#1558 Darius Dale | Why the Smart Money Is Going All In on Bitcoin

Darius Dale is the Founder & CEO of 42Macro. In this conversation we talk about why bitcoin, gold, and stocks will continue to win, Elon Musk & DOGE, spending bill, China, and how markets across the world are reacting.========================BitcoinIRA: Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Take 3 minutes to open your account & get connected to a team of IRA specialists that will guide you through every step of the process. Go to https://bitcoinira.com/pomp/ to earn up to $500 in rewards.========================Bitwise is one of the largest and fastest-growing crypto asset managers. As of December 31, 2021, the company managed over $1.3 billion across an expanding suite of investment solutions, which include the world's largest crypto index fund and other innovative products spanning Bitcoin, Ethereum, DeFi, and crypto equities. Whether you’re an individual, advisor, or institution, Bitwise provides intelligent access to crypto with your unique circumstances in mind. Visit www.bitwiseinvestments.com to learn more. Certain of the Bitwise investment products may be subject to the extreme risks associated with investing in crypto assets. Visit www.bitwiseinvestments.com/disclosures/ to learn more.=======================Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/=======================View 10k+ open startup jobs:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Speaker 00

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• 0:30Speaker 01

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• 0:58Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's going on guys? Today we've got an excellent episode with Darius Dale. He's the founder and CEO of 42 Macro, my favorite Wall Street advisory firm. They do fantastic research and as you know, Darius always brings the heat. In this conversation, we talk about

• 1:40Anthony Pompliano?

  why Bitcoin, gold and stocks, things that used to be called risk assets, maybe actually they're exactly what you need in your portfolio during a time where the dollar and bonds are getting their butts kicked. On top of that, he explains to us exactly what's happening in the treasury market, what's going on with China, Japan, Europe and much more. Darius always brings information that teaches me something and this conversation is no different. Here's my latest conversation with Darius Dale.

• 2:05Speaker 03

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 2:29Anthony Pompliano?

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• 3:11Anthony Pompliano?

  starting fresh with new contribution, the Bitcoin IRA team is here to help you get access to real crypto in your retirement account. And here's the best part, as a listener to this podcast, you can earn up to $500 in rewards when you add funds to your account. That's right, search for Bitcoin IRA in the App Store or visit bitcoinira.com/pomp to join 200,000 Americans on their journey to upgrade their retirement. Bitcoinira.com/pomp to upgrade today and you can earn up to $500 in rewards when you add funds to your account. It's no secret that Bitcoin ETFs have taken Wall Street by storm. With over $35 billion in assets in just one year, it's become the most successful ETF launch in history.

• 3:54Anthony Pompliano?

  My partner Bitwise is the first and only Bitcoin ETF provider to openly publish its Bitcoin wallet addresses, allowing anyone to verify the fund's holdings. I believe this level of transparency is exactly the kind of innovation that only crypto makes possible. Bitwise is also the only ETF issuer that is a crypto specialist asset manager, meaning their team solely focuses on Bitcoin and they have the research, education, and support to help investors navigate the space with confidence. All of that is great, but what I love most about Bitwise is probably their commitment to developers. Bitwise donates 10% of their ETF's profits to Bitcoin open source developers. Bitcoin developers are the unsung heroes, working tirelessly to maintain, improve, and innovate the blockchain. Their efforts ensure that Bitcoin remains true to its

• 4:39Anthony Pompliano?

  Promise is a decentralized system that is built to last. Go to bitwisePomp.com to learn more about their ETF and other services. Once again, that's bitwisePomp.com. Bitwise P O M P dot com. As always, remember investing is risky and carefully consider the extreme risks associated with crypto before you invest.

• 5:03Anthony Pompliano?

  And here we go. Darius, breaking news right as we're about to record this. Elon Musk, the world's richest man, the man who has been slashing government spending, literally living out of a closet essentially in the administration, just tweeted, "I'm sorry, but I just can't stand it anymore. The massive outrageous pork-filled congressional spending bill is a disgusting abomination. Shame on those who voted for it. You know you did wrong. You know it." Reaction. What do you think?

• 5:38Speaker 04

  I told you, man. I've been trying to tell you all this is, uh, this train has left the barn. It's left the station. You know, it's, it's, so I'll start by saying, uh, one, thank you for sharing that. Two, thank you for having me. Three, this is exactly what we were warning about last fall. We said Doge is this Kabuki theater process that's designed to distract a very gullible American public from trillions of dollars of debt, finance, tax cuts, and not nearly enough expenditure reductions to offset that. So, uh, it's great to see to welcome Elon to this side of the aisle. This is the purple side of the aisle. Should have worn my purple tie today. Uh, I think Elon, you, me, folks like us, we're doing our best to try to stave off what it could potentially be a, a, a, a real

• 6:22Speaker 04

  erosion of US, you know, borrowing power, borrowing authority in the, in the coming years as a function of our, uh, fiscal, uh, individually, our fiscal house. So thank you, Elon, for calling it out.

• 6:33Anthony Pompliano?

  So you've got this chart here that says the congressional Republicans inability to dramatically cut spending is basically exactly what Elon is calling out. What is this chart showing us? And what are your takeaways?

• 6:44Speaker 04

  Yeah, no, totally. I'm just grabbing this chart from our monthly macro scanner report. We've shown this chart for years to our clients. Um, you know, look, what I'm essentially calling out is the fact that something I reidentified a couple of years ago in the context of our investing in a fourth term regime analysis, which is both parties are addicted to fiscal largess. On one side of the equation, you have the Democrats and their profligate fiscal spending and their aggressive overreach in terms of regulation and spending. And on one side of the aisle, you have folks who just do bad math and don't understand that, hey, if you lose revenues and/or if you have a deficit that's 7% and you don't grow nominally 7%, you're going to wind up with a debt to GDP ratio that continues to go higher. So

• 7:27Speaker 04

  on one side of the aisle, you've got people who can't stop spending. On the other side of the aisle, you've got people who can't do high school math and you wind up with, you know, just this, you know, ever never ending, you know, debt and deficit situation.

• 7:38Anthony Pompliano?

  So Doge was saying they were going to cut a trillion, two trillion. Those big numbers out there. Um, I don't know if people ever thought they were actually going to cut two trillion, but they thought they're definitely going to cut a good amount. Um, you've got a chart here that says, we told you that even if Doge cuts $1 trillion of federal expenditures, it ain't gonna fix nothing.

• 7:56Speaker 04

  Yeah, this was always my, my, my biggest point of contention with Doge. You know, obviously I support Doge, the concept of Doge, what Doge is trying to do. But to me, again, I always thought it was a very calculated distraction from what actually needs to happen, which is legitimate fiscal austerity, right? If you flowed in a trillion, and so we were in the camp going back to last fall, that, hey, Elon's not going to get anywhere near $2 trillion, not $2 trillion of waste in the federal budget. Uh, maybe they'll get up to $1 trillion. We specifically identified $550 billion of things that could cut back then. Obviously, they stopped well shy of that. But we said, hey, let's just, you know, give them full credit at the benefit of the doubt. Let's say we flowed an entire trillion dollars of federal expenditure reduction all the way down to the bottom line. What

• 8:40Speaker 04

  would that do in debt to deficit to GDP terms? You'd wind up from you go from a 7% budget deficit to GDP to a 5% budget deficit to GDP. And again, this exercise does not include any negative ramifications upon the economy via tax receipts. And it also is pre pro forma prior to the one big ugly bill that is now adding incremental debt to the debt to the deficits to the debt. So, uh, you know, this US fiscal situation is a real issue. I mean, you look at the last couple of years, the deficit grew by $250 billion in 2024. After growing $365 billion in 2023, it's probably going to shrink a bit because of tariff revenues in 2025.

• 9:20Speaker 04

  But in my opinion, that's more of a transitory shock because again, once you walk into 2026, you're going to start to wind that, um, that sucker back up again.

• 9:28Anthony Pompliano?

  Now, uh, I think I heard a translation in there. Uh, I think they call it the one big beautiful bill. You called it the one big ugly bill.

• 9:35Speaker 04

  So does Elon. Can a big be beautiful and big in the context of our starting point? Go back to that first chart, man. Put the first chart back on the screen. You look at the US's federal expenditures as a percent of nominal GDP at 24%. We are at like crisis, financial crisis type levels of federal expenditures. Go back to the GFC when everybody was unemployed and we're handing out unemployment checks. And everybody was on Medicaid and SNAP and everything else. We, that's the kind of, that's the kind of expenditures that we have now. So America clearly voted for the Congressional Republican Party to come in and fix this. Well, now that they're sitting in the driver's seat, they're like, you know what? This pork tastes kind of good.

• 10:18Speaker 04

  You know, that's for lack of a better word, yeah.

• 10:22Anthony Pompliano?

  China, they have it a blast right now. They seem to, uh, oh, the world's distracted. Let us make some moves. What are they doing?

• 10:30Speaker 04

  Yeah, no, well, look, I tell you what, man.

• 10:34Speaker 04

  Never underestimate your enemies. That's what page one of Sun Tzu. Page two of Sun Tzu is probably never underestimate the Chinese dynasty because these people are always plotting and scheming. You know, I have no, I'm hopeful that the US wins this geopolitical strategic conflict, but as evidenced by our inability to cut federal expenditures from extreme levels to suggest that we are, we're not even playing in the right game, right? Like they're, they're playing Go and/or chess and we're setting up a checkers pool. Right? And I think so. But this chart shows is the US, the imports from various, various countries, just to track the share of imports and how they've evolved over time. And what we see from China is that

• 11:15Speaker 04

  US's imports from China are now nine percent of total imports. And that's one month of data from, from the month of April. If you look at it on a trailing, trailing one year basis, it's, it's 13%. That 13% is down from a peak of 24% back in 2015. So the share of imports that we get from China continues to decline, which ultimately means the amount of dollars that China needs to reinvest in the treasury market will continue to decline as a share of the total amount of marketable treasury securities, especially in the context of our deficit situation that we can't seem to get under control. So this is a, a, a world in which you have one of the main capital, one of the main investors in the US treasury market,

• 11:57Speaker 04

  China being the number three economy. I think they own three to 4% total of the marketable treasury market. You know, they, they just will need to reinvest, recycle dollars into the treasury market at a lower and lower frequency going forward.

• 12:08Anthony Pompliano?

  What about Europe and Japan?

• 12:10Speaker 04

  Yeah, it's the same, it's the same dynamic for different reasons. So with respect to Europe and Japan, they currently have economic incentive to repatriate capital from the treasury bond market. China has incentive to stop investing at the same rate, which is a problem when you have, you know, budget deficits that need to, you know, constantly be capitalized. We need to capitalize somewhere between six to seven percent of US GDP's worth budget deficits every year. And so if you have, you have one major investor cohort pulling away, that's China from the strategic decoupling standpoint. And then you have our other two. Investors, the two big investors Europe owns, I want to say somewhere close to eight or nine percent of the marketable treasury market, and you aggregate the Eurozone economies, Japan owns about four to five percent total. So, you know, this is a big swath of the US

• 12:55Speaker 04

  treasury market from a foreign ownership perspective. And with respect to US, with respect to European and Japanese investors, you know, it's no longer economic for them to invest in treasuries, right? If you look at the, the yield, the, the, the, the, the spread between, the spread that the European-based investors get for, for investing in treasuries, let's say the 10-year nominal treasury yield, once you hedge out the, the, the currency risk from their, from their perspective, they get, they're losing 83 basis points relative to their home market. Japan, you're losing 107 basis points relative to your home market. So you would make a, a, you know, 200, 2.89% if you're a European-based investor and just investing in a, you know, 10-year, you know, weighted average European, you know,

• 13:37Speaker 04

  yields, you would make 1.49% if you're a Japanese investor investing in the JGB market. You would actually lose 83 basis points and 107 basis points respectively relative to those, to those numbers. So it doesn't make any economic sense for this pocket of, you know, I guess I would say friendly investors to continue investing in a treasury market at the same speed, which is a problem because again, you're talking about the three largest sources of external demand for our marketable treasury market, all moving in the wrong direction at the same time congressional Republicans are legislating the one big ugly bit.

• 14:08Anthony Pompliano?

  Let's jump to the US public sector, and they seem to be already consuming a historically large share of the world's capital. It seems like, on one hand, it could be good, but maybe not what people think it is?

• 14:21Speaker 04

  Oh, it's definitely not good. Sorry, let me be very, very clear about this. So again, you have Europe remilitarizing, which is going to, you know, essentially be a capital call for their economy, for the German economy, and for other economies across Europe. You have Japan's monetary policy normalization continuing. It used to have persisted above targeted growth and inflation and above target and above trend growth and inflation in Japan with no end to that in sight. So the BOJ was out overnight essentially confirming that their QT program is going to extend indefinitely into, into fiscal 2026, which starts fiscal 2027, which starts in April of next year. And then obviously, we talked about with respect to China's strategic decoupling. Yeah, all these are three major geopolitical forces that essentially represents a negative

• 15:06Speaker 04

  demand shock for US Treasury debt, and that's a problem in the context of the following two statistics. One, the US already has more public sector debt than it can capitalize with its own internally generated capital. If you look at the US's debt to liquidity ratio, we're at 114%. That means we have 114% of US public sector debt relative to the amount of US domestic liquidity. If you want to compare that to other our peer economies like Europe, it's 61%, Japan is 61%, China's at 31%. So we're nowhere near in the area code of what a healthy debt to liquidity ratio will look like. And moreover, if you look at US public sector debt as a share of global public sector debt, it's now 35%. It was what 24% back in back in there, you know, but essentially,

• 15:51Speaker 04

  you know, 20 years ago. And so, you know, we, you know, it's been this kind of one way move higher in terms of how much of the world's capital we've been gobbling up. And, you know, I'm not calling for an imminent price collapse or anything. But again, I think this is all part and parcel to what our long-term conclusion has been on the next slide, which is the risk asset is the Treasury bond market. It's not stocks, it's not gold, it's not Bitcoin. And that's exactly what the market's telling you today from a year-to-date performance perspective. Stocks up 2%, Bitcoin up 13%, gold up 28%. And this is versus the dollar that's down 7% and Treasury bonds that are down 3%. Again, you need to freeze frame that performance spread

• 16:32Speaker 04

  or those those relative performance of those risk assets versus those traditionally defensive assets. And just remember that every time the market is down for the now until we get through the end of this fourth turning poly crisis.

• 16:44Anthony Pompliano?

  I would keep saying, I don't know for how long now, why would you consider bonds safe if they're guaranteed to lose value? It makes no sense to me. It's crazy to me that people are still running around talking about I'm going to bonds, I'm going to cash, I'm going like, so you think the safest asset in your portfolio is the thing that's guaranteed to lose value? By the way, other things could go down, but at least you got a shot that they're not going to go down. The bonds and the dollars are guaranteed. There's no shot that they're going up in value over time.

• 17:14Speaker 04

  Well, I wouldn't say no shot because there's obviously a distribution of outcomes. But again, it's a very negative skew distribution for those assets. Right? That's the problem. Right? It's we, there is a geopolitically driven supply, demand and balance in the treasury market. We have less demand and more supply and neither political party here in the United States of America has, has any real political will to fix it. And so this is why, if we go to the, the final slide, you know, this is something we continue to pound the table on to our client base and to retail investors all around the world, which is the best way to be exposed to financial market risk, certainly throughout the duration of a four turning poly crisis is via risk assets because there are very limited levers

• 17:57Speaker 04

  that the sovereign can pull to get itself out of this mess. There's grow your way out of the mess. There's print your way out of the mess, or there's cut your way out of the mess from a fiscal austerity perspective. We just saw their willingness to do number three is very low. So guess what? They're going to try number two, grow their way out of the mess. When that fails, guess what they're going to do? Print their way out of the mess.

• 18:19Anthony Pompliano?

  I know exactly what they're going to do. I mean, here's the crazy thing. You know what I've been saying? This is bad for my country. This is good for my portfolio.

• 18:26Speaker 04

  Yeah, 100%.

• 18:28Anthony Pompliano?

  That, that is going to be the next decade or so of what we're probably going to face here is it's bad for my country. It's good for my portfolio and the people on the internet understand that better than the people in the institutions. And it seems like the retail investors is just buy every dip, deploy capital, just keep throwing money into the market because the alternative of cash or bonds, not good. I don't know. Institutions, there's plenty of them that are going to make money, right? They're not dumb. They're working hard. But it does seem like more of them are sitting on the sidelines than you would otherwise think, considering what retail's doing.

• 18:59Speaker 04

  Yeah, we can observe that in our position model. We track 12 or 15 different indicators across, you know, from long-term timer with a long-term time series. And we can see that none of those indicators is even close to where they were in the, at the February highs. Obviously talked to institutional clients, we advise on $25 trillion worth of institutional client AUM. I'm talking institutional investors every single day of the week, including Sundays and days. To a person, no one is fully invested. It certainly has the, like they were back at the highs of February. So, you know, we're going to continue to pound the table on our paradigm C thesis, which is, hey, they're going to try to grow their way out and eventually they'll wind up trying to print their way out once that fails. And until then, you just need to stay focused on the three asset classes that matter from

• 19:42Speaker 04

  the perspective of retiring on time and comfortably as a retail investor. Stocks, gold, Bitcoin. Your job is to be max long those assets until you get a risk management signal that tells you to take raise cash so that you can do the most important thing I think most in retail investors should be doing if they want to retire on time and comfortably, which is avoid volatility drag. And that's what this chart shows is that if you can reasonably consistently sell somewhere near the top, you're never going to sell the exact top. Sell somewhere near the top, right out of bull bear market and buy somewhere near the bottom. You don't have to buy, you're never going to buy the exact bottom unless it's pure luck. And buy somewhere near the bottom, even it could be 10, 20% off the bottom.

• 20:25Speaker 04

  If you truncate, if you take out that, that negative alpha, that negative beta from your portfolio and you do that consistently, what you're going to wind up happening is you're going to compound your portfolio from higher levels of net asset value and you're going to see your, the money that you have in your account widen relative to everyone else who's not doing that. So, uh, this is why we continue to pound the table on our institutional risk management frameworks that we feature in our KISS portfolio construction process, which is stocks, gold, Bitcoin, no bonds.

• 20:55Anthony Pompliano?

  Hey, you ain't gonna convince me. I've been telling people that Bitcoin is the new bond, right? If you think about it from that perspective, sure. Uh, people are like, oh, but I don't get my, uh, my interest payment.

• 21:07Speaker 04

  Who cares?

• 21:08Anthony Pompliano?

  Well, just you're getting a negative interest payment because you're losing money on, on the actual, uh, uh, principal. What are you doing?

• 21:17Speaker 04

  We're going to, you pump, you and I are going to revolutionize the way a lot of investors approach financial market risk. Um, you know, our client clients tend to skew older and richer because they're, they tend to be more focused on risk management. But again, at some point, the people that you and I are talking to will be 10 years older and 10 years richer and they're going to start to care about risk management as well. So, uh, I'm glad that you've been pounding the table on Bitcoin and, and, and helping folks like me get comfortable with the asset class so we can turn around and, and help for other people get comfortable with the asset class. Cause to me it's one of the only ways out.

• 21:47Anthony Pompliano?

  Could not agree more. Where can we send people to find more about 42 Macro?

• 21:52Speaker 04

  I appreciate you, brother. Thank you so much for having me. 42macro.com. I'm on Twitter, 42macrodale. Come collect this free alpha, and the alpha only gets bigger and better when you get inside of our paywall. So we appreciate you.

• 22:02Anthony Pompliano?

  Free alpha on the internet, on social.

• 22:05Speaker 04

  Is that not true?

• 22:06Anthony Pompliano?

  That is 100% true. But say it again. That was such a good line. I need to fire one more time. Say it again.

• 22:10Speaker 04

  Come collect this free alpha, and the alpha only gets bigger and better when you get inside of our paywall. You go ask our clients. I speak truth. If I was, if I was terrible at my job, I would tell you I was average at my job. I'm not average at my job.

• 22:28Speaker 04

  Appreciate you, brother.

• 22:29Anthony Pompliano?

  We're gonna do this again soon. Thank you so much.

• 22:32Speaker 04

  Thanks, man.

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