Preston Pysh (00:03:08):

So guys, before we get into the Luna explosion and all that stuff, one of the comments for me that really just sticks out in the past week that when I heard this, I was like, “You have got to be kidding me that this was just said out loud.” And it was when Powell described the current situation as de-leveraging as the landing is going to be softish. And when I heard that, I was like, “Oh my God, this is going to be a disaster.” Correct?

Jay Gould (00:03:39):

Well-

Joe Carlasare (00:03:40):

Yeah-

Preston Pysh (00:03:40):

What was your guys’ take?

Jay Gould (00:03:41):

Joe showed me a chart today. Joe, if you want to talk about the Fed fund. I never realized this, but since 1990, every time the Fed fund rate has hit a high, the next time it hits a high, it’s never passed that, which maybe you could speak to that Joe because I thought that was really an interesting data point.

Joe Carlasare (00:03:55):

Yeah. Historically the Fed funds has never gotten back up to the prior high, which is really… It just shows you at some point something breaks. And that’s what we’re watching and I think the big question now is, “Is something broken? Are we at the point where this is it or are they going to keep the pedal on the gas?” But to Preston’s point, it’s really interesting Preston because at this point, given they’re so close to the lower bound, given the fact that they’ve had to do so much unconventional monetary policy to keep the system running. I really think they focus a ton on communication. The Fed at this point is all about these press conferences, setting expectations. And to your point, I thought when he said softish landing, because it’s such an unusual phrase that it might have just been an off the cuff remark. But if you go and look, The Federal Reserve Bank of New York’s president, John Williams used the exact same terminology in a press report.

Joe Carlasare (00:04:43):

He said, “We think we can curb inflation and ensure a softish landing.” So that tells me they round-tabled this. Yeah, go look it up. It’s amazing-

Preston Pysh (00:04:51):

No way-

Joe Carlasare (00:04:52):

They round tabled… Yeah, go look it up, Google it. He just said it yesterday in a press release. He used the same terminology, softish landing, which means that they round-tabled it. They realize that this is going to cause havoc in financial markets and they said, “We have to do it, we have to take the pain. We have to take our medicine this time because if we don’t, inflation’s going to run hot and get out of control.” So I think that’s where their mindset is. We can talk about that later on whether the inflation’s real and how long it’s going to stick around, what’s driving it. But to me, I think that shows you where they’re at.

Preston Pysh (00:05:22):

They can say this as long as they want, but they’re going to break something. Something’s about to break and I think it’s very imminent. I don’t think something’s going to break in six months, I think we are within a one quarter timeframe like in the next three months, that something is-

Joe Carlasare (00:05:38):

It’s broken. No, it’s broken right now. Look at fixed income, it’s an absolute disaster-

Preston Pysh (00:05:42):

Disaster.

Joe Carlasare (00:05:43):

The last time we spoke, I was the lone bull in the Podcast. Boy, do I have egg in my face and kudos to Jay for getting it right about this going further. But what I will tell you is, my expectation… And I think Jeff was in the same place at the time. I thought yields were going to top. I thought we were entering a peak where yields were going to fall at that point. And oh my God, a tenure above 3.1 with the Fed having done 75 bip hikes. That’s a catastrophe-

Preston Pysh (00:06:09):

It’s unreal.

Joe Carlasare (00:06:10):

That’s just… And look at where mortgage rates are. You see it across every sector. Credit conditions are so tight right now compared to where they were even a year ago.

Preston Pysh (00:06:17):

Well. And [inaudible 00:06:18]

Jay Gould (00:06:17):

Just go head. I’m sorry-

Preston Pysh (00:06:19):

No. I was just going to say on Joe’s behalf, I really enjoyed your take on the last round because typically what you find is, with all these higher prices and we’re not seeing 8% like they’re reporting. I’m looking at the gasoline prices, I’m looking at diesel prices and they’re up over a 100% and just on the year to date, let alone annualized. So typically those scenarios are going to stall things out. You’re going to see it plateau. You see the fixed income market… For 40 years we’ve seen this. The fixed income market starts to front-run that, they start bidding it and you see those yields come down. And historically when that’s happened and when that’s played out, you see equities continue to run. And after our chat, you were right there for quite a few weeks. You and I saw each other down in Miami and I was like, “Hey Joe, buddy, you nailed it.” And only for what we were seeing I guess, totally stranglehold what has traditionally played out. And now it’s just getting disgusting.

Joe Carlasare (00:07:24):

You’ve had a four standard deviation move in bonds. Across, up and down the curve. That’s catastrophic. You’re not going to be able to get any traction in equity market run without yields coming down, particularly at the long end. But to your point about the inflation, today’s report which we’ll get to I’m sure. The most concerning thing about it… I finally got a chance to dig into it this afternoon, is you’re seeing some of the stickier components of CPI actually start to pick up. And that’s really concerning like shelter. That’s not coming back down quickly. So to me, that’s really troublesome and they’re really stuck. I wouldn’t want to be a central banker at this point. Who does?

Preston Pysh (00:08:00):

Jay, what were you going to say?

Jay Gould (00:08:02):

No, I was just going to say that, when the Fed spoke recently, he said the 75 basis point increase is something that’s basically not in the cards, not actively considering. So the risk in my opinion is that they’re going to drag this on and they’re going to keep hiking, maybe 25 bips, maybe 50 then 25… And I think prolonging this could be a problem.

Preston Pysh (00:08:22):

I heard somebody make the argument. So when you’re looking at what’s causing the inflation, it’s a breakdown in supply chains. It’s a total… At the core of it… And I think what all Bitcoiners agree is at the core of all of this is you’re mutilating the economic calculation that’s taking place. And so you could maybe… And this might be a stretch for me to make this argument, but I’ve heard this argument and maybe it’s valid. So as you tighten and you make it more difficult for these businesses to do the performance of the labor that they’re doing. Maybe you actually disrupt those supply even worse than they already are by tightening into it, causing the inflation, which is materializing itself out of not enough supply, getting to all this demand that’s in the market. Maybe you accelerate that.

Preston Pysh (00:09:10):

And at this point, I have no idea, this thing’s a monstrosity of… It’s a total disaster. So you have that happening in just traditional markets. And then we have Luna explosion… For people who aren’t familiar with Luna, so here’s the idea around it. So this guy Do Kwon stands up this Stable Coin. He also has his own coin that was an ICO. They raised a bunch of funds by dumping these things into the market. I have no idea what their strategy was to offload them and how many VCs were involved or whatever. But anyway, they have a Stable Coin that is supposedly supposed to be synthetically pegged to the dollar and it’s backed by Bitcoin, but not completely backed, it just has some backing. And then they have some other things in their treasury to defend the peg. Well, it appears… Was it Citadel? I know Citadel was in-

Joe Carlasare (00:10:10):

That’s a rumor. Yeah

Preston Pysh (00:10:11):

Yeah. Nobody really knows exactly who pulled this off, but they obviously saw that they could exploit it and they did. And they’re absolutely clobbering the thing right now. The Luna token was at $100 per coin. It’s down to $1 right now as they’re selling those to try to defend the peg. They’ve sold all their Bitcoin, the thing is just a ticking time bomb before it literally both go to zero. And what I think people aren’t understanding about this, who maybe aren’t intimately familiar with the space is, you have this whole DeFi or as I referred to it today as clownfi… Has all these dependencies wrapped around derivatives, contracts and quote-unquote yield farming, that’s taking place all around this quote unquote synthetic Stable Coin. And when you look at why this coin, this Stable Coin is different. In my opinion, I’m really curious to hear Joe’s opinion on this one. But the reason why I think that this Stable Coin was so highly used is because it had a total lack of KYC attached to it like you do with USDC and also Tether. Which supposedly… Who the heck knows? I don’t deal with these things, I just don’t Bitcoin… Have US dollars that are actually in a treasury backing them. So you have the whole DeFi space, all these other coins that are tethered to these things, that are tied to these things in these off, unbanked derivatives, that is just a total cesspool of activity. And so one of these things blow up, of course, it’s going to take whatever’s tethered to it, or whatever’s closest to it with it, at least in the short term, provided some amazing buying opportunities in my humble opinion for Bitcoiners. But that doesn’t mean that the bottom is in and it doesn’t mean that this broader macro setup might continue to apply severe pressure on the price of Bitcoin. So that’s me talking way too much, but I feel like I need to give an overview of what this is, especially for people that aren’t intimately familiar with the space. Now I’m opening it up to you guys and do you guys have any additional thoughts or considerations or things that I’m not talking about that you think are important?

Jeff Ross (00:12:26):

Joe, do you want to talk about stablecoins at all and your thoughts on it?

Joe Carlasare (00:12:29):

Yeah. Again, stablecoins is the main focus of the federal reserve of policy makers. They talk about it constantly. In fact, I think Jay and I were both in a clubhouse from yesterday. We were talking about the Fed financial stability report, which is really fascinating, particularly because they’re talking about some of the hard sell-offs in the bond market and the commodities market. But they’re super focused on this, they think that this is a contagion risk for the global economy. It’s amazing considering it’s like $200 billion market. Globally, you shouldn’t think that, but I think they’re really concerned about the stablecoins threat to the dollar. But to your point Preston, I think the real key thing to look at this with respect to the market structure is that Bitcoin really is… We all know it’s what matters in this space.

Joe Carlasare (00:13:11):

And all of these other coins and DeFi protocols and even Ethereum to an extent. I view it all as a barnacle on the haul of the ship that is Bitcoin. And when there’s the turbulence in the macroeconomic environment and Bitcoin starts to sell off, you see all these things blow up. So it’s a chain reaction here and it wasn’t dissimilar from what happened in the 2018 pop. Once Bitcoin starts to go down, all these projects fail, people flee, they try to get out, they need liquidity and it’s just a cash run. So that’s the way I think you look at it and with respect to Luna in particular, I think it’s a little bit of a different dynamic and there’s going to be… My prediction is there’s going to be serious litigation that comes out of this, for the simple reason that unlike most of the other stablecoins, which purport to reflect the dollar, these things were promising substantial amounts of yield.

Joe Carlasare (00:13:57):

They had venture capital backing them in excess, they had people sticking their necks out saying, “Don’t worry, this thing’s fully collateralized.” And if you have exposure to US regulators and to the US legal system, you are going to have to bear consequences for that, that is not going to get off the hook. And in particular, Yellen is going to use this as the number one talking point to advance some regulation of the stablecoin market. She needed this, I think this gives her the perfect example, exhibit A, “Here, this market’s blowing up. So we need to step in and save you from yourself.” So I expect that to come and yeah-

Preston Pysh (00:14:27):

Wow.

Jay Gould (00:14:27):

I didn’t think of that-

Preston Pysh (00:14:28):

I did not think of any of that. So what you’re really saying is there’s some VCs out there [inaudible 00:14:33] should probably be pretty concerned right now.

Joe Carlasare (00:14:36):

Yeah. Because here’s the thing, as many people know, once you get big enough and you have a target on your back, it’s pretty easy to file a lawsuit. And there will be people coming after them based on their representations. Not going to name names, but there is a fairly famous person in the quote-unquote crypto space that has a Luna tattoo on their arm. So I’m just being nervous-

Preston Pysh (00:14:53):

He can’t get away from that.

Joe Carlasare (00:14:55):

Right. When you have that exposure, don’t be surprised if somebody comes knocking with a subpoena on your door.

Jeff Ross (00:15:03):

Let’s be honest. That tattoo was embarrassing before Luna even collapsed. [inaudible 00:15:07] All right, delete that.

Preston Pysh (00:15:13):

No-

Jay Gould (00:15:13):

Don’t be sorry.

Preston Pysh (00:15:16):

I think everybody listening to you right now, Jeff is nodding their head. How about your thoughts on how it’s interconnected with all the DeFi stuff? Does this continue to unravel as we’re looking at this in the coming couple weeks? Does the pain train… I’m looking down coin market cap and everything there is down 20, 30% today. That’s not Bitcoin. Does continue to roll out? It’s a disaster-

Joe Carlasare (00:15:42):

Jay, go ahead.

Jay Gould (00:15:43):

No. I’m just saying I’m going to look. I haven’t even looked at it. What he just said. I’m looking at it right now-

Jeff Ross (00:15:47):

Take it Joe.

Joe Carlasare (00:15:49):

Yeah. My view on this is it’s the same story. I think that if you’re only focused on Bitcoin and crypto and you’re ignoring what’s going on in the legacy markets, you’re missing the whole picture-

Preston Pysh (00:15:59):

Amen.

Joe Carlasare (00:16:00):

If we can’t get stability in the bond market, most importantly, even more than the equity market, we can’t get some stability there, I think everything continues to sell off. That is the necessary condition to give us any chance that even… Forget a rally at this point, we need to stabilize, we need a base, we need something that stops the free fall. This has all the hallmarks of a classic liquidity crisis across the board. That’s why you see everything selling off.

Preston Pysh (00:16:24):

And I think depending on when they step in, right Joe? Depending on when they step in this thing could keep ripping down heart-

Joe Carlasare (00:16:33):

And even bigger [inaudible 00:16:34].

Preston Pysh (00:16:34):

At this point, it can really accelerate.

Joe Carlasare (00:16:36):

Preston, there’s a huge assumption I think out there and I don’t want to get all… I’m not a super bear. Okay. I’m not Mr. Doomsday on this, but I’m just telling you, I think there’s assumption out there that stepping in is going to stop this necessarily like, “They can totally backstop it.” I don’t know if that’s the case. I think that’s a huge assumption given the-

Preston Pysh (00:16:54):

Well, I think if you are going to talk with market, so if you’re talking the bonds I’m with you, I think if they step in right now, it’s going to accelerate the sell-off in bonds. Because at that point, I think any bond trader with even an IQ of 10 can look at this and say, “Hold on a second. I’m pretty sure this is unsustainable and if I’m sitting on a 30 year bond, I’m about to get my face ripped off.” And now I just really became a seller, in equities I think it could bounce. And depending on what magnitude they step in with the printing, I think it could bounce significantly.

Joe Carlasare (00:17:30):

Yeah. We need-

Jay Gould (00:17:31):

What’s the catalyst for them to step in right now?

Preston Pysh (00:17:34):

Things breaking, like there’s the total lack of liquidity in credit markets. Right?

Joe Carlasare (00:17:39):

Yeah. So if you go to that, it’s fascinating guys and anybody who’s listening, I totally recommend that you’ll check out… It was released on Monday. It’s a May 9th financial stability report from the Fed. It’s released twice a year. You can go in, they specifically cite, Jay… We were reading portions of this yesterday, that lack of liquidity across the S&P 500 E-mini, lack of liquidity across sections of the bond market, even commodities. There are people getting squeezed. And I think that… You see this 40 year line of truth in the long bond in the 20-year tenure. And I think people were trading off that. I think people took a leverage position saying, “Okay, yield’s half the peak here.” And they were buying the long bond and they’ve gotten crushed. And you’ve seen this cascade of liquidity issues from that.

Preston Pysh (00:18:21):

Jay, I would describe it like this, like in your body, you got the blood that flows through your veins and you got large arteries. And then you got your capillaries. They’re already seeing out on the extremities that there’s no liquidity anywhere to be found. These low-vol locations, you’re just seeing the liquidity evaporate. Once some of those larger veins and arteries start losing liquidity they have to step in and pump the patient with more liquidity, as fast and at rates that I don’t even think we can comprehend. I think that the amount that they’re going to have to stuff into this, at whatever point that, is going to make the March 2020 liquidity insertion look like a total joke.

Joe Carlasare (00:19:07):

Well, the crazy thing Preston, and I’d like to hear Jeff’s take on this is that, why is there no liquidity? If you think about it, we still have accommodated policies. You’ve got negative real yields. You’ve got Fed funds at 75 bips.

Preston Pysh (00:19:20):

It’s all consolidating in the market cap. So they’re going to do… So this last round, they inserted all that printing into the system via the bond… Most of it went in via the bond market. Some of it went in through triple P, collectively across the globe, they’ve been doing it via the bond market because nobody understands the bond market. And if they did understand how much they were debasing the currency, people would be up in arms. Here’s an example-

Joe Carlasare (00:19:49):

But QT hasn’t started yet. Right? June 1st is when they’re starting QT-

Preston Pysh (00:19:54):

Yes. Correct.

Joe Carlasare (00:19:55):

So do you think it’s just traders, they’re pulling liquidity. They’re just being risk of-

Preston Pysh (00:20:00):

No. I think you have some of that going on, but I think where most of the liquidity goes is into the ownership of equity and it bids the market cap of equity. And so you have total consolidation of equity into the hands of a few people and so when you put all this money into the system and people out there spending it and it just percolates straight into the hands of the equity holders. And so then what those equity holders do, they have to own something scarce. Well, you can only bid up so much commodities, they’re perishable for the most part. Equities, there’s scarcity in the shares if it’s a company that’s profitable or has exponential growth on its revenue. So they’re taking all that buying power and they’re just stuffing it into a higher and higher market cap of equity, anything equity based.

Preston Pysh (00:20:48):

And so when we’re watching the credit explode, like we are in the fixed income market, and then they’re having to reprice that equity because of this cost of capital is going up, you can clearly see that it’s 8.3% after today. Those valuations have to come down. I think we’re seeing that playing out. And so some of it’s going into liquidity, some of it’s just total impairment, broken promises. And then a lot of it’s just getting stuffed into… Or at least it was not right now, but leading up to all this contraction that’s happening over the last… Since Christmas, we’ll call it. It was just getting bid into market prices up to that point.

Joe Carlasare (00:21:29):

Jeff, what do you think?

Jeff Ross (00:21:31):

I’m going to say something shocking, you guys, you know how I’ve been a bear since early January-

Joe Carlasare (00:21:36):

Oh boy.

Jeff Ross (00:21:38):

Okay. Ready?

Preston Pysh (00:21:39):

Don’t do it.

Jeff Ross (00:21:41):

I’m going to do it. I’m tilting bullish for the short term. All right. Now hear me out the macro environment-

Preston Pysh (00:21:47):

For what market? You need to specify this-

Jeff Ross (00:21:50):

For risk on assets, including Bitcoin. I think that for several reasons, in fact, I tweeted this yesterday morning. So before CPI came out, before we knew anything, I said, “I am very macro bearish, but here is something that could help tilt me to become slightly bullish for the next three months.” And I said, “Three things would need to happen. Number one, the CPI would need to come out at approximately 8.5% or lower.” Check, we got that. What does that say? Now we all know the CPI isn’t real. Blah, blah, blah. We have all our reasons for it’s actually much higher than that. Okay. So that’s a different discussion. CPI came out 8.3%, little bit lower. What does that say? We’ve probably peaked in inflation for the short term, for the time being that’s what I was saying would probably happen a couple months ago.

Jeff Ross (00:22:39):

I got lucky it did happen here. I was actually a month earlier. I thought we might have peaked two months ago, but it turns out we just peaked last month. Probably we could go higher again, but I don’t think we will. I think we’re now talking about disinflation for the rest of 2022. If we have peaked and the rate of change now is on a dis-inflationary path that takes the pressure off of the Fed. And I think we saw that. And that’s what I was talking about last week when I said I feel like-

Jeff Ross (00:23:00):

I think we saw that and that’s what I was talking about last week when I said, I feel like something changed a little bit. They gave themselves a little bit of a little bit of wiggle room for the first time. Versus being 100% hawkish they tilted just ever so slightly dovish by saying, “We’re taking the 75 BPS rate raise off the table. We’re delaying it a little bit for when we start actually doing the quantitative tightening things.

Jeff Ross (00:23:23):

I still think they’re going to go through with this. I still think they’re going to raise 50 BPS at the next meeting for sure, but that’s factor number two. If the market senses that inflation has peaked and it’s no longer running away, it’s no longer accelerating, but it’s actually disinflationary, that takes a little bit of pressure off of the fed, okay?

Jeff Ross (00:23:40):

But here’s the third and most important thing; I think that third quarter data, GDP data may actually surprise slightly to the upside. I think it may be actually flat to actually slightly accelerating relative to a year ago, third quarter OF 2021. What do we have so far? Right now Q1 was negative 1.4 GDP. Q2 is definitely going to be a negative GDP number. We’re in a recession right now.

Jeff Ross (00:24:06):

I think what we’re going to get is a double dip recession and in between I think Q3… and again, markets look ahead usually one to two months, I like to say just one and a half months. We’re about one and a half months away from the third quarter. Markets are basically completely pricing in this terrible Q2. I think they’re going to start looking at what is coming in Q3 and we could have a bit of a resurgence in risk on assets.

Jeff Ross (00:24:33):

Other things that tell me that I’m possibly right on this… I know this is a crazy call, right, because I’ve been so bearish for so long and I’m still tilted bearish in my fund, but I’m less bearish now. The 10 year treasury this morning, after the CPI what did it do? It spiked up above three, right, probably point-

Joe Carlasare (00:24:46):

It did.

Jeff Ross (00:24:47):

Yeah, and then suddenly, now what is it right now? I’m looking at 2.88 right now. So it dropped about 15 BPS today. I think the bond market actually possibly believes that we may start entering a disinflationary period. Normally I don’t like it when, that risk on assets don’t like it when it’s disinflation coupled with a decelerating GDP. But like I said, looking ahead now, Q3, I think we see some disinflation and a flat to slightly accelerating GDP risk on assets, actually like that.

Jeff Ross (00:25:21):

One last thing and then I’ll throw this out for discussion. Back in 2007, 2008, before all that stuff happened, the markets knew something was going on, right? There were cracks in the foundation. People were starting to freak out. The markets started to tank down into, I believe it was March of 2008. Again, a good chart to look at is go look at the NASDAQ, go look at the queues back then. They bottomed in March of 2008.

Jeff Ross (00:25:44):

Then we had a rally, a strong rally up and through mid May-ish of 2008. That’s what I think is going to happen. Then it really crashed, right? Then we all know what happened and then it tanked after that. So I think we get a bit of a relief rally, and then I think we go into a stronger recession, Q4 and Q1 of 2023. That’s when the fed pivots. That’s when things get super ugly. That’s when QE 4 comes on and it’s going to utterly dwarf QE 1, 2, 3 combined. That’s a whole different stor, but for now I’m actually a slightly bullish that we’re going to get a risk on asset relief rally. Lay into me.

Joe Carlasare (00:26:22):

Jeff, I actually totally agree. I think what you’re saying here is you get a bear market rally. You effectively get a bear market rally, which I think nothing goes straight down in financial markets so I think we’re primed for a rally here. Whether we go lower, which it’s possible… Nobody knows. Nobody knows where the bottom is on this, but nothing is going to go straight down like this. They’re going to try and pop it and everybody’s shorting these. I don’t think that you’re just going to see it continue to decline at this rate. I mean, this has been one of the most vicious rallies in history at this point, especially in the bond market. It’s been a route, an absolute route, a four standard deviation move.

Jeff Ross (00:26:57):

One quick caveat to what you just said, Joe, that when I think of a bear market rally, I think of a one to two, maybe three week long sort of thing that gets up basically to the top of its volatility range, like Ballinger band kind of stuff. Then it tanks again and so everybody shorts it at the top. I think this is going to be strong enough that it’s going to fool people into thinking the bear market’s over.

Jeff Ross (00:27:18):

We’re going to regain moving averages, like serious moving averages, the 200 day, the 100 day. We’re going to squirt through the Ballinger bands to the upside and it’s going to pull lots of people with it, into thinking we got through it and that the fed did the right thing. Then it’s going to crash and just destroy everybody. So I, to your point, totally agree, a bear market rally. I just want to emphasize, I think it’s going to be a very strong bear market rally [inaudible 00:27:39] a lot of people.

Joe Carlasare (00:27:41):

And not to nitpick, but I thought I saw a tweet from you that… and maybe things have changed in the last couple days, but didn’t you think Bitcoin doing an all time high this summer?

Jeff Ross (00:27:48):

Possibly. I’ve said it’s possible that it reaches a new all time high by mid May, although I don’t think so. I think it’s going to do similar to what the NASDAQ did in 2008 where it ramped up very high, didn’t quite get to that previous all time high. I think NASDAQ risk on assets in general, so small cap stocks, things like that, and Bitcoin, I could see Bitcoin getting up to 60 K 55 K 65 K, somewhere in that range and then just collapsing from there again.

Preston Pysh (00:28:14):

So just the historical note for people. The NASDAQ in 2008 sold off 25%, then it had a bounce of 23% for almost a full recovery… not a full recovery, but it was what you’re describing, where it went outside of what you would expect a vol range would be. It then sold off from that level down 50%. From the original top, it was down 54%.

Preston Pysh (00:28:46):

Now, what I think is interesting is once it got beyond… let’s see here. Well, once it went back down to the previous low, that was negative 25% in 2008, it completely unglued that second time, once it got through that negative 25%. Now, when we look at the existing setup that we have right now, and I’m just talking about the NASDAQ, we are down. I believe we’re down 28% right now.

Jay Gould (00:29:15):

It’s about 17 for S&P too.

Preston Pysh (00:29:17):

Yeah. Okay, so on the NASDAQ, we’re down 29% right now. We’ve already had a sell off that was as deep as 23 to 24%, and we had a bounce that was like the 2008, which was up 18%. Now we’re back down to 28%, so-

Jay Gould (00:29:37):

I don’t… Yeah. Yeah.

Preston Pysh (00:29:38):

So I guess what I’m going at Jeff, just to try to challenge your idea. It almost seems like we’ve already had that bounce and it also appears that when you get in a situation where the fed doesn’t come to the rescue and you get through a 30% draw down that things can get a little messy and you start getting contagion. So I don’t know if we’re there. If we are, what’s happening next week or the week after, right?

Jay Gould (00:30:04):

My opinion is we’re seeing hiring freezes happening now. I think you’re going to see the Q2 earnings calls in July and August, they’re going to have weak guidance moving forward. Potentially, there’s going to be some layoffs happening at some point. I think you’re going to really see a real… it’s really going to get worse, in my opinion.

Jay Gould (00:30:19):

I think the economy is definitely grinding down. It’s expected to continue to further slow. I disagree on the federal reserve. I don’t think they’re changing course. I think the market’s seeing that and they’re going to do their 50 basis point rate hike. What he said here is… I took the note here when you were talking… “There’s a broad sense on the committee that additional 50 basis increases should be on the table for the next couple of meetings.” I think they’re going to do 50 and 50 again.

Joe Carlasare (00:30:42):

You forgot the first part of that sentence. The first part of that sentence-

Jay Gould (00:30:47):

Seventy-five basis point increase is not something in the committee’s considering. Yeah.

Joe Carlasare (00:30:50):

The beginning part of that sentence you just read said, “Assuming the conditions evolve with expectations.” That’s for the first part of that sentence, “Assuming conditions evolve [inaudible 00:30:59] expectations.”

Preston Pysh (00:31:00):

Such a good lawyer.

Joe Carlasare (00:31:02):

That’s what it says. He leaves himself an out. He says, “Assuming conditions evolve,” with which you should read to mean that is declining inflation. You have to have that month over month change. If you don’t get the month over month change, 50 BPS are on the table.

Jay Gould (00:31:15):

The, he said also “We are not going to stop.”

Jay Gould (00:31:18):

He literally said these words; “We would just go back to 25 basis point hikes,” right?

Joe Carlasare (00:31:23):

Well, that’s what I mean.

Jay Gould (00:31:24):

So they’re not stopping. They’re not stopping is my point, right? They’re not reversing their monetary policy.

Joe Carlasare (00:31:28):

The question isn’t whether they’re stopping. The question is if they’re keeping their foot on the gas pedal. This is the first time in 20 years, they did a 50 BPS hike.

Jay Gould (00:31:35):

No. No, no. They’re increasing is my point, right? They’re not going to stop. So as they continue to increase, which means they haven’t really changed their policy, which is rate hikes, right, that’s going to have-

Joe Carlasare (00:31:43):

Well, we’re talking past [inaudible 00:31:45].

Jay Gould (00:31:45):

The last point is that stocks, they’re not cheap, right? This is the thing where I was talking about a clubhouse the other day with you, Joe. If you just look at… What are we at 220 EPS for this year’s expectation, right? That’s going to get downgraded. When that happens over the summer, at some point, I believe you’ve got to look at that and you say… We’ve been generally trading around, what, times on the S&P right?

Jay Gould (00:32:07):

If they get downgraded to 200 even, and you take that 200 and you give it a 17 multiple you’re at 3,400. S&P’s coming down, NASDAQ’s coming down. I don’t see this bounce. I think Preston’s right. I think we saw the bounce. The S&P jumped up 10%, the NASDAQ went up and it pulled back. I think you’re just going to see deteriorating conditions where it’s just going to continue to sell off. That’s my opinion.

Preston Pysh (00:32:29):

I love this.

Joe Carlasare (00:32:30):

I’m bearish.

Preston Pysh (00:32:31):

Yeah. I’m a little bit in Jay’s camp, to be honest with you. I mean, I’m open to any array of outcomes and from my vantage point, it doesn’t really all matter that much. My positioning is pretty straightforward.

Jay Gould (00:32:43):

We know the end game. [inaudible 00:32:44]. I think that’s the thing we all agree on.

Preston Pysh (00:32:45):

Yeah, that’s right.

Preston Pysh (00:32:46):

So I don’t know. I’m a little concerned that you’re starting to get to that 30% mark, where it’s going to get ugly unless the fed comes in and says, oh, we’re going to reflate all this. We’re going to stuff everybody’s hands with liquidity. They don’t seem to be saying any of that. They seem to be saying this needs to sell off so that we can dampen inflation. And if [inaudible 00:33:08]

Jay Gould (00:33:08):

They’re taken away what they gave us.

Preston Pysh (00:33:09):

It’s softish, right? It’s softish.

Jay Gould (00:33:13):

Well, they’re just taking away what they gave us in 2020, right? They gave it to us so quickly and they’re just pulling it back. Now.

Joe Carlasare (00:33:19):

I think the language he used at the press conference already showed that they were concerned about the selloff and risk assets. They went out of his way to appear dovish while still hiking, to Jay’s point. The question is not whether they stop hiking in my mind, the question is that they keep the foot on the gas and do multiple 50 point hikes. Because right now, effectively, Fed funds is supposed to be at around 2.25 by the end of the year.

Joe Carlasare (00:33:42):

The question is, do we get there? Do they just do 25 from here on out, which would put it around two? 2% fed funds in this economy is still a substantial drag, just because of the leverage in the system. So for me, I don’t think anything’s going to stop until it gets much, much worse. To Jeff’s point, the reason I tend to favor him on this call here is because I just don’t think you’re going to see consistent selling across the board in this market. I mean, you always see these bear market rallies in any condition. Yeah.

Jay Gould (00:34:10):

Yeah, but it’s all about what happens with the economic data as it’s coming out. The jobs reports and all this stuff is going to come out and it’s not going to be good. Also, large companies announcing layoffs is going to be a problem.

Joe Carlasare (00:34:20):

We’re in this perverse dynamic where bad news is good news for risk assets. The reason for that is because if there’s really bad GDP, if we get a second quarter contraction, two in a row, that’s a technical recession. There’s going to be at least speculation or hopium among Fed watchers that say maybe they’ll stop. Maybe they might put their foot on the break at this point. I think that gives hopium to the market. I’m not saying it’s justified, but people [inaudible 00:34:45].

Jay Gould (00:34:44):

I don’t think people will believe that. I don’t think they’ll believe that, but that’s an opinion. I could be wrong.

Preston Pysh (00:34:49):

Here’s a crazy stat for you guys. The top, before the COVID meltdown, okay, which was just two years ago… We are currently today on the NASDAQ 23% higher than the top before COVID right now, 23% higher. Now, if I’m adjusting and I have to do this because I got to adjust this for him too-

Jay Gould (00:35:15):

By the way, as you’re doing that, we pulled back five years at the bottom there. The 35% decline was 2015 prices so there’s no reason why we can’t pull back two years right now as they adjust the EPS.

Preston Pysh (00:35:26):

Well, I think when the fed officials are looking at that, they’re viewing it optically just totally in nominal terms of like, “Hey, we’re still up 23%. The market can handle this coming back down, right?” But in an M2 world, if you adjust that number that I just told you, where you were up 22% and you adjust for M2, you’re actually down 13% from the previous high in 2020 right now. So-

Jay Gould (00:35:51):

Look at the EPS. Look at the EPS, right? If we’re at 220 this year and this gets downgraded to 180, as an example, even with an 18 multiple on that, what is that? The market looks at this stuff, right? So you look at 180 times seven, let’s say 18%. It’s 3,200 S& P. That’s definitely in the cards. That is definitely a possibility.

Preston Pysh (00:36:15):

Well, you-

Jay Gould (00:36:15):

I even think 3000 is a possibility on the S&P.

Preston Pysh (00:36:20):

I think you’re describing the fed opinion really well, Jay, as far as how they’re viewing it from a number standpoint. But if I can just talk for your common everyday person who doesn’t have a whole lot of money in the stock market and all that, and they’re basically living paycheck to paycheck. Right now, they are experiencing severe pain in the market. Now, if you step outside the US and you look at the everyday citizen outside the US that’s dealing with dollar denominated debt infested inside of their country, and dealing with the DXY blown out to 20 year highs against every other [inaudible 00:36:58] currency, dude, it is mind bending [inaudible 00:37:04] they’re stretching things right now.

Jay Gould (00:37:07):

Let me give you a data point. So prior to COVID, the average home equity had $48,000 in home equity, roughly $50,000, okay? If you look at the price of the average home in 2012, it was about $260,000. Right now the average price of a home is about $450,000 and the average home equity right now is $185,000. So they’re not feeling the pain because they don’t really own stocks. Most people have their wealth tied to their house.

Jay Gould (00:37:29):

When that starts to happen, as interest rates go up and they are going up, and you see mortgages go from 3.5% to 7%, you’re going to see a direct correlation and an inverse on the home prices going down by 30%. That will shave off from 450 to 300 and knock out the home equity, which the home equity didn’t have anyway, when you really think about it. So they’re feeling the pain because they look at what they did have on a number but it’s they’ve really had it to begin with. So I don’t know.

Preston Pysh (00:37:56):

I’ve got one I want you guys to cover here. Midterm elections coming up, right? If this market sells off hard because the fed is acting independent and all that kind of stuff, right. And this market sells off going into that midterm election, does J Powell get fired and do they bring in some super Uber dovish fed chair at that point? What’s-

Jay Gould (00:38:23):

Joe just said to me a couple hours ago, right Joe, that he hasn’t been confirmed. I didn’t even realize that.

Preston Pysh (00:38:29):

What? Joe, what are you talking about?

Joe Carlasare (00:38:33):

Well, Powell was reupped, right, renominated. But as far as I was checking, the senate hasn’t confirmed him, right, or maybe recently happened. They haven’t voted on the confirmation.

Jay Gould (00:38:43):

And if they haven’t, it’s like they’re hanging this over a [inaudible 00:38:45].

Joe Carlasare (00:38:45):

Let me double check.

Jay Gould (00:38:47):

I think if that’s the case, what you said earlier today, then that is more pressure than Trump going on television saying all the shit that he says, right? This is way more pressure. He hasn’t even been confirmed for his job. So then don’t have to fire him. They just don’t confirm him. That’s political pressure.

Preston Pysh (00:38:59):

Yeah. I just can’t imagine going into the next two years, what pressures that are going to be there to reflate and pump this thing in preparation for the next presidential timetable and congress election cycle.

Jay Gould (00:39:18):

Let me ask you Jeff, because you had a call on… You’ve been right so far on the Bitcoin drop, right? How far down do you think this can go if we see this get worse? What do you think your bottom is? I’m not saying when, but if worst case scenario, what do you think it is?

Jeff Ross (00:39:31):

Sure. So I’ve been using 25 K plus or minus 10%. So 22 5 to 27 5. It could go lower, right? The 200 week moving average, I think is about 21 5 or so. It could pierce that. It could go down if it does pierce it, I think it’s going to be a dip, a transient thing. It would be a massive buying opportunity. I would be buying handover fist at that time. So yeah, that’s definitely possible. I will tell you though, but because of my views where I’m tilting so ever so bullish right now, I’ve been buying handover fist already sub 30 K. So when I see the 29 handle, I saw the 28 handle, I bought more after market today. Because I’m not convinced it’s going to go… I don’t know if it will hit 25 K. There’s some good evidence saying that it might not.

Jeff Ross (00:40:16):

When you look at things, I mean we can… I don’t know if we want to take the conversation this way, but different pricing models, right? You look at things like adoption curves, Metcalf law based kind of thing. Still waiting for Will Clemente. He’s supposed to put out a report, I think May 16th on that. I gave him a person to check out. There’s some good work that’s done on this.[Yurien Timmer 00:40:35] from Fidelity has some work based on cell phone adoption.

Jeff Ross (00:40:39):

That’s I think, okay. I think it’s underestimating the growth of Bitcoin. When I look at that kind of thing, I think Bitcoin right now is cheap. It is trading along its adoption line right now. It would take massive market forces to get it to go lower. It would be ugly because it’s very rare for it to go lower and stay lower. The last time it did, where it dipped significantly below was COVID and then it quickly ramped back up and got back on track again. So that’s how I would envision it happening this time around as well.

Joe Carlasare (00:41:10):

Just to correct Jay, he’s up for confirmation for a full vote of the senate either tonight or tomorrow [inaudible 00:41:16]. Yeah, so either tonight or tomorrow on the 11th. So I wasn’t wrong on that.

Preston Pysh (00:41:21):

Can I address it?

Jay Gould (00:41:22):

But when he gets it maybe he gets more aggressive and doesn’t have to care. It’s scary.

Jeff Ross (00:41:26):

Can I talk about that and then we can come back to the adoption thing if we want to too, either way. I’m not into politics at all. I don’t care, don’t have any horse in the game, don’t care. I think Biden and the Biden administration, they are not Trump, right? They are not stock market junkies. They are not pump it and we are going to have the best stock market returns ever. They are all about inflation and they say they’re for the little guy so they’re trying to bring down inflation. I think they may continue to sacrifice the market without putting pressure on Powell. I don’t think there’s necessarily going to be a ramp up into the midterm elections. I do think the Democrats are going to get trounced, but I think they’re going to run on the platform that look, we actually got inflation under control. We sacrificed, we stuck together. Look at us, go America.

Joe Carlasare (00:42:10):

We’ve ruined your 401k. Your gas prices are lower.

Jeff Ross (00:42:13):

Yes. You’re all going to work 10 years longer because of it. Anyways, so that’s what I think is probably going to happen. And I still agree with you guys that we’re going to get to these lower lows. I just think we’re going to delay a little bit. I think we have a two month interval or so, and then it really tanks at that point. And then when

Preston Pysh (00:42:29):

You look at that chart, I don’t see a lot of support between 20 and 15, right? It starts to get really hairy there, right? To your point, it would be a quick jump down… a spike down rather, a wick down. I think there’s going to be a lot of money that comes in saying, man, I missed this in a 2020 bull run up. There’s going to be retail coming in big and probably hedge funds as well.

Jeff Ross (00:42:47):

So here, here are my reasons, again, for this. I’m sorry to keep harping on this, but do you know more than three people who are bullish right now? I can’t think of three people.

Preston Pysh (00:43:00):

I don’t think anyone on here other than you.

Jeff Ross (00:43:00):

Three months ago when I was Dr. Bear and going on Twitter spaces and talking about, I literally was mocked and ridiculed all the time. People were, “Are stupid? You’re just a doc.” Trust me. I’m I wore my daughter’s shirt she got me for Father’s Day; trust me, I’m a doctor. You’re just a doctor. You’re blah, blah, blah, people hacking on me. Not to toot my horn or anything, but you could see this stuff coming, right?

Jeff Ross (00:43:22):

Now when I talk about being bullish on Twitter spaces, the same ones, I get mocked and ridiculed like, “That’s insane. How could you possibly think that?” I don’t know anybody who is bullish, right except I’m-

Joe Carlasare (00:43:32):

I’m bullish.

Jeff Ross (00:43:33):

Yeah, Joe is. David Hunter, he’s always bullish. Who’s that other dude, Tom Lee or whatever. So a couple guys are still bullish, but the vast majority of people are all nodding their heads and talking about how it’s going lower. When everybody is bearish, there’s nobody left to short it, right? There’s nobody left to sell. That’s when the price starts creeping up and nobody believes it for a while. So that’s again, what I’m going off om. I’m sorry.

Joe Carlasare (00:43:54):

The issue is, as I see it, is not one of pure sentiment. It’s not a traditional orderly market. What we were talking about earlier and what I think was the key that Preston was hitting on is you have a liquidity issue. In a liquidity crisis, you can’t stop that just because sentiment gets really bad. It’s like a snowball down a hill that turns into an avalanche. That’s the problem we have right now. If you can’t backstop that through liquidity, resolving in the issues…

Joe Carlasare (00:44:19):

By the way, guys… I’ll put this in the chat and you can check it out. The feds own working financial stability report is talking about these liquidity issues in the commodities market, in the bond market, in the S&P 500. They’re identifying this as a systemic risk so I don’t know. I think at a certain point they’re going to call uncle, whether it’s 10, 15% lower from here, because they’re just a little bit more hawkish than they were in 2018. That remains to be seen.

Jeff Ross (00:44:43):

One quick… Sorry, Preston. One quick thing is I’m always early. I’m notoriously early so this may take longer. We may still go lower for longer and I’ll look stupid for a little while before we get this ramp up that I’m hoping we see, sorry. I just wanted to throw that up.

Preston Pysh (00:44:56):

When, when the liquidity starts drying up, it becomes very mathematical. It’s funny because when you talk to anybody who’s not really intimately familiar with markets they always say, “Oh yeah, it’s the fear. It’s the fear.” Actually it gets really mathematical at the end where the promises have been so broken that everybody’s just trying to cover their counterparty risk and they have to sell to cover it.

Joe Carlasare (00:45:19):

So Preston, this is directly from the report that just came out on Monday. I’ve just got to read this one sentence for you.It says, “A sharp rise in interest rates could lead to higher volatility, stresses to market liquidity and a large correction in risky assets, potentially causing losses at a range of financial intermediaries.” That’s the fed. The fed is saying that these rent rates are going to cause potentially a liquidity crisis if they continue.

Preston Pysh (00:45:44):

And if you take that definition and you put it up to an equal sign, it will equal softish.

Jeff Ross (00:45:55):

That’s funny.

Preston Pysh (00:45:56):

What in the world is happening in China? What in the world is happening over there? Are you guys seeing these videos and stuff that are coming out? This is crazy.

Preston Pysh (00:46:00):

Are you guys seeing these videos and stuff that are coming out? This is crazy.

Joe Carlasare (00:46:05):

I’ve only heard a ton of theories about this. I’ve probably heard a dozen things, everything from they’re potentially trying to sack the supply chains that cause havoc for US consumers and they’re willing to take the pain to inflict harm on the United States and to advance Russia’s cause. I’ve heard theories about how it’s related to Xi Jinping, trying to get another term for life, become president for life, and his political issues and he’s trying to stop some of his adversaries. But I agree with you Preston, you see these videos and knowing what we know now about COVID, it seems… probably can’t say that, but yeah, it seems wrong.

Preston Pysh (00:46:36):

No, no, no. So I have grandparents, they’re both in their nineties. They got COVID two weeks ago, they’re perfectly fine now. They pushed straight through it and they fully recovered. The COVID that we’ve got right now has mutated to a point that is drastic… I got COVID when it first happened and let me tell you I was down hard, like really hard. I did an interview with Jack Mallers. It was funny, Jack had it two weeks before I got it and I was doing that interview, I distinctly remember this. I didn’t even know what my next question was, I was out of it. And so this thing is mutated, it’s completely different, and I’m looking at these videos from China and I’m saying, “Oh my God, they’re locking down cities that are three times the size in New York City. Literally welding people into their apartments. People aren’t allowed to go to work.” You’re watching the ships build up in the ports. It’s Beijing and Shanghai. Who knows what else? There is nothing normal that’s happening over there right now.

Preston Pysh (00:47:38):

And I’ve heard the arguments of, “Oh well they’re strategically doing it to disrupt supply chains and blow up the dollar.” There’s that argument. I’ve heard arguments that it’s actually a political rift between Beijing and Shanghai that’s playing out in relation to Xi Jinping. I’ve heard that it’s a resourcing constraint or they don’t have enough water, they don’t have enough food. Because everything was so centrally planned, the cities and everything was so centrally planned, that it didn’t materialize in the whole social order and construct of how things function over there, from a resourcing standpoint, was completely centrally planned. And so now it’s completely coming unglued as you’re getting pressures in the broader markets. There’s people talking about there being an invasion this fall and that maybe some of it has to do with that, or in preparation, or making social issues abroad greater by causing these dynamics. I don’t know what it is. I’ve heard a lot of different theories but I can tell you this, something is really wrong over there right now. Like scary.

Jeff Ross (00:48:49):

If I can chime in. I think all of those theories are giving them too much credit. I think it’s stupid healthcare policy. I think it’s people, centrally controlled government, who thinks they can eradicate an endemic virus that’s highly contagious by doing lockdowns. And that’s just not how highly contagious viruses work. You have to play the game, you have to take your medicine, you have to let it run its course. You can help reduce it with vaccinations if you want to, and we don’t have to get into all that stuff, but they tried and they sort of eradicated it initially, and then it comes back because it’s highly contagious. And I just think it’s stupid policy. And now the rest of the world has gone through our COVID time and, to your point Preston, now it’s very tolerable. Most of us have some significant immune response to COVID and we don’t really have to worry about it anymore. That’s what happens. These things, they go through their course. China hasn’t taken their medicine yet, and now it’s coming back to hurt them. And so that’s all I think is going on.

Jay Gould (00:49:48):

Jeff, let me ask you a question. My cousin lives down in Maryland and he posted a photo of himself with a surgical mask because he went in without a mask and they said you have to wear this, in the doctor’s room. That doesn’t do anything, right? What is the point of the surgical mask in the doctor’s office? They’re all making them wear these now when they go in.

Jeff Ross (00:50:02):

Yeah. I don’t know if we really want to go down this route, but-

Jay Gould (00:50:05):

I’m just curious. Isn’t it supposed to be an N-95. It seems like it’s virtue signaling or something’s happening here and it’s not-

Jeff Ross (00:50:12):

Most of it’s… so yeah. And man, I can’t believe we’re going to do this, but so-

Preston Pysh (00:50:18):

No, no, no, don’t answer. We don’t need to hear this in the comments. I don’t even want to hear it in my comments.

Jeff Ross (00:50:22):

Good, good. Okay. Save me.

Jay Gould (00:50:24):

I’m just curious, you’re a doctor. I don’t know.

Preston Pysh (00:50:26):

I think everybody can tell by our facial expressions what we think.

Jeff Ross (00:50:29):

Yes. That’s my theory about China though.

Preston Pysh (00:50:31):

I think that your simplicity of this is signal, for me at least. I think you’re right, maybe it’s just pure stupidity in just like… I mean, think about this culture over there. They have social credit scores tied to their phones. And if they complain about the policy being too whatever, all of a sudden now they can’t go out and get a loan on a house or something. Or they can’t be seen at the better clinic or they can’t be whatever. And so who’s going to speak up in an environment where you’re penalized by saying anything negative as to whatever existing policies exist.

Jeff Ross (00:51:09):

Think about it-

Joe Carlasare (00:51:09):

But that argument… Go ahead, Jeff.

Jeff Ross (00:51:10):

I’m just saying, think about how it was even here in a free country like America. You say something anti what the government protocol is, you get destroyed and you get canceled.

Jay Gould (00:51:19):

You can’t even give an opinion about a mask on Preston’s show here.

Jeff Ross (00:51:23):

Right, right. Now imagine living in China where the government literally will threaten you and put you in jail possibly, and cancel your social credit score because you said something opposed to them. So who’s going to say anything against it. Anyways, sorry Joe, I interrupted you.

Joe Carlasare (00:51:37):

No, I just think the art… I agree with what you’ve all said. The thing is though, China’s all about control, from controlling the internet to banning Bitcoin miners, to banning access to all sorts of different things we take for granted in the United States. So to me, there is an agenda behind it. It can’t be just merely ignorance on the part of healthcare policy, there has to be something they’re concerned about free people doing. And so I don’t buy the whole just ignorant, poor medical policy. They may have a role in it to some degree, but there’s something in particular or variety of things they’re concerned about.

Jeff Ross (00:52:10):

I would humbly submit, Joe, that we had massive amounts of ignorance at our leadership level for our policies related to COVID and we suffered for it. And some of it was okay and some of it was good and lots of it was terrible. And we shouldn’t get into this anymore, but I just think you might be giving their leadership too much credit personally. I think it’s really simple.

Jay Gould (00:52:27):

Yeah. This is going to be shadowbanned on YouTube.

Jeff Ross (00:52:31):

Sorry.

Preston Pysh (00:52:31):

Well, no, I just want to keep it focused on the finance and the markets. And Jeff does not need that type of action in his comments section, let me promise you.

Jay Gould (00:52:41):

He gets a lot of heat. It’s all good. He knows how to take it.

Preston Pysh (00:52:43):

He does take a lot of heat.

Jeff Ross (00:52:44):

I can take it. Yeah.

Preston Pysh (00:52:45):

He likes the heat.

Jeff Ross (00:52:46):

I kind of do. Masochist.

Preston Pysh (00:52:50):

Joe, the regulations coming out of the Luna situation. What is this going to do?

Joe Carlasare (00:52:57):

Well, the regulation was already coming. It was coming, they already had the executive order earlier in the year. They’re studying the stablecoin market, they’re talking about creating it. If you read that financial stability report, the Fed has made clear again, that they’re waiting on a directive from either the executive or Congress before they implement a CBDC. And again, check it out, I just put it in the comments view. It’s pretty fascinating. They have a whole couple pages on the CBDC and the efforts and the benefits, and what it would look like and how it would involve the banks. It’s a pretty detailed breakdown of the Feds view. But to your point though, I think this was always coming. What this gives is a rhetorical talking point to hammer home; look at this stablecoin, look at all this wild, wild west activity going on in crypto. We need to come in and we need to deal with it. That’s really powerful, because it’s much harder to drum up support if you don’t have a blow up. If you have a blow up, you can easily go into every legislator’s office and say, “Guys, we got to act now. There’s consumers at risk, there’s people that have lost their life savings.” I’ve seen… there’s some tweets out there today about fairly prominent lawyers in this space and people that I know personally, they lost a ton of money on this. They lost their life savings.

Preston Pysh (00:54:05):

Really?

Joe Carlasare (00:54:06):

Yeah. Yeah, just awful… People were putting a ton of money into this token, they thought it was foolproof. There were entire companies, some of which had reached out to me asking for advice and support in my job, my day job, that literally built platforms based off staking tokens and getting 15% APY. Just a total mess. And full disclosure, I told a lot of these folks that this doesn’t make sense, this is a house of cards you’re building on sand. And once there’s a run on the bank, we all know what happens next. Particularly if you don’t have somebody coming in to do open market operations. The whole reason that the Ponzi of the Fed exists is because they can always come in and intervene and always inject liquidity. That’s not happening in these stablecoin protocols. Somebody gets left holding the bag.

Preston Pysh (00:54:54):

How could anybody think that you can collect a 15% yield on something that’s not tied to anything?

Joe Carlasare (00:55:00):

How are you getting that. Yeah.

Preston Pysh (00:55:03):

If you’re going to have a token and the token’s tied to some protocol or application that has a billion users; sure, maybe there can be some type of utility there, but even then how are you pumping out a yield if you’re not harvesting actual earnings from an equity based business? These tokens are nothing. They are literally nothing. They’re a piece of software that says that there’s 10 million coins. This is insane.

Joe Carlasare (00:55:31):

But Preston, you know how attractive this is. How many times do we sit and talk with bitcoiners, and they always ask the question, “Should I put my Bitcoin on this exchange and should I get that yield?” That’s really attractive to people. And I think they’re now finding out, when you give up your keys, when you give your Bitcoin to somebody else, you’re compromising the best asset in the world. You’re letting people for five BIPs or whatever, and they end up paying. I mean it’s a joke. And the people are going to have to learn this lesson again and again and again, until they get it.

Preston Pysh (00:56:00):

How about the ETH staking? So, if we go back to whenever they rolled out this idea of ETH2 and that you could stake ETH. I forget how many you have to stake, what is it, 25 ETH to stake it, right?

Joe Carlasare (00:56:11):

Right.

Preston Pysh (00:56:11):

And so of course most people that are buying this stuff don’t have that much. So then they have to go through the exchange, which totally centralizes the clearing mechanism for a proof-of-stake system in a long enough timeframe. But you pull back the clock, are we in 2019 or 2020, when this became an option, to start staking ETH for quote/unquote “ETH2”, that still has not rolled out? So now you got all these people, and those numbers of these people staking this stuff just keeps going up. I forget what the number is, but you’re talking billions that has been staked, and they can’t get anything out but yet they’re collecting yield, which is just the ETH protocol debasing itself on ETH 1. I suspect, I think, I don’t know. It’s so convoluted and confusing as to what the heck they’re actually doing here.

Preston Pysh (00:57:04):

So when I’m looking at the ETH volume and things like that, you would think the volume’s going down if these people keep staking their ETH into this ETH 2 and they can’t withdraw. They can’t pull it out, even if they want to. And so Coinbase and other exchanges that are offering these services are complicit with this scheme. It’s a scheme. What the heck is going on? And now I don’t even think, are they even doing… and I’m not an expert on this stuff. So, people listening to this, if you got ETH and you think I’m crazy, feel free to think I’m crazy. Because I don’t dig into this stuff. I find the whole thing to be very Ponzi like. But the timeline, when are they rolling this thing out? Are they going to roll this thing out?

Preston Pysh (00:57:44):

It doesn’t seem like they can get off of a proof-of-work-protocol and move to a proof-of-stake-protocol, without there being severe, intense engineering gymnastics; of 10 things you can’t even pronounce the name of it, and they keep changing the name of that. It just seems like it’s so similar to all this Luna like disaster framework architecture of just noise, engineering software noise, that you can’t even wrap your head around. So I’m just curious what you guys think of some of this, and I guess where I’m looking at you Joe is, are the exchanges complicit in this staking of these clown coins? And, I know I’m going to upset people when I say that about ETH because everybody… there’s a massive community around that. I don’t own it. I just don’t understand it. I don’t understand how people can’t see the lack of sound engineering in this stuff.

Joe Carlasare (00:58:40):

So, I’ll start. So from my perspective, I think you have to get everybody in Bitcoin, has to get into their heads that the SEC’s regulation by enforcement is purposely designed to be slow and inefficient. They’re going to go after the biggest fish, it’s going to be very long and painful before they get results. And with respect to the exchanges, in many cases, they’ve taken a hands-off approaches for exchanges. So to your point, are they complicit? Most of the time, like we’re seeing right now with Luna, and as I alluded to earlier, it’s going to take something to go really wrong before you start getting civil lawsuits filed against them. When people start saying, “I had my life savings in this, it blew up, you are responsible because I can find you. I know where to serve you. I can sue you and have legal process in court.” That’s the way this goes down.

Joe Carlasare (00:59:25):

So when these things actually blow up, or if rather they blow up, at that point, that’s when you’re going to get civil suits that are going to actually force these people to change. To your point though, you’ve had these tokens listed, and Gensler has come out publicly and he said, “I look at these exchanges, I see tons and tons of unregistered securities.” The vast majority of these things are unregistered securities. Well guess what we’re seeing now, we’re seeing not one, not two but three separate class actions that have been filed against Coinbase for aiding and embedding the sale of unregistered securities. They’re pending in the civil format where people can bring these things on their own without waiting on the SEC or any other enforcement agency. So I think that’s going to come. I think you’re going to see a ton of litigation against these entities coming forward. And it remains to be seen if they can advance it.

Joe Carlasare (01:00:10):

But if you get one of these things to go forward and a judge to say, yes, a private investor or a private actor can sue Coinbase and advance these claims against an exchange. Man, you’re going to open up a plethora of litigation from the plaintiffs bar. And keep in mind, one of the things Congress loves to do; they love to give the ability for private rights of action. They can easily put forward a bill in Congress that empowers and gives attorneys fees. And they do this consistently with medical malpractice and all different types of litigation that gets filed. They give them the power to bring private suits because they don’t have the enforcement capacity. They don’t have the attorneys. It’s just too broad of a market.

Preston Pysh (01:00:48):

And I guess what I’m looking at as like, let’s say the price of ETH, and I think it has, it’s gone down 50% or whatever, and you can’t withdraw. You’ve deposited into this thing that they’re acting as your representative for, that you’re supposedly collecting yield and you’ll get it whenever they’ve decide that it’s done. And you’re in this Do-loop of you can’t even withdraw to get rid of it. I mean, it’s all new tech. All this stuff is happening, there’s no framework for what, what… Because none of this has ever been done before.

Joe Carlasare (01:01:23):

The most unfortunate thing is that you’ve got all this junk out there, right?

Preston Pysh (01:01:27):

Yes.

Joe Carlasare (01:01:27):

And again, it’s tied up in Bitcoin. We’re associated, we’re lumped in, which I’ve heard Jeff say this, and I totally agree with it; bitcoin is totally different from all this other crap, it really is. And the problem is it’s all crypto, it’s all blockchain. It’s all buzzwords that people lump together. And we get caught up in this regulatory drive to do something about this wild, wild west market. When, it’s really unfortunate that we have nothing to do with it. We’re kind of only related loosely.

Preston Pysh (01:01:55):

The transaction fees today were a hundred dollars for an ETH transaction. A hundred dollars. It’s insane. That’s insane. Who’s buying this?

Jeff Ross (01:02:07):

Hey, let me segue here, Joe, because I’m glad you’re here. And a dude on Twitter asked this question before we got on. His name is “small state huddle.” So, shout-out to him. He said, he’d like to know, and I’d say from Joe, what the ramifications of the SEC claiming Alts as securities would be? This is what you’re talking about, but do you think there’s a point where litigation will go from beyond exchanges and actually to individual Alts? Will they come after the founders of, pick a thing, Luna, Cardano, whatever?

Preston Pysh (01:02:41):

How would that go down? How would that go down?

Jeff Ross (01:02:41):

You think that could happen?

Joe Carlasare (01:02:41):

Yeah. So this is the biggest misconception. I think people think that one day Gensler can stand up in his office and say, I declare these hundred tokens to be unregistered securities. And that’s not how it works. He has to bring a civil suit. He has to make a claim that an entity or a person engaged in the sale of an unregistered security. They violated the act, basically the Securities and Exchange Act. So from that standpoint, they have to be selective because they only have so many attorneys to bring these claims. And what we know from SEC versus Ripple, which is dragging on and on. We won’t get even a motion for summary, doesn’t get briefed until later this year. And then we won’t get a ruling until 2023. That they have limited capacity, they’re overworked.

Joe Carlasare (01:03:20):

So to your point, Jeff, I think what you will see is, you will see increasing enforcement. They’ve telegraphed this extensively, but it’s going to be one off case filed. Here’s another case filed. Here’s another case filed against individual actors. And it becomes really problematic when the entities that are creating these things and the individuals who are promoting these tokens are outside the United States. So to me, that exposes a lot of liability on the exchanges, because if the exchanges are aiding and abetting the sale of these things, that is a problem. That’s where your legal liability is. Gensler will never, he will come to the conclusion eventually, that you will never get your arms around this market, unless you stop the choke points of the exchange. And then, the other problem is, well, now you’ve got these decentralized protocols. And are they quote/unquote “decentralized” or are there actual actors behind them that you can haul into court? If there are actors, you can haul into court, they’re not decentralized. And that’s how he goes after those markets.

Jeff Ross (01:04:14):

Thanks.

Preston Pysh (01:04:15):

What’s your thoughts on the Ripple outcome?

Joe Carlasare (01:04:17):

At this point, I don’t see anything that takes us outside the context of a simple investment contract case. I think it is clearly a sale of an unregistered security. I’m going to get hacked now, once again, because I’ve said this publicly and the Ripple army comes after me every time. I don’t care, that’s my view of the law. You can prove to me wrong, I think, when the judge comes down and says I was wrong. The good news for us is that, well, I guess, depending on your perspective, the unfortunate news, put it this way, is that no matter what comes down, if the judge rules, finding it’s a security or it finds that it’s not either the SEC or Ripple Labs, is going to appeal it. So you get a decision next year, unless there’s a settlement. If you get a decision, it’s going to go up to the Second Circuit and the Second Circuit, the next court’s going to review it, and they’re going to decide on it.

Joe Carlasare (01:05:06):

The most interesting thing though, in that case, anybody following it, is this fair notice defense, which today has been allowed to stand. It’s still moving forward a motion for summary judgment. This is a constitutional defense. And basically it argues the regulatory environment was too uncertain, it was too unclear for us to enforce anything. Therefore, you can’t hold us liable, it violates due process. If that argument is allowed to stand and be advanced, every Alt coin out there will cling to that argument. They’re going to say, “It was too confusing for us to comply with the law, even though we had lawyers telling us how to comply with the law.” They’re going to latch onto that, and that’s going to really handicap the SEC. So my hope, as a bitcoiner is that defense is rejected that you’d follow the traditional Howey Test and the traditional securities laws. And you don’t create a special carve out for quote/unquote, “crypto”.

Preston Pysh (01:05:55):

Now would the SEC try to get that case dropped into a certain jurisdiction of a judge that would rule on that? What would be their play to try to get the angle that they would want? Can something like that even happen?

Joe Carlasare (01:06:09):

No, no. It’s already in front of a judge. I mean, we already have a Judge Torres, she’s ruling on it. She’s going to rule on the motion for summary judgment and then it has-

Preston Pysh (01:06:18):

What’s her [inaudible 01:06:18] on being a liberal view of that or a ultra conservative view of it?

Joe Carlasare (01:06:22):

I don’t think she’s had an issue that’s close enough on point to really make that assessment. She’s a good judge. She follows the law. I’ve read some good opinions from her, just in my limited research. But again, her ruling’s not the final say. You’re going to go up to the next level, the Federal court system, The Federal Court of Appeals. So their opinion in many ways is probably going to be more important, but there’s also the potential that they settle. There’s always this thing that you get later in the litigation and people say, “That’s enough, we’ve had enough. We don’t want to risk a bad ruling.”

Preston Pysh (01:06:51):

What would the SEC want from a settlement out of that? What would that look like?

Joe Carlasare (01:06:55):

Discouragement, a fine, can’t list it anymore. Can’t-

Jay Gould (01:06:58):

You kept saying on Clubhouse, that this is more likely than not, which is encouraging all, only to continue and perpetuate, right?

Joe Carlasare (01:07:06):

Yeah. If there’s a settlement, then all this stuff… I mean, this is the big thing, I think that folks that aren’t living day to day in the legal system, they don’t realize that a lot of, the vast majority of lawsuits end in a settlement. This is not a criminal action. Nobody’s going to go to jail for this. Even if it’s found to be a security, it’s generally discouragement and some penalties, and maybe some other agreements that have to be fulfilled in the order. But ultimately it’s not going to be somebody’s liberty taken away and thrown into court. That’s not what the SEC does.

Jay Gould (01:07:34):

They just bankrupt it or something. If they have no money in the bank.

Joe Carlasare (01:07:39):

Discouragement. They get their money back. But again, if it’s anything that’s short of a full loss of all profits, that’s… A lot of people look at it like a speeding ticket, they had to… I mean, look at BlockFi. Look at the settlement they paid, I think it was a hundred million.

Jay Gould (01:07:54):

Is that the New Jersey one?

Joe Carlasare (01:07:55):

Yeah. Yeah. It’s a hundred million and they can still offer their yield product. That’s a speeding ticket.

Preston Pysh (01:08:02):

How about the… And Joe, sorry for so many legal questions, but this is- [inaudible 01:08:07]

Jay Gould (01:08:07):

Got them. Go get them.

Preston Pysh (01:08:09):

The Spot ETF, you and I were talking on Twitter a couple weeks ago and you provided some really awesome insights as to where you thought this was at. Help everybody understand your vantage point on this one.

Joe Carlasare (01:08:21):

Yeah. So a couple developments first on that; I am told through some pretty reliable actors, and I think it was publicly shared as well, that folks from Grayscale did meet with officials from the SEC. So that’s positive. You want them to strike up a dialogue, hopefully they pivot and change their stance. But the confusing thing for me in the financial reporting on this has always been, well, we can’t figure out why they’re not approving the Spot ETF. People say it’s being held hostage, or Gensler’s concerned about Bitcoin growing and the price appreciating. I think that’s wrong because they’ve been extremely clear what they want to see to approve a Spot ETF. They want basically two things; number one, they want market of sufficient…

Joe Carlasare (01:09:00):

… two things. Number one, they want market of sufficient size and liquidity that is based in the United States that has some access for US regulators to see is there real trading going on? Is there real spoofing? To the extent that if there is “market manipulation”, it’s not going to be enough to move the major spot price. That’s their main thing.

Joe Carlasare (01:09:21):

The other alternative that they cite in the orders is that they want exchanges to have a universal, shared surveillance agreement. Which basically means that any regulator’s going to have full access to their books and records. You can see what they’re looking at. They’re looking at some US exchange that has the majority of the volume, being able to peek into that market and know there’s no funny business going on.

Joe Carlasare (01:09:43):

The problem for the Bitcoin market, as I think everybody on the call knows, is that most of the major leverage exchange is all overseas. It’s outside the jurisdiction and purview of United States. That’s a black box. And when the SCC is looking at, they’re saying, “Listen, we don’t know if this underlying market has integrity, if it’s something that isn’t just being manipulated by these offshore exchanges.”

Joe Carlasare (01:10:04):

To me, reading that in the order, if you’re seeing them say repeatedly, “We want surveillance, sharing agreements. We want a market of sufficient size in the United States.” Unless something changes structurally with the market you’re not going to get them to just wake up one day and say, “That’s it. Green light. We’re going to make it move forward.”

Joe Carlasare (01:10:21):

It’s possible. But usually regulators get stuck into their precedent. They get stuck into their position in their firm, an absent of political pressure, or some rule change or a law. Or Congress saying, you have to approve this. You don’t just see a random pivot on a Tuesday.

Jay Gould (01:10:37):

Well, what about the gold and the silver markets? Isn’t there the same concern there and how is that approved? How does it have an ETF for those?

Joe Carlasare (01:10:45):

Yeah. [inaudible 01:10:48] Yeah. Their answer to that is that the majority of the marketplaces, the majority of the exchanges and liquidity is in the domestic markets. It’s done by the CME. And you can’t accuse the CME of any market manipulation, because they have a surveillance sharing agreement.

Joe Carlasare (01:11:01):

The SEC or, in the case of the CME with gold, they have the CFTC. They can come in, they can look at those commodity markets and the CFTC can say, “Yeah, there’s nothing funny going on here. We trust this market.”

Joe Carlasare (01:11:13):

If you go back, why did they approve the future’s ETF? I don’t believe it was to manipulate the price of Bitcoin. Others may disagree with me. That’s fair enough. They approved it because they couldn’t legitimately claim with a straight face that the CME futures were being manipulated internally, that there was spoofing going on in the futures market, that there was something irregular in their order books. They can’t claim that because the CME has pretty much a world class reputation status.

Preston Pysh (01:11:38):

This was the last question I think we’re going to cover here. And I think this one’s fun. How to explain to your significant other, that the magic internet money will go up, after the last couple days.

Jay Gould (01:11:51):

Or my parents.

Jeff Ross (01:11:54):

I’ll take that one to start.

Preston Pysh (01:11:55):

Yeah. Go ahead.

Jeff Ross (01:11:56):

Because I’ve been married. We’re going on 23 years of marriage here. I got my wife to read the Bitcoin standard. She understands what money is. She understands why Bitcoin is better money. She doesn’t care about the price. She trusts me to buy it at reasonable times when it’s cheap. And she’s totally orange peeled. In fact, one of the coolest things that happened and I will digress for just a second here.

Jeff Ross (01:12:20):

Our mailman came by, who sees I work from home. He sees things coming for Vailshire, for my financial business. And he was asking about using me as an advisor. And my wife said, “Oh, you don’t need Jeff. All you need to do is start buying Bitcoin.” And she’s trying to orange peel the mailman. He’s like, “Really? Just Bitcoin?”

Jeff Ross (01:12:37):

That was my proudest moment as a husband. My wife was trying to orange peel the mailman. That was fantastic. Anyways, that’s no problem for me here in the Ross household.

Preston Pysh (01:12:45):

Really, it’s education. Your answer is education, right?

Jeff Ross (01:12:48):

Yeah. Education.

Preston Pysh (01:12:49):

Jay.

Jay Gould (01:12:49):

There you go. I was going to say the same. It’s really, I’d point them to VJ’s medium post. If you read that, I think you get a real understanding of Bitcoin. I think from there, you can understand how the value goes up over time just by reading that.

Preston Pysh (01:13:01):

Come on, Joe.

Joe Carlasare (01:13:02):

Yeah. My view is this. And it’s actually, we’re in the perfect environment for it right now. I don’t like ever trying to talk to about Bitcoin in a bumper slogan or some short, little pithy statement. I think you need to have a conversation with them and needs to just get down to some of the core fundamentals about what’s going on right now.

Joe Carlasare (01:13:20):

And if you look at financial markets right now, and I think this is the biggest selling point for Bitcoin, everything we’ve been talking about in this show, they’re completely broken. You have the Fed setting expectations of hiking and everything is selling off. You have bonds selling off, you have equity selling off. That system is not sustainable.

Joe Carlasare (01:13:39):

The question only becomes what are we moving towards next? And to me, it’s an easy call. It’s Bitcoin, because there’s nothing out there. Our good friend, Bitcoin TINA., there is no alternative. I don’t really see an alternative in the system that’s out there. I don’t believe the world returns to a gold standard. I don’t believe we return to Zoltan Pozsar’s financial commodity backed currency. I don’t think that’s coming.

Joe Carlasare (01:14:00):

I think you have this pristine, perfect asset born into the internet that is unlike anything we’ve seen in history. It has all these unique characteristics that literally you have to create new words like unconfiscatable to describe them. And in that paradigm, I think Bitcoin wins. It’s just a question of when. You can’t focus on the day-to-day. I know it stinks to buy Bitcoin at $60,000 and have it evaporate down to 28 or whatever it’s trading at.

Jay Gould (01:14:24):

But I was about to say, as you’re saying this, because I was just talking to my father. My son’s birthday, is my son turned three today, so we had a little birthday before I came down here. And he’s telling me, he’s like, the store value argument that you’ve been telling me about for years. And this hedge against inflation. And he goes, “What kind of hedge are we talking about? We’re down 50% from 60 some thousand.”

Jay Gould (01:14:44):

It loses that argument. When you talk about those types of fundamentals and how it is the… It’s a really difficult conversation to have, which is why I point them back to the article because you got to look at the things you’re talking about. The confiscatability. I call it the disc test, which is it decentralized? Is it immutable? Is it scarce? And is it censorship resistant? And there’s really only one thing that is, and that is Bitcoin.

Preston Pysh (01:15:06):

People don’t understand how powerful the dollar is and how it’s so powerful that it’s a wrecking ball for anything that comes in its path. And I don’t know how you can distill some of those ideas into the stuff that you guys are saying into something that people can understand without doing just an intense amount of hours and hours of research to wrap their head around all the variables.

Joe Carlasare (01:15:32):

You can’t. Just like if you’re talking to somebody in 1991, you couldn’t explain the potential of the internet. It’s the same thing. You can use analogies, you can struggle to explain it. But ultimately, unless they really do the deep dive themself, they’re not going to get it. But everybody listening to this podcast has the ability to do that deep dive. And wherever you’re at in your Bitcoin journey, I can tell you, we might not be at the bottom, but this is a pretty darn good time to start buying Bitcoin, I think.

Jay Gould (01:15:59):

The internet was different because you could use the internet and you can feel how it made you feel using the internet in the ’90s. And you could say, “Wow, I definitely could see how everybody else would be sucked.” Let’s for instance, AOL chat rooms in the ’90s. You started to use that and you fell into the chat rooms, or IRC before that. You can see the addiction of it. Technology, give a two year old an iPad and you could see. There’s an addiction, literally. There’s dopamine levels.

Joe Carlasare (01:16:19):

Jay, have you shown a newbie how to send a Bitcoin transaction? Have you ever done that?

Jay Gould (01:16:24):

But they conflate that with, “I could do that with PayPal.” They don’t understand. They think that it’s the same thing. We already have digital money in their mind. I think we have to really understand is the value that it really has that it’s unbreakable. That’s the thing that to me makes the most sense.

Jay Gould (01:16:39):

And then the argument that it’s basically a digital gold. Except the difference is you can’t take a billion dollars of gold and move it. From that perspective, large institutions, sovereign nations, they’re going to want to hold onto digital gold versus actual gold, in my opinion. It’s a better gold.

Jeff Ross (01:16:58):

One last thing I like to tell people. Sorry, real quick. Is just sometimes the dollar strengthens in the short term, but over the long run, it’s guaranteed to depreciate. It just does historically.

Joe Carlasare (01:17:08):

That’s right.

Jeff Ross (01:17:08):

Sometimes Bitcoin weakens in the short term, but it’s just mathematically and physically programmed to appreciate and value over time. And so, you got to just not put too much faith or stock into short term price movements. I get hit all the time with, “Well, what kind of inflation hedge is Bitcoin if it’s down 50%?”

Jeff Ross (01:17:26):

Back up. Look at five years, I just showed a guy the graph of this yesterday. Or if you look back five years, even with this huge drawdown we’ve just had, it’s still up over 1,000%. Come on. Yeah. I guess it’s such a silly argument to talk about that. Short term price movements are meaningless, their emotional. The weighing machine is the long term price movements. And that’s where you need to make your judgements from.

Jay Gould (01:17:45):

100%. And one way I got my father to really catch this is that he built his house. My dad’s a carpenter, so he built the home for $40,000 in 1985. That house today is four, $500,000. I said, if you would’ve left that in cash, what are you buying for $50,000 today? Can’t even buy a piece of property, like land.

Jay Gould (01:18:03):

You understand that the dollar just loses 100% of its value over 100 years, basically. 99.9% of the value if you look at all the asset prices. And when people start to see that, and then to your point, Jeff, you zoom out on the chart for Bitcoin, everybody always focuses on this myopic what happened in the last six months, one year, two years.

Jay Gould (01:18:20):

You got to like zoom out. And to your point again, I would say it’s the Warren Buffett. Voting machine in the short term, weighing machine in the long term.

Jeff Ross (01:18:27):

Absolutely.

Preston Pysh (01:18:28):

And for those periods that you’re talking about, Jeff, where the dollar is strengthening, it’s strengthening against everything else. Everything else is going down relative to the dollar during those periods. And those periods don’t typically last too long.

Preston Pysh (01:18:42):

I mean, if we go back and we historically look at how long the dollar just goes through these aggressive tightening periods where credit’s blowing up and that’s why it’s strengthening and everybody’s running to it. It’s typically about 12 months. I’d say 24 months at the longest period of time.

Preston Pysh (01:19:01):

I think if you went back to the great depression that was the longest that you saw sell off, which was from 1919 to I think ’31 was where it really hit a bottom. These periods where the dollar will strengthen and I think recently, they’ve actually been a little bit tighter and faster where they haven’t been really tightening for more than a year.

Joe Carlasare (01:19:29):

And again, it’s strengthening versus FX versus foreign exchanges.

Preston Pysh (01:19:34):

That’s right.

Joe Carlasare (01:19:34):

It’s not strengthening versus going to buy gasoline. That’s a big distinction.

Preston Pysh (01:19:40):

It’s a good point. All right. Well, I don’t have anything else, unless you guys had any other topics you wanted to hit up. Let’s go back around the horn in the opposite order. Let’s start with Jay. Jay, give people a hand off where they can learn more about you.

Jay Gould (01:19:53):

Yep. Just find me on Twitter or any other platforms. My username is my name. J-A-Y G-O-U-L-D.

Preston Pysh (01:20:00):

And we’ll have links for this as well. Go ahead, Joe.

Joe Carlasare (01:20:02):

Yeah, same here. You find me on Twitter. I’m there pretty often. It’s @JoeCarlasare. And next time, Preston, give me the memo that I need to wear a hat because I feel out. Everybody and all your hats on this, I feel like I missed the dress code.

Jay Gould (01:20:17):

With the long hair now.

Preston Pysh (01:20:20):

Jeff.

Jeff Ross (01:20:21):

Yeah. I am on Twitter way too much. My handle is @VailshireCap, V-A-I-L-S-H-I-R-E cap. And then if you want to learn more about Vail Shire, the investment stuff that I do, I obviously manage money really differently than most investment advisors and financial planners. If you want to check that out, you can shoot me an email, info@vailshire.com, or just go to my website, vailshire.com. And thanks for having us on today, Preston. It was awesome.

Preston Pysh (01:20:42):

Oh my, I love this. I really look forward to this mix because I know you guys are just going to be open candid, just whatever flies. And we’re all vulnerable in our ideas and comfortable here and counter opinions. I just love this mix and I’m sure we’ll do it in another quarter or whatever. Looking forward to the next one.

Jay Gould (01:21:01):

One more thing. Joe owes me a Happy Meal. We bet three times. Yeah. He owes me $3, a dollar bet. And I’m going to bet you here, Jeff, I’m going to bet you a dollar that we’re not hitting all time highs.

Jeff Ross (01:21:13):

Well, I don’t want to take that [inaudible 01:21:15]

Joe Carlasare (01:21:14):

Jay, Jay. Or Jim, can we just really quick because then we’re wrapping up, but tell us where do the equities go from here? Where do you think in the next two months?

Jeff Ross (01:21:22):

In the next two months, let’s hear it, Jay.

Joe Carlasare (01:21:24):

Next two months. Let’s hear it.

Jay Gould (01:21:25):

Oh, man.

Jeff Ross (01:21:27):

We’re talking July 11th, mid July.

Jay Gould (01:21:30):

Yeah. Yeah.

Preston Pysh (01:21:31):

Oh boy. Don’t ever sign up [inaudible 01:21:32], Jay. Don’t ever.

Joe Carlasare (01:21:32):

Rapid fire. Just let’s do S&P 500.

Jay Gould (01:21:35):

The wide, from here, I think we’re lower.

Preston Pysh (01:21:36):

S&P 500.

Jay Gould (01:21:37):

I think we’re lower by July, August. Because I think that’s when earnings calls come out. We have week guidance, as I was saying earlier. I think that’s not a good sign in July.

Joe Carlasare (01:21:45):

Jeff.

Jeff Ross (01:21:45):

I think we’re higher. And I’m going to say I’m going to give it, I’ll say 4,600.

Joe Carlasare (01:21:52):

I’m going to go 4,400.

Jeff Ross (01:21:54):

Okay. Preston.

Preston Pysh (01:21:55):

I don’t know. I try.

Jay Gould (01:21:58):

Higher or lower than 4,000.

Preston Pysh (01:21:59):

No.

Jay Gould (01:22:00):

Higher than lower than 4,000. It’s like an over, under.

Preston Pysh (01:22:02):

Here’s why I don’t know. Because in my opinion, it’s not dependent on any actual fundamentals that I can look at right now. It’s depending on five people in a room, changing course on whatever they think is enough, is enough. And so-

Jay Gould (01:22:16):

And I’m betting, that’s not happening. That’s [inaudible 01:22:18].

Jeff Ross (01:22:18):

And I’m telling you, it’s not going to happen either, but it doesn’t matter. Just a rally.

Preston Pysh (01:22:22):

This is another reason why I don’t sell Bitcoin, I just buy it. Is because by the time I try to do the math on, all right, I think the market’s going to go lower. I think Bitcoin’s going to go with it. I’m going to sell here and then I’m going to have these massive realized gains that I’ve got to pay.

Preston Pysh (01:22:39):

And then, I’m going to try to insert it at where I think the selloff is going to be. Meanwhile, you have some Fed official that comes out and just completely changes course. And becomes super dovish and eases into this thing. I don’t know where they’re and what metric they’re going to use, especially right now. Because before, and I think what’s so different and here we are just continuing the conversation.

Preston Pysh (01:23:02):

But before we didn’t have inflation, it was like inflation was a mythical creature. Like a unicorn that didn’t exist and nobody believed it was ever going to come back. And right now, for the first time since 2008, it’s back. And not only is it back, but it’s literally, God, it’s unicorn horn, pointed in the person’s heart of these central banks.

Preston Pysh (01:23:29):

And what are they going to do? They’re in a completely totally different situation than where they were before, where the market would sell off 30%. They still had no inflation and then, they would ease into it again. I don’t know what they’re going to do.

Jay Gould (01:23:43):

They have two mandates. They say dual mandate, full employment and inflation. Their target is 2%. And there was for years, as you know, it was lower than 2%. At least how they reported on CPI. And I think they would like to see inflation run. This is why they started to raise the rates and what they’re doing with their policy.

Jay Gould (01:24:00):

It’s gone a little bit too much, as we know. They’re pushing a little bit further to try to pull that back. I think that what’s going to be the catalyst for them to change their policy is the employment. What are the two mandates? It’s inflation, it’s employment. If they start to see that there is layoffs in the market, or you see a crash that infers that there may be some layoffs in the market for employment, I think that’s where you start to see them reverse their monetary policy earlier than we would otherwise see, just based off of the rates itself and the math.

Jay Gould (01:24:28):

It could happen sooner, based off of what the marketing conditions are. In the S&P it’s a 30, 35% decline. If that happens quickly, they have to respond, in my opinion. But this is why I’m a little worried about the 25 basis point, the 25 bip hikes, because it may not rapidly sell off. If they do this 50 and the 50, it could rapidly sell off and there could be reversal, but that’s just my opinion.

Preston Pysh (01:24:49):

I guess that’s where I’m a little hesitant. For me, it’s a coin toss whether it’s higher or lower right now, because I do think that we’re going to have things get really messy here in the coming two months, really messy. And if that’s true, they might have to step in and reverse course. I just don’t know the timing of that. I just, I feel like this is getting very unorderly real fast.

Jay Gould (01:25:16):

You got to make a call, higher or lower.

Preston Pysh (01:25:18):

It’s a total coin toss. I could go either way. With that, you tell me, am I up or am I down? Because either way, I don’t know which one it’s going to be at this point just because of where we’re at. If this was our last recording, I was pretty bearish last recording. And it’s easy for me to say that now.

Jay Gould (01:25:39):

Well, you said it last time.

Preston Pysh (01:25:42):

But yeah, I thought that there was a whole lot more selling to go because I was looking at the disparity. I didn’t think that the inflation was going to go away. The market was only down, I don’t know, 10, 15% when we talked last and now we’re approaching 30%. I think things can get pretty nasty. And I think that they could come in and reverse course. I don’t know. I just don’t know.

Jay Gould (01:26:04):

Wait, what’s 30%? What are you saying? On the [inaudible 01:26:07]?

Preston Pysh (01:26:06):

On the NASDAQ. On the NASDAQ, we’re close to being 30% down from the high right now.

Jay Gould (01:26:10):

But see, the S&P is what I think the gauge is, because that’s the broader market. And so, we’ve already seen the pain in the NASDAQ. I think you’re going to start to see the pain in the value stocks and the small caps, the midcaps. That’s [inaudible 01:26:20].

Preston Pysh (01:26:20):

I don’t think the care. I don’t think they care. [inaudible 01:26:22]

Jay Gould (01:26:22):

Anywhere near.

Joe Carlasare (01:26:24):

They care about the bond market. The bond [inaudible 01:26:26] credit conditions.

Jay Gould (01:26:26):

No, no. They care about that because it’s a leading indicator for employment, which is their second mandate. I think in [inaudible 01:26:35]

Joe Carlasare (01:26:34):

Credit conditions are even more of a leading indicator and credit conditions froze in 2018. That’s what-

Jay Gould (01:26:37):

I know.

Preston Pysh (01:26:38):

If Larry Lepard and Greg Foss were here, they would be throwing up in their mouths hearing us talk about equity markets. They would be literally throwing up in their mouths and saying, “You amateurs. Stop talking about the equity mark.”

Jay Gould (01:26:52):

He said we couldn’t get to these 10 year rates. Greg’s wrong. He said, “There’s no way. There’s no way.” And we’re there.

Jeff Ross (01:26:58):

Can I make one final point [inaudible 01:27:00] that I think, and then I’ll stop talking? Just because it piggybacked on what Preston said, and I want to leave people with this, at least from my perspective. People get fascinated with the idea of catching the bottom, especially in something as awesome as Bitcoin. And everybody wants to know what the bottom price is. And everybody wants to be that guy that said, “I bought it at X price when it hit the bottom and then it rebounded up and look at how rich I am now.”

Jeff Ross (01:27:24):

I want to let people know that the way that wealthy, good, smart, long-term investors do it is they recognize value. And then they start buying it in size when something is at an extreme valuation. Bitcoin, right now, I’m telling you on May 11th, sub-$30,000 is a very good value if you are a long-term holder. And by long-term, usually, I mean, at least 10 years, I’m telling you if you have a two plus year time horizon buying 30,000 or sub-30K is a fantastic price.

Jeff Ross (01:27:53):

I believe, this is not individual investment advice, but learn to recognize value. Quit trying to time the bottom. If you’re still sitting in cash waiting to time the bottom before you get into Bitcoin, you might miss the boat. This might be the worst opportunity cost of your life. This may take off and go up again and you will kick yourself, I promise you, if you’re not at least owning some Bitcoin. My final message is quit trying to time it, recognize value. Bitcoin is a value. Please, please, please buy a little bit at least of Bitcoin at these prices. And that’s my final point.

Jay Gould (01:28:25):

Good words.

Preston Pysh (01:28:25):

There’s nothing else that needs to be said. Amen, sir.

Jay Gould (01:28:28):

Those are good words.

Jeff Ross (01:28:31):

Thanks.

Jay Gould (01:28:32):

I mean, that’s why I keep posting my buy. I keep buying on the way down. You see it, Jeff. I keep buying on the way down. I’m not trying to time that either. It’s like, buy, buy, buy. I’m signaling to the market. You should be doing the same. And I get these comments and replies. They’re like, “It’s only going to go lower. Wait till 15.” I’m not doing lump sum by trying to time the bottom. I’m buying as it’s dropping. These are great buys.

Jeff Ross (01:28:51):

What’s the way to do it. As the very famous Preston Pysh said at Bitcoin 2022, buy Bitcoin and fall asleep for five years.

Preston Pysh (01:28:58):

Five years. That’s right.

Jeff Ross (01:28:58):

That’s all you need to do.

Preston Pysh (01:28:59):

That’s all you got to do.

Jeff Ross (01:29:00):

Great quote.

Preston Pysh (01:29:00):

That’s it. All right, gents.

Jeff Ross (01:29:03):

Thanks.

Preston Pysh (01:29:04):

That’s a wrap and thank you for your time, guys. That was fun.

Jeff Ross (01:29:06):

Thanks, guys.

Jay Gould (01:29:07):

Thanks, everybody.

Preston Pysh (01:29:09):

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.

Preston Pysh (01:29:22):

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. 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.

Outro (01:29:41):

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