happens to all the yields and all of these pools, if everybody can kind of like lever up their eats, they can get 8%.

Like why the hell would you ever L P? Yeah, I guess there's like, yeah, I guess there's like two risk free rates that matter. But what about a real one in crypto? I think that's important because, but does it weed out all the shitty project? Cause they're like, well, no one's going to invest in our project or care about a 6% yield, or does it push people further out on the risk thing and be like, you know, uh, Oh, I think it rate it right. There's like 20%.

The raise of the tide for, for everybody yields, the reason that if, uh,

I mean, if fast history is any indication, it wipes everything out. I think in a good way, in a good, I don't, yeah, I don't necessarily think you want a bunch of frothy projects doing like a, like this, like obtuse financial engineering to basically trick people to invest in kind of like Luna as sort of many Ponzi schemes, worse than Luna.

Can I ask a one follow up question on the junk yield, uh, do you have it in front of you? What's, what's the, what's the APY on that? Yeah. Eight and a half percent, I think.

Eight and a half, eight and a half. Pretty juicy.

But isn't, isn't those junk yield spreads? Like, um, isn't that how you measure like when an economy is like declining? So if you're expecting like a heavy recession, one of the first things that does is like, you know, mid mid cap companies who can't afford their like 9% interest anymore. Like fail, on that debt. And yeah. So like, I don't know. I don't know.

I think you could look up, you asked Chad GPT, how often, uh, the coupon gets paid on junk bonds. I think it's most of the time. Like, I looked at the fund,

the implied default rate probability of the portfolio is 2%. Yeah. It's like, it's just very high in bond world. Yeah, but like junk bond. Yeah.

It's like, it's just very high in bond world. Just jump, aren't like junk. world. Yeah, but like, jump balls aren't like junk. It's just like, and it's also not like,

and it's also not like entirely in junk, like these things are invested in a kind of variety of stuff. So like, if one sector just goes belly up the entire thing probably doesn't go to zero,

you know, just reminds me of that big short scene when the Mark Bauman character just like gets up in the middle of the mortgage broker real estate conference and it's like asking about default

rates. What is the current default rate right now? Anyway, something to keep in mind, something to keep in mind. Bare market things talking about investing in bonds on chain. Yeah. Good times. I like it. All right. Cool stuff guys. Anything else anybody wants to throw out there before we call it a week? No. All right.

Awesome. That was a fun discussion boys. I guess we will see everybody

in the next episode. All right. Later. Yeah. Cool stuff guys. Now. All right. Later.

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