[00:02:44] Joe Carlasare: Putting him into the MDC. So a lot of issues here, but suffice it to say, you know, his use of the VPN to try to influence witnesses. Not a good move, right. Definitely. The, the next step in a long string of horrible mistakes made by SBF I think we can all agree on.

[00:02:59] Steven McClurg: I’m a little shocked by it.

[00:03:01] Joe Carlasare: Yeah. Just because I’m not, I’m not-

[00:03:03] Steven McClurg: The guy’s nuts, I mean-

[00:03:04] Preston Pysh: Well, no, no, no. Yeah, that’s a given. But considering the a hundred million plus of donations to political candidates on both sides of the aisle, he, you know, gets brought to the US immediately gets house arrest type treatment for a guy that literally lost $9 billion, like up in smoke.

[00:03:25] Preston Pysh: Like, I’m just a little shocked that a, that happened. And then I’m even more shocked that with that treatment that he got that now all of a sudden they’re like coming down on the guy. So like, it seems like he was protected and like, just everything that I have expected with this guy has literally been the opposite of what’s played out.

[00:03:45] Joe Carlasare: Yeah. My only, my only comment on that is that I think they haven’t cornered, he’s dead to rights. There’s really not much of a defense, in my opinion. I think this idea that he was, you know, he’s sort of intimated that he’s going to raise a defense that he was somehow misled or mismanaged by his lawyers.

[00:03:58] Joe Carlasare: That’s going to go nowhere. In, in my, in my opinion, I could be wrong, but I, I think that’s a it’s a FTA complete at this point. I think he will be sentenced as for at least a significant amount of time. And we can debate whether what’s significant, but he’s going down. Right? And when you’re going down, you’re kind of desperate.

[00:04:14] Joe Carlasare: And I think that’s what prompted him to go out and try to massage some of these witnesses to saying favorable things about him and, and also leaking the story about Carolyn to the New York Times. Totally reprehensible. What’s going to happen to these people that had, like, your everyday person that had deposits.

[00:04:31] Preston Pysh: Let’s say you had, you know, a hundred thousand dollars of deposits on FTX, like, what happens to these people?

[00:04:37] Steven McClurg: Well, if you, I mean, I don’t know how closely you’re following the bankruptcy action and obviously there’s go. Yeah, well, I mean, long story short is there’s not enough money to cover all their liabilities, right?

[00:04:47] Steven McClurg: And you’ve got structures in terms of who gets preference right there. Some of their bond holders, some of their credit gets preference. So unfortunately, you know, we don’t know. I can tell you this, they’re not going to be made whole, if they’re lucky, they’re going to get, you know, some de minimis amount, 30 cents on the dollar, 20 cents on the dollar, if that, that would be a, a huge favorable outcome for them.

[00:05:06] Steven McClurg: But my guess is after the lawyers and everyone else eats into it there’s going to be very little left around for the guy who had six figures up there, if anything.

[00:05:14] Preston Pysh: Wow.

[00:05:15] Jeff Ross: Can I ask a question on this? Yeah. Because I, I’m kind of intrigued too. I’m, I’m kind of where you are, Preston, and this is not how I expected this to play out.

[00:05:26] Steven McClurg: And I think it’s just the size of the contributions that he made. If, if you remember Madoff, Bernie Madoff had contributed something like a quarter of a million dollars to various campaigns, and a lot of that was returned. And, you know, I think Chuck Schumer was one of the biggest recipients of of, of Madoff contributions.

[00:05:48] Steven McClurg: I don’t know if you remember that. But the way that it sounds to me is, you know, a quarter of a million dollars isn’t enough to keep you outta jail, but a hundred million is, and you know what’s going to happen with that a hundred million dollars? I, I, I keep seeing commentary that you know, a judge struck it down.

[00:06:03] Steven McClurg: It’s not going to get returned. It’s not going to get clawed back. And then I’m hearing that it, that it is, are you following that part closely at all? Yeah.

[00:06:10] Joe Carlasare: And with the revised indictment that they just released, we now learned that the a hundred million dollars was not like his personal funds. Right. It was actually customer assets that were used to go out and make these contributions, which see you guys shaking your head.

[00:06:23] Joe Carlasare: I have the same reaction. It’s horrible. Right? It’s different if you use your own money to go out there and try to cajole politicians, but to use other people’s deposits, that’s just awful. But to answer your question, you cannot return something that has been spent. That’s usually an old sort of doctrine in politics.

[00:06:37] Joe Carlasare: Right. And a lot of this money had already been spent from my understanding and prior election cycles. I think that the money that’s gone, the very unlikely to be refunded or returned. But you know, the clawback efforts for contributions are a little bit different, especially ones that were given isn’t his name right, because he effectively stole money, gave it to someone else, unwittingly not knowing that he was involved in these crimes, and then they spent the money.

[00:07:00] Joe Carlasare: So clawbacks usually only extend out to people that somehow were part of the original apparatus. Were, you know, insiders that were spending the money right before a bankruptcy was filed. Those types of claims, when it’s sufficiently removed, if it’s six months or a year removed, very unlikely, not impossible, but unlikely to claw that back.

[00:07:19] Joe Carlasare: So that’s the short answer. You know, it’s all about time and degree. You know, when the bankruptcy trustees come in, they look at everything and they start with, okay, what just happened in the last 90 days? And then if there are huge pots of money that extend out beyond 90 days, they think about it, they consider it, but the longer the time goes, the less likely to recovery.

[00:07:37] Preston Pysh: Alright, off to the next topic unless you guys had anything else there that you wanted to talk about.

[00:07:42] Jeff Ross: My only comment on it is when I watch him, every single thing that he has done and said since he started getting in trouble a year ago seems like it’s just a game to him. I mean, he’s just like this cocky, absent-minded professor slash teenager that just thinks it’s a game and I think he thinks he’s just got enough people paid off and he’s going to get out and I just don’t think it’s going to end up well for me.

[00:08:04] Joe Carlasare: Wait, wait until you read the book, Going Infinite by Michael Lewis. Coming soon, October 4th. It was supposed to come out as I understand it with the trial, they may be delaying that I’m hearing whispers about if the trial gets continued. So they want to like, you know, capture the moment. But Michael Lewis, I’m mean obviously author of the big short lot of excellent books liars Poker, that’s going to be great.

[00:08:26] Preston Pysh: Alright, let’s go ahead and talk about, everybody loves talking about the ETF. And I think most are sick and tired of this conversation, but I want to cover it because I recently saw that the SEC is saying they’re going to push this out to 2024. Is this just a rumor? Like what’s, what’s the ground truth here, you guys?

[00:08:50] Joe Carlasare: So we have one unconfirmed coin desk report about their intention to cont continue it out to 2024. Obviously the ARK ETF, they did formally extend the deadline in that, but there’s a host of other deadlines are coming up and from following the SEC I’ve never heard of them issuing like an envo. Like we’re not looking at anything until the beginning of next year.

[00:09:13] Joe Carlasare: So I’m very skeptical. The CoinDesk article doesn’t even mention a source, so I don’t know where they’re getting this from. I wouldn’t be surprised if they do in fact, you know, continue them out. Particularly ’cause they’re waiting on the grayscale appeal, which by the way, we could get any day now. We can get the grayscale, we’re supposed to get it today.

[00:09:28] Joe Carlasare: I know there was some speculation about today, the next window is going to be 11 o’clock on Friday, which by the time this airs, we, we may have it, but that’s really the linchpin I’ve along so that I don’t think they’re going to make any move until you get some sort of resolution. In that case, it wouldn’t really make sense.

[00:09:41] Joe Carlasare: Right. Why would you, why would you rule favorably or unfavorably on the a ETFs when you’ve got a, an appeal where you’re fighting against gray scale’s conversion efforts right now in the appellate court? If you were going to change your opinion, you would just save yourself the potential embarrassment of losing the appellate court and say, you know, this whole action is moot.

[00:09:58] Joe Carlasare: We’re dismissing the appeal.

[00:10:00] Preston Pysh: You guys got anything else?

[00:10:02] Steven McClurg: Look, I’ll say this. I don’t know anything because, you know, I’m, I’m in the middle of this race. Yeah. I really don’t know anything. I’m only speculating and guessing as well and being kind of close to it and watching it. I’m, I’m sure I’m, I’m missing the forest for the trees.

[00:10:19] Steven McClurg: But I can’t imagine a scenario that BlackRock doesn’t go first, in some form or another.

[00:10:27] Preston Pysh: But they wouldn’t go far behind.

[00:10:29] Preston Pysh: Whoever does go first.

[00:10:31] Steven McClurg: That’s right. I, I think it would be a really tough argument to just, there, there’s,-

[00:10:36] Preston Pysh: There’s no way they can approve that one first.

[00:10:39] Joe Carlasare: Well, approving it a day later is, is the same as basically approving it first, right?

[00:10:44] Steven McClurg: Look, when it comes to, when it comes to gray scale, let me, let me, let me tell you what my speculation is. Okay. I actually think that gray scale has a good chance of winning this court battle.

[00:10:56] Steven McClurg: I’ve heard that from a lot of people and watching it closely, I think they’re going to win. I mean, that’s, that’s my opinion.

[00:11:02] Steven McClurg: And again, I don’t know anything, but I think they’re going to win. But the SEC also has a lot of tools that they can use to hold things up especially in this particular type of filing. Because the way, because you have to have an actual rule change. So there’s two pieces of the Bitcoin spot, ETF, there is the S1 or the, or the 1933 act application process, which I mean, man, ours is still live.

[00:11:31] Steven McClurg: And we filed it back in January of 2021. Okay? So that’s, that’s, that’s the one piece of it. The second piece of it is the 19 before, which is the application for a rule change by an exchange. And the way that the SEC is playing this out is they won’t review any of the S1 until, by the way, that review process is done by investment management, which is the division of the SEC, the investment management staff.

[00:11:59] Steven McClurg: They’re, they’re not, they won’t even look at it until the rule changes process which is handled by trading and markets. Oh. So it’s really easy for trading and markets to either approve one. Or approve all of them or, or approve them, whatever order they want. Because it’s not necessarily about who filed the 19b-4 first or second or third.

[00:12:23] Steven McClurg: None of that matters at all. Hmm. And I think there’s a lot of people out there that are confusing the fact that, oh, they’re the first ones that filed the 19b-4. That means they’re first. No, first doesn’t matter. Right. Matters. Which one was done correctly in my estimation. And, and what I’ve seen, the, the BlackRock 19 before was the first one that was done correctly.

[00:12:44] Steven McClurg: It included the surveillance language, which is essentially what the staff was looking for in, in my opinion.

[00:12:54] Preston Pysh: You know, staff probably wrote it. Staff probably wrote it and sent it to BlackRock.

[00:12:59] Joe Carlasare: The SEC staff. Yeah. Not a chance. Not a chance. And, and just, just to be clear, the surveillance, the surveillance sharing agreement that Steve’s referencing, which you know, is a linchpin, I totally agree with him on that.

[00:13:12] Joe Carlasare: It is with Coinbase and Nasdaq. Right. Keep in mind the SEC’s suing Coinbase saying they’re not legally able to operate as an exchange. It is sort of a stretch in logic there. But I take your point. I mean the, the surveillance sharing agreement’s been their whole thing, a surveillance sharing agreement, the market of sufficient size.

[00:13:28] Joe Carlasare: The question is, if Coinbase, in terms of global market share and volume is a market of sufficient size and the SEC and their briefing against grayscale said it isn’t. So which one is it? Is it the enforcement heads or is it the registration staff who, who takes precedent?

[00:13:42] Steven McClurg: Let me just put a little bit more public information that’s out there.

[00:13:45] Steven McClurg: So the actual Director of Trading and Markets that wrote the brief on what is required in a 19b-4 in order to get it passed was a woman by the name of Dalia Bloss, have you heard that name? Okay. So Dahlia’s was the person who wrote that letter and every 19b-4, after that, Point of time had to answer all the questions that she posed, and they, and they, and they, and they show up in actually four main categories.

[00:14:12] Steven McClurg: All the other categories have since been satisfied except market manipulation and surveillance. Dalia Bloss retired from the SEC in 2021. She’s been working at BlackRock for the last two years. When you say the statement, you, you kind of jokingly said, did someone from the SEC, well, yes. That, I mean, I can’t tell you that that’s what happened, but it’s no.

[00:14:38] Steven McClurg: Oh yeah. But that the person who wrote the questions went to work for BlackRock, and then BlackRock filed something that answered all the questions.

[00:14:48] Joe Carlasare: But that’s common of all throughout the securities lawyers’ field, right? I mean I’ve got securities lawyers that used to work for the SEC and my office, right?

[00:14:55] Joe Carlasare: And they file cases and have cases against the SEC and they lose, you know, just because you work there at one point doesn’t mean you have the ability to control policy, which, you know, that’s the bigger question.

[00:15:06] Preston Pysh: How long did she work there? That would be the next thing. Because if she was there for two decades and then leaves and has all that entire network back there, like, you know?

[00:15:15] Steven McClurg: It was the Director of Trading and Markets, that’s the senior most person in that division.

[00:15:20] Joe Carlasare: Exactly. I think it’s a little bit strange to look at it from the standpoint of like actually meeting a legal test. Okay. ’cause there are politics wrapped up in this and there’s clear animus towards Bitcoin and crypto from the SEC. Yeah. I mean, they’ve effectively declared war on crypto. They couldn’t make it more overt.

[00:15:36] Joe Carlasare: So the notion that this is being driven by some legitimate policy defect in the registry, in the SS one, I disagree with that. I don’t think it’s the secret sauce will get you past the finish line when you’re dealing with a rigged system that is set out to not approve just my thoughts.

[00:15:52] Preston Pysh: I mean, maybe I just sound too much like a conspiracy theorist, but I think this is all just to buy Wall Street time.

[00:15:58] Preston Pysh: Like I think this is all just to give them more and more time to play catch up. Like I think that the relationship between the SEC and legacy finance, like the BlackRocks of the world is way closer knit than than anybody realizes. But again, I might be a conspiracy theorist here.

[00:16:16] Steven McClurg: Well, look, Joe makes really good points.

[00:16:18] Steven McClurg: I mean, just because somebody worked at the SEC doesn’t mean that they can get things done. I mean, that is absolutely a fact. But yeah, I think the person who very publicly runs a division very publicly writes a letter of all the things that have to be contained. And then the firm that she went to work for for two years comes back with a document that answers every question specifically to do that.

[00:16:42] Joe Carlasare: Was hired specifically to do that, I’m sure.

[00:16:44] Steven McClurg: By the way, there’s nothing wrong with that. There’s nothing wrong with that. I mean, look at, you know, he, he, he supported the bid license in New York and then started a firm that got the very first bit license.

[00:16:54] Joe Carlasare: You know, who was arguing the case on behalf of Grayscale in the court?

[00:16:58] Joe Carlasare: Don Verrilli, right? Former Solicitor General of the United States of America. One of the highest positions legal positions you could hold. He’s arguing on behalf of Gray Scale’s, conversion efforts. I mean, they’ve, all these guys, when they leave the public sector, they make a ton of money going out, representing, you know, whoever will pay them the most usually.

[00:17:14] Preston Pysh: Joe one other question, kind of on the legal front. So the ripple, the SEC is bringing them back, they were not satisfied with how that went down. Explain to folks maybe what, what this is maybe. Oh, maybe. Okay. Explain, explain this for people so they understand what’s happening potentially.

[00:17:33] Joe Carlasare: Yeah.

[00:17:33] Joe Carlasare: Just to pivot back one second, I wanted to give the audience the date. So if you’re following at home and you’re really interested in the, the BlackRock, right? The what the decision is, the SEC deadline to respond is September 2nd. Okay? That’s a formal deadline. There has to be an official response.

[00:17:47] Joe Carlasare: At that point. We’ll get something. It might be a delay. If they delay, it’ll be into the new year ’cause that’s their typical mo right? But we will get some response formally, not just a CoinDesk article from the SEC on nine two. But to answer your question about Ripple, obviously, when you’re in litigation, You’re filing motions for summary judgment.

[00:18:07] Joe Carlasare: Many times the judges resolve some issues, but not all the issues. And what the judge did in this case, she Judge Torres, she resolved some of the issues on a motion for summary judgment and said other issues, particularly the involvement of Garlinghouse and Larsson, they have to be tried. We have to figure out if they recklessly disregarded securities laws at trial, and that’s going to be set in the near future.

[00:18:26] Joe Carlasare: I think the judge actually entered an order on that. So what the big question has been in legal circles in the crypto industry for like the last month or so has been, is the SEC going to seek what’s called an interlocutory appeal? Because ordinarily the way appeals work, you get to the end of the case.

[00:18:40] Joe Carlasare: You do all your discovery, you do all your trial, and then you appeal what’s called a final order. This has everything bo you know, in wrapped up in a bow. All decisions have been made. There’s nothing left in the case. Now it goes up on appeal. Well, there’s a special mechanism in my world, in the civil litigation world, where you can do what’s called an interlocutory appeal, just a fancy way of saying an appeal in the middle of the case.

[00:19:02] Joe Carlasare: They’re granted seldom. You have to meet special heightened standards to get up into the appellate court for an interlocutory appeal. And what the SEC did is they filed a letter motion to Judge Torres saying we want to have the right to seek an interlocutory appeal. So the question is, will Judge Torres give them that, right?

[00:19:20] Joe Carlasare: Actually, they filed a motion requesting a, to file a brief in support of their right for inter interlocutory appeal. That’s the first sort of two-step process in, in her courtroom. So we’re going to see whether Judge Torres is going to allow this case to go up. Now, the biggest wrinkle in all this is that one of the other judges from that exact circuit okay, sits contemporaneously on the same level, on a co-equal basis with Judge Torres put out an opinion, criticizing her opinion very quickly.

[00:19:49] Joe Carlasare: He said, I disagree with the judge’s analysis here that makes no differential between initial and secondary sales, and that’s not part of the test. So that criticism from a very well-regarded judge in that same district court may serve as a basis to sort of make judge Torres think twice whether she will or will not allow an interlocutory appeal of the case. So more to come.

[00:20:11] Preston Pysh: Wow. Yeah. Now is that, is the judge that had the opinion off to the side more superior in like how the, the judges are older viewed or older in peers? Or how would that person be viewed and their opinion like that voicing that? I would imagine this is really rare for something like that to happen.

[00:20:31] Joe Carlasare: Well, judges within a, within a district court disagree. Right. Like everybody not. Well, he did it in the, he did it in the form of an opinion. He was actually writing an opinion because there was a citation already. Everybody’s citing the ripple lab decision in all these other district courts, and it’s Judge Rakoff, that’s his name, a very well regarded judge, senior senior judge in the Southern district of New York.

[00:20:53] Joe Carlasare: He was effectively saying, I disagree with the judge’s logic here. I’m not going to follow it. I’m going to apply my reading of Howie in that case, right? He wasn’t just in a vacuum criticizing the judge. ’cause they don’t really do that. To your point, he was saying, I know you’re citing this precedent from one of my peers, but I disagree with that and it’s not binding on me.

[00:21:11] Joe Carlasare: It’s, we’re, we’re co-equals, right? So I don’t have to follow it. Judges are typically bound to follow decisions from superior courts, from courts of appeals or the US Supreme Court above them. They don’t have to follow ordinarily decisions of their co-equals.

[00:21:26] Preston Pysh: And so the SEC is running with that.

[00:21:28] Preston Pysh: They’re basically waving that around saying, this is why we can step in in the middle of this and, and try to reverse it.

[00:21:35] Joe Carlasare: He did him a huge favor. I mean, he could not have helped them more in sort of pushing them towards filing an interlocutory appeal. So he’s on payroll, all that boring legal stuff. I’m sorry to bog us down.

[00:21:45] Jeff Ross: Hey, can I, can I make it exciting for a bit? Because I’m obviously, I got nothing from the legal perspective, but I was in the room the day that Joe and Greg Foss were going back and forth about when a spot Bitcoin ETF would be approved. And I believe, Joe, you gave Foss 10 to one odds that it would not get approved be this year.

[00:22:03] Jeff Ross: Yeah. Is that correct?

[00:22:03] Joe Carlasare: I did. That’s true.

[00:22:05] Jeff Ross: I love, I know it gets, it gets people excited. I’d love to know your and Steven’s opinion on what, what odds do you give a spot Bitcoin ETF approval this year?

[00:22:14] Steven McClurg: What’s the updated odds? What’s the updated odds?

[00:22:17] Joe Carlasare: To be clear this year, meaning ending 1231?

[00:22:21] Steven McClurg: Yeah. Yeah. Launching this year or launching approval. Oh, you say launch? Either approval, which the SEC says stamp approved.

[00:22:28] Jeff Ross: You’re in, we’re good.

[00:22:30] Preston Pysh: You can buy the ticker.

[00:22:32] Jeff Ross: Yep.

[00:22:34] Steven McClurg: I give highest odds to some time of being approved Q one of next year. That’s highest odds. I, I think it’s going to be like, frankly, what I think is going to happen is the, the final deadline for ARKis going to expire and then they’re like, and then, and then they’re out of the race, and then it’s going to be like, all right, BlackRock or everybody at once.

[00:22:54] Steven McClurg: Those are, those are really the two things that, that, that I think happened. I do think there’s a small chance that the, you know, like the, the 19 A or several 19 befores get approved this year. I think there’s a chance. I wouldn’t take it off the table, but that means once that happens, it starts to clock for a 75 day statutory approval period.

[00:23:15] Steven McClurg: For the S-1, anything launching this year I, I think is like hardly no chance. But getting a 19 before approved this year, I think is possible.

[00:23:28] Joe Carlasare: This was back in June. And, and the reason why I made that bet with FOSS is just looking at the calendar. I mean, these things move very slowly, and even if you’re bullish, which I told them, I, I, you know, if I, you had a gun to my head and made me calculate odds back then, I, you know, I would say 40 to 50% chance we get a spotted ETF in the next year.

[00:23:45] Joe Carlasare: That was back in June, right? In the next year. Okay. Which is pretty good odds in my opinion, but considering how long we’ve had to wait, having it approved by the end of the year, I think while possible it was unlikely. That’s why I took the bet. But ultimately what I’ll tell you is this, When you look at the big wrinkle and all this, and I continue to believe it’s the Grayscale case.

[00:24:04] Joe Carlasare: The Grayscale case. If Steve’s right and they win, in that case, that cane a ton, expedite a ton of stuff, right? That, so that’s the big wrinkle, and we could get that Friday. By the time you’re listening to this, we could have a decision on it.

[00:24:17] Steven McClurg: Wow.

[00:24:17] Preston Pysh: Nice.

[00:24:18] Steven McClurg: Yeah.

[00:24:19] Preston Pysh: Steven, you agree with that? Piggyback on that because –

[00:24:21] Steven McClurg: I, I fully agree.

[00:24:23] Steven McClurg: I think a, a very, there, there is a good possibility that, that they win. The SEC says, great, you won. Congratulations. Now go get in line. Go, go, go file everything over again because there’s a process here, and we’ll approve you once the process is over. And then the next decision date for BlackRock is actually October 2nd.

[00:24:47] Steven McClurg: That is potentially the date that there, there is a chance that October 2nd is a, is a approval of 19 before date and basically everybody’s kind of grouped around that time. You know, most people, the, the, the next dates are either October 1st, October 2nd, October 4th, and you, you get like a slew of 19 before approvals.

[00:25:11] Steven McClurg: That is the only, I would say possibility. ’cause you know, that would then start a 75 day clock. That’s absolute best case scenario.

[00:25:19] Steven McClurg: I think that would be their go-to if they lost that case, if Grayscale won.

[00:25:25] Joe Carlasare: The SEC would absolutely throw them to the end of the line, no doubt about it. And, and keep in mind they could lose it and also they can also appeal it, right?

[00:25:33] Joe Carlasare: They’re entitled to an appeal. Yeah. Yeah. To the US Supreme Court.

[00:25:37] Preston Pysh: Alright, so Steven wants to rub your nose in some stuff here, Joe. So we’re going to pull up, love it. So we’re going to pull up a chart. Can you guys see the chart? Notice how Steven took the time to put the tweet back and forth between you and Joe.

[00:25:57] Preston Pysh: Okay. For people listening and not looking at the charts, we’re showing a 10 year US Treasury over the last 30 days, and we’re showing the sell off. And because the last time we talked, Joe and Steven were talking about the treasury market and Steven thought it was going to continue to sell off. Joe, you were, you were bullish.

[00:26:17] Preston Pysh: Steven, take it away. What are you, what are you trying to prove here? Based on the price action over the last 30 days.

[00:26:23] Joe Carlasare: Now, and just to be clear, I’ve been, when you say bullish, I’ve been short treasuries since like Q1. Like I’ve, I’ve been arguing publicly about this, but a hundred billion is not the, the issue.

[00:26:33] Joe Carlasare: But anyway, we’ll talk about that later. Why you should be bullish on treasuries. ’cause the economy isn’t rolling over. I mean, or bearish on treasury because the economy isn’t rolling over. ’cause we’re having a bear steepening. So I mean, that’s, that’s the trade treasuries probably 5%.

[00:26:48] Preston Pysh: But the time, I don’t, I don’t remember when we recorded last, but the last time you were here, you were bullish on treasuries.

[00:26:53] Preston Pysh: You thought that Yeah, that the sell off was over.

[00:26:55] Joe Carlasare: We were going to bid be because of the, the recessionary dynamics, which we didn’t get. Right. Everything is reac accelerated into the fall and or into the summer here. So that’s, that’s the problem. Like the recession didn’t come. Like we still have consumer demand.

[00:27:09] Joe Carlasare: Look at the retail sales, look at all the economic indicators. They’re still robust. For now, the bear steepening is going to, going to send yields to probably 5.5%. Steven, what’s your-

[00:27:19] Steven McClurg: Yeah, look, I, I really only did this to have fun with Joe for moment. But but, but, but no. Other than that, no, seriously, I mean this is actually a really good chart here.

[00:27:29] Steven McClurg: Really what I think is important is where treasury yields are going. I’m not convinced that we’re, let’s back up a little bit. We had a, a generational first. We had a generational bear market in bonds in it around 1981, and then we had a generational bull market in bonds that essentially ended in covid.

[00:27:53] Steven McClurg: And right now, I think the treasury market is kind of trying to find its footed and are we going to continue on in a bull market and bonds, or have we entered into the next generational bear market and bonds the real, and we talked about this a little bit earlier. I don’t know, that’s the question. That’s the biggest question on my mind is I don’t know which way it’s going, but what I do, what I do speculate on is what’s happening in the short run.

[00:28:23] Steven McClurg: So in the short run, we definitely are going to see, we’re going to continue to see yields rise. We still live in a world with an inverted yield curve. And we even went through a period of time, you know, a few months ago where short-term yields got to 7%. And what was, what was a lot of fun was in our, our hedge fund at Valkyrie, we actually traded out of a lot of Bitcoin and bought you know, 7% short-term treasuries back in May.

[00:28:55] Steven McClurg: I carry them through June. ’cause everybody was afraid that, you know, the US might default. Well, we were buying them, hoping that the US would default. And even if they didn’t, you know, we’d get a, a massive pickup in yield when everything else we expected would stay flat. Where we stand right now is pursuing a really, really bizarre situation where the yield curve is predicting a recession.

[00:29:15] Steven McClurg: Short-term rates are higher than they’ve been in 22 years. And you still have low ish rates on the long end of the curve and, and even in the belly of the curve what’s happening, capital markets and, and this is bond traders, which I used to be one of. A lot of bond managers are moving out of longer duration treasuries and longer duration bonds in general and moving to the shorter end.

[00:29:43] Steven McClurg: So they’re moving to, you know, 1, 3, 5 year even belly of the curve treasuries and, and other instruments because of the yield pickup that you get right now.

[00:29:52] Preston Pysh: I mean, why wouldn’t everybody be doing that right now?

[00:29:55] Steven McClurg: Right. ’cause they can’t, ’cause they can’t ’cause they structurally have to hold duration.

[00:30:00] Steven McClurg: Yeah. Yeah. Insurance companies, there’s plenty of players that have to hold it. But

[00:30:03] Steven McClurg: just to be clear, like, okay.

[00:30:05] Joe Carlasare: Rates right now, the long end are at the same level they were last October with the Fed funds at a hundred, well, no, 70, no a hundred pips higher. We’re a hundred pips higher at the short end. And we’re the same yield we were last October.

[00:30:21] Joe Carlasare: You have to ask why. And the real reason why is because the economy has not rolled over. As soon as the economy enters a recession, if that’s your play, which, you know, I still think we’re way away of, away from, you’re going to see the long end crater. I mean, we’re going to be back at 2%. It’s not like my opinion, this is just the math.

[00:30:36] Joe Carlasare: The math has to flow into the bond market in times of crisis because of equity risk off. That’s all the bids will be to the bond long end of the bond market. And you saw this in March, right? Just to be clear, you know, the treasury was doing massive issuance right before the death ceiling debacle. You had the long end collapse that I’m looking at the tenure right here.

[00:30:54] Joe Carlasare: If you above the 10 year chart, we went from 4% in two weeks down to 3.2. We dropped 80 bips at the long end despite the issuance, which is not an un factor, it’s economic growth that drives the long ends sell off.

[00:31:10] Steven McClurg: Now what’s really interesting is we’ve almost come back to match that. Yep. 10 year yields are popping back up, mainly because people don’t want it.

[00:31:20] Joe Carlasare: And they’re going to go higher. They’re going to, no, I, I think they’re going back up. I, I agree with everything. But why, why they’re, it’s not because they don’t want it, it’s because the economic growth indications are strong. We just got to a real, we just got Atlanta Fed g d p now of 5% growth projected for the Q3.

[00:31:34] Joe Carlasare: That’s what Atlanta fed now is saying, 5% growth. Now, Atlanta fed always misses to the upside. They’ll probably revise that down. But the, the, the growth expectations at long and long end bonds are directly proportional to the growth expectations in the economy. That’s why you’re seeing it sell off so aggressively because the recession, everybody’s been prognosticating, hasn’t come yet.

[00:31:57] Steven McClurg: So there’s two factors that you look at as a bond manager, right? There is, there’s duration and there’s rating. Okay? So we just actually had a downgrade of, of US government bonds. So what does that do? What? So, so what does that do to the market? Well, If you’re, man, you’re managing duration, you’re also managing rating.

[00:32:21] Steven McClurg: Insurance companies actually don’t have so much of a duration matching program as pension funds do. So there’s a lot more flexibility. But where there’s not flexibility is is weighted average rating. So if a treasury rating goes down, you would think that, oh, if, if you, you’re going to sell, you’re going to, you’re going to sell out of treasuries, no, actually you’re going to buy more.

[00:32:46] Steven McClurg: And where are you going to buy more? You’re going to buy more on the short end, right? So you’re matching that rating with rating. And the way that you match that is you barbell treasuries with high yield bonds. High yield bonds have a much lower duration. So you have to match that duration in, in the rating game.

[00:33:06] Steven McClurg: So that’s why you’re getting a lot of uptick on the short end of the curve. And purchases and downtick on the long end. So you’re, you’re selling out of long end buying, short end buying, buying in, in the belly. Couldn’t you just make those? ’cause you have to, you have to weight more into higher rated securities to get that average rating that you need.

[00:33:28] Preston Pysh: Steven, maybe I’m just simplifying this too much, but like, I’m looking at the announcement that the treasury announces a 1.85 trillion in net borrowing in the second half of 2023. I’m looking at that. I’m looking at the fact that for a decade they’ve had none of this under control and it’s going parabolic on the amount that they have to keep spending to add into the system.

[00:33:50] Preston Pysh: Right, and I’m saying, who wants to own long duration bonds in something like that? None of this is under control. The math doesn’t work. Is, is that what these people managing billion dollar bond tranches are thinking at? Like, are they thinking long game or is it much more of a shorter game? And that’s not necessarily the mindset of people that are selling outta long duration bonds?

[00:34:14] Steven McClurg: No. I mean, if you’re, if you’re a bond manager right now, you’re, you’re having to, you’re essentially having to manage to the quarter, right? Mm-hmm. Mm-hmm. Every quarter you’ve got to present to your clients, whether you know, your, your, your pension clients, your insurance clients, your sovereign wealth clients, and you’ve, right now what people are doing is scrambling to match the duration needs and to match the rating needs.

[00:34:38] Steven McClurg: And there is more tenure paper coming onto the market than what these bond managers want to absorb. Which is why we saw so, so if you, if you go to my chart, you can, you can see that’s why 10 year yields are going up right now because there’s more paper in the market than people are, are actually, are actually buying.

[00:34:59] Steven McClurg: So, but to, and, and I think this trend is going to continue until we’ve found some kind of equilibrium.

[00:35:06] Preston Pysh: But to Joe’s point, so I, I want to pull on something that Joe said. He said that a crisis will eventually happen at some point and then everybody’s going to pile in into long duration bonds.

[00:35:16] Preston Pysh: And I don’t know that I buy that at this point, 10 years ago.

[00:35:21] Preston Pysh: I think like that’s what we always saw every cycle, right? But I think now the math is way different than any, because we haven’t even seen a cycle since 2008.

[00:35:35] Steven McClurg: Well, that’s what financial advisors do, right? You know, this is more retail, financial advisors are doing that. But like, you know, if you’re, if you’re a, if you’re an insurance company or pension fund, you’re not, you’re not blowing out of equities and buying bonds.

[00:35:47] Steven McClurg: You already own bonds. You already have your allocation. So why did, why did the, you don’t see their type of rotation and that’s where the real money is.

[00:35:54] Joe Carlasare: Why did the tenure year drop 80 bips in five days, which five days in, in March, after the SVB collapse. Why did the 10 year drop 80 bips? Was it because of supply getting cut?

[00:36:05] Joe Carlasare: No, it’s because that’s the safe haven trade. ’cause it’s huge money managers doing, it’s not just retail. You, you saw cumulative buying from the belly of the curve. All the long end record setting levels because people thought the banking system, particularly the region banking system, was going to collapse.

[00:36:19] Joe Carlasare: That is the fear trade. And what has changed since then? You’ve seen growth uptick. You’ve seen consumer spending uptick. You’ve seen retail sales uptick. You’ve seen liquidity improve. You’ve seen foolish indications at least from a leading indication standpoint, extend throughout the summer. And that was not the doom trade, right?

[00:36:40] Joe Carlasare: The doom trade was we’re going to have a banking meltdown. So when you see real productivity and you see real wages, step up, which we have seen, you see the bond sell off, it’s that simple. Economic growth generally means higher yields.

[00:36:54] Preston Pysh: I have the chart pulled up for people that are, are watching on YouTube.

[00:36:56] Joe Carlasare: That right here, that shows it right there, Preston. I mean, that’s, that is it. If you think that and if there’s a recession, you are going to see massive amounts of bidding from the, the middle of the curve out to duration.

[00:37:09] Preston Pysh: So, Steven, do you agree with that? Like, let’s say we’re a year into the future and we see the recession finally hit, things are slowing down, grinding, and do you see the, the entire duration of bonds that the US bonds getting bid like crazy?

[00:37:23] Steven McClurg: When you have a situation where a very short period of time where people are trading outta one sector into another, that was a crisis situation.

[00:37:33] Steven McClurg: That doesn’t always happen, right? So that happened then. That’s not what’s driving markets today. We, we truly have the potential of banks failing and, and some banks did fail, so that is what caused that bond sell off. But what’s driving markets today is something entirely different now. Also, when you, when you enter into a recession, a lot of times people know that you’re going into a recession and it is a much slower trade off.

[00:38:02] Steven McClurg: It’s not, you know, it’s not like a five day crisis period, you know, COVID a. Banking crisis. You know, these are things that cause very, very fast sell offs. When people finally realize, or some data comes out, it’s like, okay, well the party’s over that also causes it. But no, I think it’s going to be a much slower sell off.

[00:38:19] Steven McClurg: But I do agree. I mean, we’re, we’re going to recession and we will have a slow rotation out of equities and into bonds.

[00:38:29] Joe Carlasare: I mean, you look at the 20 18, 20 19, right? 2018, you had a 10 year at 3.2%. And then by the covid, I mean, it, it, it basically got bid the entirety of 2019. We were at 3.2. By the end of 2019, we were at 1.9, and then we bottomed after Covid at 0.4 on the tenure.

[00:38:50] Joe Carlasare: So the entirety from basically 2018, late 2018 forward to Covid, you had a bid of the 10 year plus.

[00:38:58] Preston Pysh: Hey guys, I want to throw up a chart that I wanted to present to you and just kind of pick your brain here. And, you know, we’re talking about this behemoth of an event that is potentially going to happen in the coming year to two years. I’m pulling up a chart right now that shows the 30 year minus the three month, and this spread between the 30 year and the three month. And you can see when it gets deeply negative, you can see where the S&P500 here on the bottom rail. You can see where the S&P500 is. It’s peaking out right as you get the largest amount of negative spread between the 30 year and the three month.

[00:39:36] Preston Pysh: You see it again. And that was in 2000. You see this again in the oh seven timeframe where it’s peaking out and you have the S&P500 making its high. And then as the yield curve gets back into a positive slope, the thing melts down. Here we are now, the deepest spread that you’ve seen between the 30 year and the three month on record.

[00:39:59] Preston Pysh: And another important note here is when you’re looking at, when it goes back into where it’s not negatively set, that’s pretty much when the unraveling is happening on all of these. Historically we’re not there yet. It’s still deeply negative between the three month. And this is what Steven was talking about, like everybody’s going in the short duration and I’m not seeing a breakout in the volatility here between the spread.

[00:40:26] Preston Pysh: Is this just, are we forming a top in equities right now and is this going to get really nasty and call it 24 if this starts to reverse? I, I’m, I’m just really trying to zoom way out and look at the really big picture as to like, what is this thing that’s brewing right now that they seem to be doing everything they possibly can to prevent from unraveling itself.

[00:40:50] Preston Pysh: Well, I don’t know if that’s properly framed. They seem to be doing everything they can to get this thing to pop and, and it won’t pop. So go ahead guys. What are, what are your thoughts?

[00:40:59] Steven McClurg: Dr. Jeff? I haven’t heard from you.

[00:41:02] Jeff Ross: It’s been a great conversation. It’s been fun to listen. So, I mean, obviously when you look at these charts, it kind of freaks you out a little bit, right?

[00:41:08] Jeff Ross: Like are we at another kind of generational top right now? I continue to think that this is going to be more of a slow, painful grind and we’re just going to continue to get this crab like unsatisfactory. Nobody’s happy. Bulls are mad. Bears are mad. More akin to 2000 to 2003 less akin to 2007, 2009. Like I just don’t see a catastrophic event.

[00:41:33] Jeff Ross: Could we get a, you know, obviously you got to factor a black swan, right? Like if we announced we’re going to war with China tomorrow, that would be a huge, you know, hit to the markets and that may be the catalyst that would set us off and the floor could drop out under risk assets. I just don’t see that event though, to, to me it just feels like we could just continue to be, you know, surprised to the upside.

[00:41:52] Jeff Ross: Like Joe said, light Q3 GDP may come back again. Surprising people once again. And I’m one of those people who I’ve been waiting for the recession since I’ve been calling it since Q two of 2022, right? Because after we had two consecutive quarters of negative GDP growth and then it was a surprise in Q3 and then it was a surprise in Q4.

[00:42:10] Jeff Ross: And then everything changed with the liquidity scenario. And now, you know, getting back to liquidity and net liquidity and bond yields and things. Net liquidity is, we had this nice ramp higher from October, basically late September, October of 2022 through the Q1. And that’s been grinding lower and lower and lower and, and, but while the economy kind of hangs on, right, we have this manufacturing side of the US and of the world that is clearly in a recession, that’s in contractionary mode and has been for several months.

[00:42:40] Jeff Ross: Then the services sector just keeps hanging on though, and it’s so dang frustrating for people like me, I’m going to tear the bandaid off. It’s like stinking rollover services. Like just, let’s go into this recession and get this thing over with, right? And let’s get the fed to reset. But I just don’t think it’s going to happen.

[00:42:55] Jeff Ross: And I think that that’s what’s killing everybody is the lack of patience because we could just go crab sideways for another 2, 3, 4 quarters. We might be having the same discussion, you know, a year from now, nine months, a year, a year from now. And I think it’ll, everybody’s going to just freak out.

[00:43:10] Joe Carlasare: And I, I’ve got some data I can show you that leads to that analysis and sort of that conclusion if you want, Preston, you could throw it out real, real quick.

[00:43:17] Joe Carlasare: Yeah, let’s do it. Yeah, let’s do it. Okay. So there’s two charts. We’ll go through them real quick not to bore the audience and we’ll try to describe them for those listening on audio. The first one, if you could pull up, it’s the net interest chart. Yeah. Hold on one second here. And this one’s a stunner like, and I think it, I would love to have this on the chart you just showed with the inversion of the yield curve because I think this is critical.

[00:43:35] Joe Carlasare: Have you seen this one? Steven and Jeff. I’m not sure. We’ll have to see it. I don’t know. I don’t know if Preston sent them over, but yeah, I’m pulling it up right now. Okay.

[00:43:46] Steven McClurg: By the way, while you’re pulling that up, we could keep going higher, although we should not, but that always happens. Yeah.

[00:43:53] Steven McClurg: You’re saying on the interest, you’re saying on the interest rates, overpriced assets that keep going up.

[00:43:58] Steven McClurg: Right. We’re at a Bull Mart. This is it.

[00:44:00] Joe Carlasare: Okay. Yeah. Okay guys. So, so for the viewers at home, this is a a line chart with, with two lines on it. The top is a red line. It is US non-financial corporate net interests, and on the bottom you see the Fed funds and the most, the biggest takeaway. Okay, so this is net interest payments as a percentage of post economic profits, right?

[00:44:20] Joe Carlasare: So you had that big chart up with the S&P500, and you had the fed funds rate at the bottom, and you have the same fed funds rate on the bottom and here in a, in a black line. What you see here is that as fed funds have started to rise in prior cycles, Non-financial court corporate net interest costs were very responsive.

[00:44:38] Joe Carlasare: They immediately sort of in a proportionate way started to rise eating into the bottom line of companies alongside the Fed funds rate. And you see this in the, the 2000 leading into the the.com bubble. You see this into the great financial crisis. As Fed funds rose, you saw corporate net interest rise as well.

[00:44:56] Joe Carlasare: And then the gray bars are the recession on the chart. What is actually different this time based on the data is you see, despite this very rapid, fastest hiking high cycle in history, we’ve continued to see net corporate net interest payments, meaning the amount to service their debts decline. And this is, this is updated to the end of Q2.

[00:45:14] Joe Carlasare: Okay. Eat into the bottom line of companies, right, to actually affect them from an interest rate perspective, making them sensitive. That needs to rise. They have to start.

[00:45:22] Preston Pysh: Why isn’t that, how, that doesn’t make any sense.

[00:45:24] Joe Carlasare: It’s, it makes tons of sense. The reason is ’cause they locked in duration. Because they, they borrowed a ton of money.

[00:45:29] Joe Carlasare: They don’t have maturity walls, Preston, that start to hit until the end of 24 and really accelerate into 20 25, 20 26.

[00:45:36] Preston Pysh: Wow. A ton of people took out money. Sorry, go ahead.

[00:45:40] Jeff Ross: I was just going to say, it’s the same reason housing hasn’t rolled over too. Yes. ’cause everybody locked in low interest rate mortgages and so nobody’s. Sorry, go ahead.

[00:45:47] Joe Carlasare: No, no, you got it. We’re not, we are not as sensitive people. Were smart, right? They locked in these low, especially companies. Companies were, you know, they were, you couldn’t take the PO punch bowl away from them to get as much low cheap debt as possible. And they’re not as sensitive. They’re well protected from a balance sheet perspective.

[00:46:03] Joe Carlasare: Fed can hike to 12% overnight. It’s not going to affect them in the short run. Now it’s going to cause a banking crisis because they are far more affected by holding duration. But, and that’s what are we seen, we’ve seen stress in the banking system, but corporate profits have tended to hold up. Another chart is, is that you could pull up right there.

[00:46:20] Joe Carlasare: It’s the one at the top, I think, dude, when they roll this-

[00:46:24] Preston Pysh: So when they have to refi this, it’s going to be, it’s disaster. It’s going to be cataclysmic.

[00:46:29] Joe Carlasare: But here’s the thing, let’s, let’s back up for a moment because when it, when it comes to corporate debt, let’s really break things out into three categories and, and two of those categories are subcategories of one, okay?

[00:46:43] Joe Carlasare: So there’s companies like Apple, right? That was issuing 10 and 30 year debt at ridiculously low interest rates. Now, does Apple need to borrow money? No. They’re cashflow positive. They have lots of cash. One of the biggest corporate treasuries in the world, along with a lot of other companies like that, that began this trend where usually tech companies that are highly profitable don’t borrow money, but because rates got so ridiculously low, they borrowed money and, and essentially created an arbitrage, the money that they borrowed and they reinvested it at higher rates.

[00:47:22] Joe Carlasare: So in one bucket, you’ve got companies that are either playing that ARB trade or borrowing money for growth. Right. They don’t, they don’t actually need to borrow the money and they’re actually profitable, which, you know, yeah.

[00:47:37] Steven McClurg: So that does actually skew that data a lot. And those companies aren’t going to be reissuing debt because they, they, they don’t need to.

[00:47:43] Steven McClurg: Yeah. Only the debt. Talking about high yield, and these are the companies that need to issue debt. Some of them are, are, are high yield bond issuing or junk bond issuing companies. Some of them are investment grade issuing companies. And, and those are the two sub buckets that I was talking about. A lot of the corporate debt issuing companies or, or, or high quality investment grade issuing companies, they typically issue debt at at 10 year tranches.

[00:48:11] Steven McClurg: And because the tenure is still around 4%, that’s actually not too bad. Versus where they were issuing before, which is between two and three, they’re, they’re, they’re only getting charged an extra point. A lot of them had the ability to, and did issue a lot of debt while rates were still low for 10 years and it’s going to be a long time before they even have to do anything again.

[00:48:34] Steven McClurg: They just, they just caught up really quickly and the people that were buying that debt were locking in, were just locking in duration at that point in time. Okay. The second bucket, and this is the bucket that I’m highly worried about, is your junk bond. Issuing companies, those companies typically issue debt for two, three and five years.

[00:48:54] Steven McClurg: They don’t have the luxury of issuing tenure debt ’cause nobody’s going to buy it. You don’t know if these companies are going to be around beyond five years. Typically it’s 2, 3 5 year debt. Sure. They did issue a lot of debt when rates were still low. They’re going to be coming up very quickly, and this is in the next two to three years, they’re going to have to reissue debt to just pay their principal back.

[00:49:17] Steven McClurg: None of these companies have enough cash balance to pay the principal. They always have to continually re reissue. And typically, like, let’s say that they issue five year debt, you typically refinance between three and a half and four years. You never let it play all the way out because you don’t know if you’re going to be able to get that loan again, or you’re going to issue that debt again.

[00:49:37] Steven McClurg: So it’s actually for, for that bucket of companies, you’ve got a really short timeframe. And if I were, you know, managing, you know, a high yield bond portfolio right now, I would be very selective in the companies that I’m buying bonds for. If there’s a field of 300, I might be buying, you know, maybe 20 to 30 companies because you’re going to see very high default rates.

[00:49:59] Steven McClurg: In the coming years, especially if interest rates don’t come down, which I don’t believe that they’re going to. And, and, and in the five, five-year part of the curve,

[00:50:06] Preston Pysh: Alright. That was a, a fantastic roll up and thank you for breaking that out. I’m going to go back to Joe here on your chart that you told me to pull up.

[00:50:14] Preston Pysh: This is selected single most important problem.

[00:50:18] Joe Carlasare: Yeah. So, so just to circle back for a second. Yeah. If you look at, if you look at high yield, okay? You always look at the weakest part, right? High yield in the early two thousands, average loan to maturity was 1.5 years. Now it’s 3.5. And if you look at the walls of maturity that are about to, we’re about to hit, and to Steve’s point, they will start to hit in mid 2024.

[00:50:39] Joe Carlasare: So from a timing perspective, from a sequence perspective, okay. And that goes back to the first chart you see, yes, it’s true that different companies are not situated in, in the same way, but high yield in particular, those maturity walls will hit in the middle of next year. So if rates are still at where they’re at, that is very difficult environment for those folks.

[00:50:58] Joe Carlasare: And you can’t wait until obviously, maturity to have to roll that paper, right? You have to do it sort of in the months that leading up to it. So the clock’s ticking. But the interesting thing is this is from the where did I pull this chart? The small business optimism survey, right? The NFIB.

[00:51:15] Joe Carlasare: NFIB Small Business Optimism Index as updated this week, right? What you see on the bottom, okay? And it’s, I don’t like how they did the gray scale on this chart, but what you can see on the bottom is that you see what it, what percentage of the firms? Small businesses, okay? Which make up half of the US economy.

[00:51:33] Joe Carlasare: Are identifying the biggest challenge moving forward. And what you see is that line at the bottom, it’s fewer than, what is it? 5%, 6% are saying interest rates in finance. You’re not seeing the stress on the smaller shops that you would expect to see with the fastest rate hiking cycle in history. Maybe it will come, but they’re far more complaint at this point about complaining about taxes and issues with their poor sales and issues with their labor.

[00:51:58] Joe Carlasare: That labor is still a very dominant issue near the top of the list here. In terms of what is the most important problem self-identified by half of the economy, effectively through the NFIB survey, if it were truly financing costs, you would expect to see this number tick up. It’s ticked up a little bit, but not out of line for the 2014 2015 range.

[00:52:16] Joe Carlasare: For those that can’t see the actual chart at the bottom. I tried to highlight it just so you can spot it. The all this is to say, That consumers as well as many companies have protected themselves from very short term spikes in interest rates. And I think that’s why many have been misidentifying an imminent recession since early 2022.

[00:52:37] Steven McClurg: Wow.

[00:52:38] Jeff Ross: And while we may be talking about this a year from now, and you know, to Steven’s Point too, these zombie companies, right? I mean, people are waiting for this wall of these companies to go down and, and to go bankrupt. But we’re talking 2024, probably 2024, 2025. So again, everybody’s waiting for this to happen.

[00:52:55] Jeff Ross: Were they, you know, like acting like we’re sitting on the edge. I, I, I’m in Twitter space is all the time where people are, we’re going down, everybody’s effed, like, you know, and people are going into bonds already and they’re going into their safe haven assets and they think this is it for stocks. Like, we just peaked and we’re going down.

[00:53:10] Jeff Ross: And I was like, I don’t think so. I thi I think this is just going to drag out for a very, very frustratingly long time. You just got to buckle up and prepare for that.

[00:53:19] Preston Pysh: Let’s talk about something that could potentially accelerate, ’cause it seems like the general consensus in in here is we might have another year before things really start to get interesting, something that could potentially accelerate that we’re seeing gasoline prices.

[00:53:35] Preston Pysh: I saw Euro wholesale diesel prices are the highest that they’ve been in eight months. So we’re looking at oil. Anything from a momentum standpoint seems like you could potentially be seeing a shift into a bullish market. We’ve had quite a long sell off here. What was, what’s it been about nine months to even, maybe even a year at this point.

[00:53:55] Preston Pysh: I got to pull up the oil chart here. You’re talking about oil? Yeah. It looks like we hit the highest in oil about wow. 526 days ago we saw $138 a barrel on the UK oil prices. So yeah, I mean we’ve been in a bearish, sideways down kind of movement and it seems like we might be seeing a little change in the price action and Europe seems to be kind of leading the charge with respect to that.

[00:54:24] Preston Pysh: So what are your thoughts? I know the last time we were here, Steven said that he was bull, he was a bull on oil. Joe, you were thinking maybe that wasn’t going to be the case, but how are you guys seeing it right now? And is this really go tie it back to the treasuries? ’cause I think everyone knows where, where we’ll go with that if oil prices are starting to surge.

[00:54:45] Steven McClurg: Yeah, I mean, I, I think we’re kind of in the early stages and I, I sent over a chart for just the last month and oil, which I expected kind of into the summer is when oil prices would start going up because we’ve had a bit of demand in oil across the board. There’s been a lot more air travel and, and travel in general.

[00:55:05] Steven McClurg: But at the same time, our supply has been dropping and demand has been increasing. And, but here’s the more, here’s the more important factor, right? And there, and there you go. There’s there’s price of oil kind of shooting up and I think that’s, from the last time we spoke, I think it goes up higher. And, and here’s the reason why.

[00:55:26] Steven McClurg: That area of time, between May and June, When oil prices were bouncing below 80 bucks a barrel, a lot of countries that are pr, their primary production is oil based their national budgets on a certain price of oil. This is going to be countries like Russia, Saudi Arabia, u a e, and, and if the price of oil stays low for too long, they have to either adjust their budget or they collude to produce less so that they can, you know, essentially maintain their national budget.

[00:56:03] Steven McClurg: Eventually we’re going to see that happen. Also, when oil stays at a low price for too long, even in the US activity such as fracking and other drilling activity does begin to stop, which means that there’s less oil being produced and eventually the supply goes down and eventually, obviously the price goes up.

[00:56:25] Steven McClurg: There’s been two factors in the US that have really made me concerned. One of them is almost an absolute stop in fracking activity as well as discovery of new oil fields and new drilling. One has to do with price in the general bear market that we’ve had in the, in the price of oil, but two has to do with regulations.

[00:56:44] Steven McClurg: One of the most interesting things that that, that I saw was in the state of California, they’re actually suing oil companies for climate change, and the court system is allowing this. So the cost now to produce oil is going to continue to go up if you can sue them for climate change. So both of those things put together makes me believe that the price of oil could potentially double in the next six months.

[00:57:10] Preston Pysh: Double.

[00:57:12] Steven McClurg: Yeah.

[00:57:12] Steven McClurg: Joe’s laughing. Joe.

[00:57:15] Joe Carlasare: I, I, I just don’t see it. It doesn’t make any sense. Okay, so here’s some facts. Oil’s cheaper today, right? Suing companies for climate change does not make sense.

[00:57:23] Joe Carlasare: Well, I, I agree with that, that, that no, no objection there. I’ll just tell you, sorry for interrupting.

[00:57:30] Joe Carlasare: So you have one of the largest consumers of oil in the world that is by all accounts and measures seemingly on the verge of collapse right now in China. I mean, they’re, they’re, I don’t know how closely people are following their decision to not even report youth unemployment, their decision to cut rates.

[00:57:47] Joe Carlasare: I mean, they are on, they are on the verge of entering recession, and you’re going to take a ton of demand out of the system. You’ve had multiple Saudi cuts of production in an effort to shore up the oil market, and oil is still trading despite the cuts under where it traded last September. In real terms, oil is cheaper today than it was decades ago.

[00:58:06] Joe Carlasare: Okay? And despite production cuts, despite lack of, you know, new permits being issued, you have all these structural things that should be in this secular bull market for oil that never seems to come. And in my view, it’s because you have poor demographics, too much debt and low productivity. You have an over indebted world, and you cannot have a robust commodity super cycle.

[00:58:25] Joe Carlasare: Until you have strong demographics as a tailwind. Okay, now in Brazil and these India and these developing countries, that could change the dynamic. But ultimately, right now, why? After several Saudi cuts to shore up the market and we’re coming out of the summer, right? Moving into the winter, which structurally in the oil market, oil tends to actually decline in price going into the winter.

[00:58:46] Joe Carlasare: LNG in Europe is a little bit different story, but crude itself is, is sort of peaked for the year. And look what happened today. We had to sell off an oil coincident with the China fears. So if China answers a recession, you should expect to see oil prices significantly cheaper when, where they are now structurally a decade out.

[00:59:03] Joe Carlasare: You know, can oil be higher?

[00:59:05] Steven McClurg: Yeah, absolutely. I mean, I don’t think there’s enough oil in the world. That’s a, there’s a supply side shortage. There’s no beef there. But short term, if your base case through all the things we’re talking about is that we’re headed for maturity walls and rocky shores with the economy and unemployment rising and recessionary levels of declines in growth.

[00:59:24] Joe Carlasare: Then why would you be bullish on oil? I mean, that doesn’t make any sense to me.

[00:59:29] Preston Pysh: Well, Joe, I mean he, we just talked about the, that not really arriving for another year. So if we’ve got another year, like for sure, you know, Luke Gromen’s argue, so Luke Gromen’s on the bull side. Luke’s big argument is that he’s saying that the US shale industry has completely rolled over it’s cap, very capital intensive.

[00:59:48] Preston Pysh: The higher interest rates are wrecking havoc. And here’s something that he wrote in one of his repo reports. He said, US shale production has been 90% of global oil production growth over the last 10 years. And US shale production declines faster annually than global oil demand has ever declined annually in any recession in the last 60 years.

[01:00:09] Preston Pysh: So he’s saying that on a net basis, Shale has been the thing that’s been basically adding all the excess supply that has turned, it’s rolled over. And that’s one of the main reasons that he thinks that the price is going to run higher here in, into the second half of 2023.

[01:00:25] Joe Carlasare: It could run higher, but, you know, run higher is 90 bucks, right. It’s not, I don’t, the doubling in, in, in the face of a recession is what I’m sort of, that’s what I was responding to.

[01:00:36] Steven McClurg: Yeah. Well, there’s two things to look at and the first one is, let’s, let’s, let’s talk about China for a moment. China is in a recession, the data just isn’t out yet. But here’s what happens when China moves into a recession or China faces a headwind.

[01:00:53] Steven McClurg: China is the largest planned economy in the world and it’s 100% planned. So if people are starving, what happens then, then China reduces the price of rice. Right. China has that ability to subsidize rice, lower the cost of rice, subsidize oil, subsidize gasoline, lower the price of gasoline, and their goal is to continue to build into an, an industrial economy.

[01:01:23] Steven McClurg: And if they’re not continually producing, then the government will simply subsidize the things that they need to do to continue to produce. Despite the fact that China’s in a recession, the government subsidizing the price of gasoline and oil will simply drive the price higher. So that’s, that’s one side of it.

[01:01:43] Steven McClurg: The second side of it is when you have a, when you have supply demand mechanics that you have now, a lot of oil is actually stored and, and it takes a long time to run through the, the actual stored oil. So when you have fracking activity and other drilling activity and other wildcatting activity beginning to decline or completely fall off the, it’s going to take a while for the supply to catch up with the production of gasoline.

[01:02:14] Steven McClurg: We’re not seeing it immediately, but we’ll see it in the coming months. Now there’s one other thing that I want to point out, and this is kind of going back to something that Jeff said that I think is really important. We need a catalyst. The economy will just keep running hot until there’s a catalyst, right?

[01:02:29] Steven McClurg: And that is always the case. I think it’s a strong possibility that the price of oil is going to be the catalyst of a recession, not the other way around.

[01:02:40] Preston Pysh: I agree with that real fast. Just to kind of piggyback off of the point that you were making as far as China, Joe, if you look at Europe right now, I’m going to pull up a chart here.

[01:02:49] Preston Pysh: This was out of an another Luke Gromen report. Let’s see if I can find it here. Here it is. This is Europe’s manufacturing index. Luke says, we’re already in a recession. We’re practically in a depression of manufacturing over in Europe, yet they’re making new highs in their gasoline and diesel prices over there, despite the, this drastic slowdown that you’re seeing in manufacturing.

[01:03:17] Joe Carlasare: So why would that happen? Pull up the chart again. Just I want to, yeah, yeah, yeah. Sure. So, so by-

[01:03:23] Preston Pysh: It’s a Jeff Snider chart, by the way.

[01:03:25] Joe Carlasare: Oh, he, he stole it from Snider. Yeah. Is it a Euro dollar university one?

[01:03:29] Preston Pysh: Yes, it is.

[01:03:31] Joe Carlasare: There you go. Okay. Global Eurozone manufacturing. Right. And I think this is the Sunner, right? So you see the Eurozone and Steve’s Exactly right. Like I wouldn’t be surprised ’cause the official numbers are always suspect coming outta China. They, they, they probably are in recession. And to me, looking at this like this manufacturing in terms of just overall production levels, leading indicators of oil prices.

[01:03:55] Joe Carlasare: A chart like this should tell you oil should be trading at $50 barrel. I mean this is a success, but it’s, but and that’s, and that’s the point. But look, look where it’s point. Look where it’s pointing to. It’s pointing to the covid bottom. What was co what was the oil price of oil during covid? Negative? It craters.

[01:04:07] Joe Carlasare: The futures, the futures were negative, right. When you have manufacturing recessions, when you have service re service-based recessions, you tend to see oil sell off rapidly. Coincident with lack of economic growth.

[01:04:19] Preston Pysh: But you’re saying the opposite. I mean, I’ve never seen it, Joe, you’re seeing the opposite. It’s going up.

[01:04:24] Joe Carlasare: What do you mean it’s going, it’s, we’re, we’re stuck in real terms. We’re below where we were a year ago. So I’m looking at the oil chart right here and on, on Octo on September 29th, right? Oil was trading let’s like crude, 80 bucks a barrel. It’s the same price. And you’ve had sho you had production cuts by OPEC production designed to shore up the market.

[01:04:44] Joe Carlasare: So explain to me like if oil went higher, if you approach the nineties, OPEC would restart those, you know, those wells? I don’t follow the logic. I’m curious, Jeff. They, they’ve cut. They’ve cut, by the way, whose camp are you in? Jeff? Yeah. Just to, you know, the OPEC production cuts. The OPEC production cuts have decreased daily new supply by as much as 8%.

[01:05:05] Joe Carlasare: Imagine if they didn’t do that, if OPEC hadn’t done those cuts, we’d be talking about $60 barrel oil.

[01:05:10] Steven McClurg: But they basic, those cuts. There’s no change instantaneously. As a result of actions of cutting supplier.

[01:05:16] Joe Carlasare: Sure they do demand. Sure they do. That’s the futures.

[01:05:18] Steven McClurg: No, no. The future’s respond instantly. The future’s price in the cuts almost immediately.

[01:05:22] Joe Carlasare: That’s why we were in backwardation and the futures curve as soon as they started cutting. Anyway, Jeff, sorry I interrupted you.

[01:05:28] Jeff Ross: You guys are going to hate me because like everything, I’m not in either of your camp, I’m in the crab camp. We’re going to chop sideways like you guys are given the great bull cases and the bear cases, and we’re going to just continue to waffle in between is what I think.

[01:05:42] Jeff Ross: And that’s going to be the same with equities, and it’s going to be the same with basically any investible asset including treasuries by the way. Like so could 10 year yields make a new high? Sure, they probably will in the near term, probably will, but then they’re going to come back down again. Then they’re just going to continue to chop sideways.

[01:05:56] Jeff Ross: And inflation, we haven’t really talked about inflation, but inflation I believe, is going to chop sideways between kind of the two to four-ish range. Yeah. Indefinitely. We’re going to be talking about it nine months from now, that it’s still in the two to 4% range. I think because for every reason, every reason I can come up with why the economy could be boosted, inflation could be boosted, oil could, prices could go up.

[01:06:17] Jeff Ross: I can the counter to everything that why, why you should be bearish on inflation, on the economy. And so anyways, I, my answer to everything is really boring. It’s just I’m crap sideways.

[01:06:26] Preston Pysh: Joe, what you, this is, this is my thesis, Joe. So when I look at the pressure in this current cycle that we’re, that we’re experiencing, the real pressure to it is just higher interest rates.

[01:06:39] Preston Pysh: It just seems to never end and the like, the higher they go, it just isn’t enough to make this thing pop. So when I’m looking at that, I think that that’s going to continue to persist until something actually pops. So what takes the interest rates higher and higher?

[01:06:53] Preston Pysh: It has to be some type of energy input to the inflation number.

[01:06:57] Preston Pysh: Like, they’re not going to get, I don’t think they’re going to get inflation under control. I think energy’s going to be really kind of the catalyst that continues to insert that pressure. And I think you’re going to see the treasuries blow out to the point where all of a sudden it is becoming an issue for these companies that, that have to roll over their debt and then it just dominates their interest expense or their, their entire expense structure.

[01:07:19] Preston Pysh: And then that’s when you get this, maybe it’s in commercial real estate or whatever, but like I just think that inflation has to continue to be persistent for the, for the overall catalyst of this entire cycle to keep going to, to the point of breakage.

[01:07:36] Jeff Ross: Can I ask you, Preston, what do you mean by persistent?

[01:07:39] Jeff Ross: Do you mean at these levels or do you think it’s going to go back up again? What, what I think you’re going to see, where do you see inflation going?

[01:07:45] Preston Pysh: Yeah, I think you’re going to see it’s, it continue to creep up. Now the, the pace, I don’t know, like it could just be like this slow grind, which I think really plays into what everybody’s saying here is maybe this thing pushes out till mid 2024.

[01:07:59] Preston Pysh: I think if that inflation is really slow to manifest itself, then yeah, I think it continues to push out. If it’s pretty aggressive and we get like what Steven’s saying, which I don’t think it’s going to double in six months, I think that’s pretty aggressive. But let’s just say that that’s the scenario that plays out.

[01:08:16] Preston Pysh: I think a lot of this is going to pick up that the pace of everything is going to really accelerate if that’s necessarily the case.

[01:08:23] Jeff Ross: So real quick, just ’cause you know I’m on this little crab roll. So I agree with you with the pressure of, I think oil prices will go higher, although I don’t think they’ll double.

[01:08:32] Jeff Ross: I’m more with Joe. I think they could go up to maybe a hundred, you know, so 25% or so from here, and then they chop sideways as they add that upwards pressure to inflation and therefore to interest rates. I think that there is an equal but opposite downward pressure because of owner, owner equivalent rent rent.

[01:08:48] Jeff Ross: And because the comparisons from a year ago for inflation are really tough now. So we had that really rapid disinflation from nine to 3% as, as everybody knows from now, it gets much more difficult to for the comparisons. And so, so I think that puts some pretty impressive downward pressure on the CPI.

[01:09:06] Jeff Ross: So I think oil pushes it up, OER and comparisons push it down. And that’s why to me, we, we just sort of stay range bound and I think that’s going to hold treasuries down as well.

[01:09:16] Steven McClurg: So let’s do some basic math oil prices. Crude oil goes up 15 bucks from these levels between here and the end of the year.

[01:09:23] Steven McClurg: Let’s assume that to be the case. OER declines by 3%. You’re sitting at CPI with a 2.6 handle, which is within the fed’s target. Well, let’s, you can pull up that pull, pull up that chart. Preston real quick. That, that one about it’s contributions to CPI. Can you get that one up real quick?

[01:09:41] Steven McClurg: I’ll just show this 30 seconds, Steve. Sorry. Okay, so this one, for those that are following the audio version, this is a US contributions to annualized CPI. There’s two bar charts. One is the, it’s a breakdown really, of the housing, which is OER. That’s how it’s calculated on the CPI. And then it’s everything else.

[01:09:57] Steven McClurg: And what you’ve seen is you’ve seen basically the, the housing remain sort of sticky, right? It sits there basically above 2%. And you’ve seen very gradual, ever so slight cresting of this and moving down. But everything else is cratered, right? Everything else outside of OER has, has fallen like a rock.

[01:10:15] Steven McClurg: And if the proje, and then the second one, you see, the Zillow one, it’s a OER. This is the leading indicator of OER OER is lagging. Right? Because people don’t, their leases aren’t up every month, right? So they try to annualize it. It’s a very laggy indicator. If you move that other chart that says OER, you can see the, the Ford leading indicator on where OER is.

[01:10:34] Steven McClurg: This is the, the Zillow observe red index. Right? So their, their new metric as to trying to gauge new leases that are expiring on a monthly basis and built that into a model. You see that compared with the, the CPI primary rent month over month percentage, it’s set to crater through the rest of 2023 down to 0.1%, which is below the 20 17 20 18 trend.

[01:10:55] Steven McClurg: So if you get, again, just the math oil goes up because the way the basket’s constructed. Mm-hmm. And we all know CPI is a flawed metric, but because how the basket’s constructed. So you get $15 more in on oil, and you have O OER decline somewhere between, you know, two, three, 4%. You’re going to see two point, you know, two handle inflation.

[01:11:14] Preston Pysh: I like that point. Sorry, Steve. I, I really like that counterpoint.

[01:11:18] Steven McClurg: Well, I’m, I’m actually going to support that counterpoint for a moment. If you don’t mind pulling up that, that same chart. I want to mention something that’s really important here, and that is how you, you know, you touched on it, Joe, but the way that OER is actually calculated, it is based on a survey.

[01:11:35] Steven McClurg: Okay? So there’s a survey that occurs every six months and the results of that survey, and by the way, these surveys aren’t very accurate. So CPI isn’t that accurate, but, but, but that being said, there’s a survey that happens every six months, and what happens is, based on the results of that survey, the results are broken out month by month and calculated into the monthly CPI almost equally.

[01:12:01] Steven McClurg: So you won’t get new survey results until I can’t remember when the next survey happens, but we’re still, our monthly CPI is still calculated on a survey that happened many months ago. So I agree. I, you know, you know, the rent index is. By the way, rent’s still going up. It’s just going up at a smaller clip.

[01:12:21] Steven McClurg: Yeah. This chart is kind of, it’s a, it’s a little bit skewed. It’s, it’s, it’s making it look like rents are going down. They’re not actually going down. They’re just going up by less. Right. So they’re not, they’re not additive to CPI as much as it will be in the future. So yeah, rents definitely aren’t going to add much to CPI.

[01:12:38] Steven McClurg: Now, here’s the thing about energy, though. Energy. So the price of oil doesn’t just add to the price of energy and gasoline. It also is inclusive on the, on the, on the price of food, which is a really important metric because oil or petroleum is used to fertilize the ground. It’s also used to transport food.

[01:13:02] Steven McClurg: So cost of food is very sensitive to the price of oil. So, so that’s another big factor here. So it’s not just energy cost, it’s also food costs that are, that would pop potentially be affected by petroleum costs.

[01:13:13] Joe Carlasare: Yeah, and I was referring to the model where they, they take the $15 additional price oil and they filter it through all the different food stuffs and medical services and how everything’s affected by it.

[01:13:23] Joe Carlasare: And that’s the, that’s how they get to a two handle by the end of the year.

[01:13:26] Steven McClurg: One, one other final point on CPI here from me anyway, is the other thing that we’re not really factoring in is the substitution effects When the price of some things go up, like, you know, the, the actual things that are used to calculate CPI, people start substituting one thing for another and you don’t always see the substitution effect.

[01:13:45] Steven McClurg: So whatever the CPI is, the way that it affects a normal family is probably a lot different. And you’re seeing that played out right now. This is the group of living for somebody. You know, for an average, an average blue collar worker is extremely high compared to, you know, a year ago.

[01:14:05] Joe Carlasare: Yeah, this is the, the great, you know, you’re substituting you know, chicken for beef, right?

[01:14:09] Joe Carlasare: You’re substituting now chicken for, you know, beans, right? Whatever’s even, even cheaper than beef or cheaper than chicken. And that’s really true, right? But the only reason it matters, it’s, we all know there’s huge flaws with the metric. It matters because that what, what guides fed policy, right? They have to be able to go out there and say, you know, we conquered the beast of inflation.

[01:14:28] Joe Carlasare: We brought it down within our range. And all is good in the world like that. That’s why it matters. Other than that, it’s just sort of a foolish exercise.

[01:14:36] Preston Pysh: Guys, one final thing that I want to talk about before we wrap it up, and it’s just the price action of Bitcoin the past couple weeks. I guess it just seems like all the volatility’s being sucked out of Bitcoin compared to what we have historically seen.

[01:14:50] Preston Pysh: When I look at the chart of Bitcoin for the last decade, There’s these moments in the middle of the boom cycles, right smack in the middle where you get into these really low vol price action and it just is this real slight grind up. And I’m kind of curious if that’s what your expectation is over the second half of 2023 into the beginning of 2024.

[01:15:17] Preston Pysh: Is if we just have like this, this reduction in volatility with maybe this really slight climb in the price like we’ve seen previously at this kind of point in the cycle, is that what you’re expecting? Or is there, is there something else that’s happening in the background, maybe the ETF or whatever that’s causing the price action that we’re currently, or at least that we’ve been seeing lately?

[01:15:39] Jeff Ross: I’ll jump in first and then you know, get, get the other answers from you guys. So, so my take on it is that this is all related to liquidity, right? I consider Bitcoin to be the great absorber of liquidity and a lot of people ask me like how to keep up with liquidity metrics. And I say, you don’t need anything fancy.

[01:15:53] Jeff Ross: All you need to do is look at the price action of Bitcoin. It will tell you if liquidity is expanding worldwide or if it’s contracting. And so we’ve been in this sort of contractionary phase of liquidity since the end of Q1, both in the US and worldwide. There’s lots of different ways to do it.

[01:16:09] Jeff Ross: Michael Howell from Cross Border Capital, he does some of the best work on this, but I, I do these, you know, poor man’s versions of, of liquidity and it basically tells the same trend until something changes with liquidity and until that changes from slightly declining sideways to slightly down, I wouldn’t expect anything different for Bitcoin.

[01:16:26] Jeff Ross: Now, I will tell you from a trading perspective, so I look from three perspectives. Short term, like a trade midterm, like out a year or so. And then long run, long term, massively bullish, right? I think all of us are, I think we, we think that 24, 25, somewhere in there is going to be really, really exciting for Bitcoin once again.

[01:16:43] Jeff Ross: Very short term. It’s getting to the point where it has been at the technical indicators. I look at, it’s been fairly oversold, so I wouldn’t be surprised if we had one more dump or you know, we could have this just excruciating, painful, low volatility, sideways movement for another week, two weeks, three weeks.

[01:16:59] Jeff Ross: I wouldn’t be surprised to see a 27 handle or 28 handle on Bitcoin if it tags maybe the 200 day moving average. I would expect at some point, and I thought we might get this yesterday, but we didn’t. It’s not, not yet. I thought China might capitulate and start really adding liquidity again. So what did they do?

[01:17:15] Jeff Ross: They, they lowered interest rates. That’s step one. Step two obviously is go back to the, the liquidity pool, right? So if we see China, who knows, maybe Europe will get into the game at some point and they’ll capitulate it a little more quickly since they’re more clearly in a recession than we are here in the us.

[01:17:30] Jeff Ross: They may just start adding liquidity. If they do, I would expect a nice bump in, in Bitcoin, in the price of Bitcoin, and I think we could see it head up towards 40,000 or so midterm. Again, choppiness, I think midterm by the having, which is expected to be in the end of April of 2024, as you guys know.

[01:17:48] Jeff Ross: I’m not overly optimistic or pessimistic. I think we’re going to be sitting at about 40 to 45 K based on past cycles. And I think just where we, we are, you know, liquidity, what the economy is doing, all that kind of stuff. If it gets too far above or below those levels, I would get nervous. You know, if it’s down at 20 k around April, around the having time, I would think, man, this thing is going to just shoot higher, it’s going to be insane.

[01:18:09] Jeff Ross: And if, but if we, if we get up to 70 K, maybe, you know, there’s a lot of people calling for new all time highs in Bitcoin even this year, which I think that’s kind of crazy personally. But if it did, I just think, well, we’re just going to correct again and we’re going to get back down and head, head lower again heading into the first quarter of 2024.

[01:18:25] Jeff Ross: So that’s kind of my take on it until liquidity changes, until something changes or some kind of big catalyst type event. I don’t really see anything too exciting other than just chop you sideways for Bitcoin.

[01:18:37] Preston Pysh: Gents, do you have anything to add? Can I just say ditto?

[01:18:43] Preston Pysh: Joe, did you have anything else to add?

[01:18:46] Joe Carlasare: I largely agree with that. The only sort of caveat that I, I, I have in the back of my mind is that I’m looking at sort of more high beta stocks, right? More speculative areas, further out on the risk curve in the equity market. And a lot of them have just been sideways for like over a year, right?

[01:19:03] Joe Carlasare: And that’s sort of what we’ve seen with Bitcoin, right? Bitcoin obviously had the sell off and it was it bottom very close to the equity market. So the big question I have is like, if one of the things I can never really, you asked like, you know, what’s a question that lingers in my mind? Okay. One of the things I can’t really figure out is how Bitcoin’s going to operate in an environment if the equity market does in fact start to sell off.

[01:19:27] Joe Carlasare: Because you know, historically, obviously they’ve been very closely correlated. You’ve tended to see, you know, price action mirror one another. We obviously had an prolific run in the equity market this year. I mean, the NASDAQ were traced what, like 80% of its downswing. Whereas Bitcoin, I think from the all time high only made it back 30%.

[01:19:48] Joe Carlasare: And I think part of that speaks to sort of these overarching issues that sort of plague the greater crypto market. Not necessarily Bitcoin, but this, these issues with litigation and some of the, the choke 0.2 0.0 measures on-ramps to some of the, the exchanges being potentially jeopardized. I think some of that is affecting our market in a way that has never been affected in prior cycles.

[01:20:10] Joe Carlasare: So I wonder if some of that overhang is still going to, if, if not cause a sell off, just going to hold back the price action, because that’s what it feels like, right? It feels like we’re kind of stuck in this range and we can’t get going. And you’d expect it in an environment where we’re seeing, you know, the Nasdaq within, what did we get Jeff?

[01:20:26] Joe Carlasare: Like, within 5% of an all time high, 6% of an all time high, somewhere thereabouts. You’d expect Bitcoin to make a run to at least 40 k. It’s kind of, you know, been disappointing, at least from my perspective. It hasn’t, but obviously structurally long term there’s nothing but blue skies and being bullish for Bitcoin, I don’t, I don’t know why anybody, would.

[01:20:43] Joe Carlasare: You certainly not sell Bitcoin at these levels? The only question is whether you get another amazing opportunity to pick up cheap coins, you know, in the low twenties. That’s, that’s the really only, only thing I see.

[01:20:53] Preston Pysh: Alright, guys, go around the horn. I just want to tell you, I thoroughly enjoyed these conversations with you guys because it’s very candid.

[01:21:01] Preston Pysh: It’s just a, a lot of fun to be able to kick around ideas and everybody’s vulnerable and we can poke fun at each other and, and I greatly appreciate that. I know the audience and the people that listen to it. That’s the feedback that I always get from people was to thank you guys for coming on and making yourself vulnerable with some of your ideas.

[01:21:17] Preston Pysh: That some are right, some are wrong. But go around the horn, we’ll start with Jeff and give people a handoff or just let them know where they can learn more about you. Sure.

[01:21:28] Jeff Ross: Well, thanks again for having us, Preston. It’s, it’s just super kind of you to, to host us and to do this. I love these. I learned a ton from these conversations as well from all three of you guys.

[01:21:36] Jeff Ross: So thanks for having me aboard with you guys. You can find me most commonly on Twitter still. I’m trying to, I’m spend more time on Nostr. You can find me there too, but, but Twitter is still where there’s a little more engagement. My handle is at vailshirecap. Or if, you know, I also run a hedge fund If you want to learn more about that, that you can go to vailshire.com.

[01:21:54] Jeff Ross: And if you want to just shoot me an email, I manage all the accounts personally, info@vailshire.com.

[01:22:00] Joe Carlasare: Joe, thank you guys. Thank you, Jeff, Steven Preston, I got to tell you, I, I love these conversations. If it, if you can’t tell, I, I love the respectful disagreement. It’s awesome. Same thing as Jeff. I, I learned a ton here and this is really complicated, right?

[01:22:14] Joe Carlasare: Like, it’s not like there’s clear cut answers for any of this stuff. So we’re all just trying to figure it out together. You can Google me and you’ll find tons of articles and also my firm website, Joe Carlasare at Amundsen Davis. I’m a partner there, primarily the litigator. If you have a litigated matter, particularly one that’s focused in the crypto space or the blockchain space, or even the Bitcoin space, preferably at your disposal, happy to help in any way I can.

[01:22:39] Joe Carlasare: On Twitter at JoeCarlasare you can reach out there, but if it’s a, a professional legal matter, I try to funnel all that through the, the official channels. But thanks again, Preston and Steven and, and Jeff.

[01:22:50] Preston Pysh: Thanks Joe. Steven.

[01:22:52] Steven McClurg: Yeah, thanks. Thanks for having us. This is always a lot of fun. I enjoy Joe trolling me.

[01:22:58] Steven McClurg: I enjoy trying to prove to Preston that world coin’s going to win. At the end of the day, we’re all going to be staring at a giant eyeball on the, on our screen and happily hand over our personal data for a few bucks, where you can find me mostly in Nostr, but a little bit on Twitter at stevenmcclurg.

[01:23:16] Steven McClurg: It’s pretty simple.

[01:23:17] Preston Pysh: I love that. I love that you just said that. That’s awesome.

[01:23:21] Steven McClurg: But no, no, this is a lot of fun. I really, I really, I really enjoy the segment in the show. And but yeah, I don’t, I don’t post a whole lot anymore. I’m a little bit more reserved. I’ve just, I’ve been, I’ve been heads down just focused on our funds.

[01:23:33] Steven McClurg: But but yeah, and I’m at Valkyrie Investments doing, doing a lot of fun things.

[01:23:39] Preston Pysh: We’ll have links to all of this in the show notes for people if you want to check this out. And gentlemen, thank you for making time. This was a blast.

[01:23:46] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm.

[01:24:10] Preston Pysh: So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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