#1570 Marko Papic | The Case for $250K Bitcoin in a Falling Dollar World

Marko Papic is the Chief Strategist at BCA Research. In this conversation we talk about what is happening in the market, why he is bullish, what is happening with the dollar, tariffs, bitcoin, gold, global conflict, and how all these different events impact your portfolio. =======================Simple Mining makes Bitcoin mining simple and accessible for everyone. We offer a premium white glove hosting service, helping you maximize the profitability of Bitcoin mining. For more information on Simple Mining or to get started mining Bitcoin, visit https://www.simplemining.io/=======================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.=======================Maple Finance is where real money meets real yield. With over $1.5B managed, Maple offers secure lending, Bitcoin yield, and premium DeFi assets like syrupUSDC. Get started today at https://www.maple.finance !=======================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.

• 1:26Speaker 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.

• 1:50Anthony Pompliano?

  What's going on guys? Today we got an amazing episode with Marco Papice. He's the chief strategist at BCA Research and he is one of the people I turn to whenever I have questions on geopolitics or macroeconomics. Marco in this conversation breaks down what he thinks is happening in the market, why he's bullish, what he thinks is happening with the dollar and why he's bearish. Then he gets into things like tariffs. Whether we're actually going to get a recession or not, how he's thinking about the US dollar, Bitcoin, gold, and also whether he is worried about domestic terrorism, the conflict in the Middle East, or what's going on in Russia and Ukraine. This conversation is wide ranging, and it's all focused on how these different events and these developments affect your personal portfolio and financial markets here in the United States. So enjoy my latest conversation with Marco Papic.

• 2:33Anthony Pompliano?

  All right, Marco, I thought a great place to start the conversation is you are bullish the market, but you are bearish on the US dollar, and you've got some ramifications in the financial world in terms of what assets are going to win and what assets are going to lose over the next five years. But let's just start with what is driving your bullishness in the market specifically?

• 2:50Speaker 04

  Well, so, look, I think there's a huge risk that the US economy is slowing down. I think we're seeing a lot of concern with retail, with consumption. You know, the savings rate has started to tick up. That concerns me a little bit. So it's not like everything is great, but two things that I think are very important is that I think there's some rationality in fiscal policy. And I know that a lot of your, a lot of your listeners are going to disagree with me on this, and they're going to say, look, what are you talking about? There's like 6% deficit until the eye can see. Yes, but it's not six, and then seven, and then eight, and then nine. And that's what it would have been had President Trump gotten all of his campaign promises

• 3:35Speaker 04

  through. And the bond market actually rioted in September, October, and November in anticipation of President Trump winning, and then in December and January because he won. But the truth is that the House of Representatives, particularly the fiscal conservatives, really started pushing back almost right after President Trump's victory. And he has essentially acquiesced to over $3 trillion of additional, you know, revenues through tariffs or cuts. And that's something that the market didn't anticipate. So on one hand, what makes me bullish actually is that we're done with fiscal policy.

• 4:13Speaker 04

  And this is counterintuitive, but I think we're at a point where fiscal policy can't drive the US economy anymore. I mean, we learned this in college when we were like 19. There's a limit to how much you can borrow from the future and how much the government can basically crowd out the private sector. The yields are too high, nobody wants to buy a house. So the best thing that American policymakers can do is kind of get out of the way and stop spending money. We've reached the beginnings of that process. The bond market is going to settle down, the long end doesn't have to keep bidding higher. And so that's the first reason I'm bullish. The second reason I'm bullish is that I think something that none of us have really focused on for the past 12, 18 months is the Fed. I think the Fed is going to come back in the picture as well, pretty dovishly from,

• 4:58Speaker 04

  you know, pressure from President Trump, but I would also argue for good reason because inflation is abating in the US and a lot of hysteria about tariffs is kind of like not really articulated itself. So even if growth slows down, you've got three things happening. Borrowing rates are coming down, both the short end and the long end. That's positive. Second, oil prices, energy costs are not egregiously high. Folks who were worried about Iran and Israel ushering World War III, that was overstated. And finally, that dollar decline that you're pointing to, that is also stimulative as well for parts of the US economy. Part of the reason that I'm more bullish than I was maybe four months ago is because a lot of the earnings of, you know, the tech giants in particular are sourced externally.

• 5:43Speaker 04

  So the dollar weakness should help them.

• 5:44Anthony Pompliano?

  Let's talk about maybe what's happened over the last three or four months. So obviously there's all the tariff announcements, there was mass hysteria in the market. We went down, depending on how you count, about 20% and then we've rallied back to all time highs. Now, for me, the number one reason why I was bullish in April was the fact that pretty much dissent had been outlawed. If you didn't think that tariffs were going to destroy the US economy, the shelves were going to be empty, you know, all the like fear mongering stuff, then you were ostracized, you were yelled at and screamed at, literally there's, you know, pages and pages of tweets of people being like, you're an idiot. As soon as I saw that, I was like, okay, hold on a second. The odds that actually we get the recovery. And there's like reflexivity to this market are much higher.

• 6:25Anthony Pompliano?

  Now, as we record this, we are at or near all time highs for S and P, NASDAQ, gold, Bitcoin. It's like it's across the board. Everything has rallied. How much of that is just the tariffs not getting put on to the severity that they were? And also potentially these like spending bills? Or do you think it literally we would gone back to all time highs? We just said, hey, we're going to put these really stringent tariffs on. Oh, you know what? Let's roll them back a little bit. And that relief alone in the tariff rates, that was going to drive us back to where we are now.

• 6:55Speaker 04

  Well, look, I think you have to understand that if you have a recession that's caused by a financial imbalance, that's scary. We don't know where a financial imbalance leads. We don't know where it leads. We don't know how it articulates itself further in the markets. If there is a recession because of, you know, some sort of economic malfunction, like again, we don't really know how that articulates itself. But when there's a slowdown or a risk of recession that's policy induced, when there's a policy induced problem, then you should be trading policy. And so you were absolutely right in April to focus on the tariffs because, you know, all these macroeconomists are telling you like bad things are going to happen because of tariffs.

• 7:40Speaker 04

  And then you're like, well, tariffs are probably not going to happen at that level. The hard data then is irrelevant for a time being.

• 7:50Anthony Pompliano?

  When you look at where we are today, it does look like there's this big shift going from fiscal to monetary policy. Obviously, Trump, Besen, Bill Pulte, I mean, all of these guys are just yelling and screaming at the Fed nonstop. Now, one thing that I always call out is this happens under both political parties, right? Joe Biden called Jerome Powell into his office, gave him kind of like the principal talking to the student who was in trouble, you know, conversation. And so I think also Elizabeth Warren wrote a letter to the Fed saying, hey, you should change monetary policy. So it's not either side of the aisle, but the Fed independence is pretty important. How does either Fed independence change or the pressure campaigns change as the United States focuses much more on the monetary policy versus that fiscal policy that really politicians kind of are in the driver's seat of?

• 8:36Speaker 04

  You know, I gotta tell you, I'm kind of a heretic here. We're probably gonna disagree on like a very methodological, fundamental view, but I just don't think the Fed is independent. You know, sorry. I think that many of us in the financial community, in our sort of epistemic community, we, we need the Fed to be independent so that we can reasonably tell our clients that when we read an FOMC statement, we're doing actual good work, you know? And I just think that they're not, and they never have been. And your example of, of the Fed under Biden, you know, like, oh, inflation was transitory in 2021. Sure, you know, there was political pressure not to put a break so quickly after the pandemic. You know, it wasn't even ending, but it like looked like it was ending.

• 9:21Speaker 04

  So there was pressure on central banks, not just the Fed, to take it easy and to allow inflation risk to effectively seep into the macro context. So I think that central banks are always in, always political because they are political institutions, number one. And second, I think that there are absolutely going to be other political pressure today because President Trump is a charismatic leader. And I use that term not objectively, I use it subjectively from a verbarian sense. You know, this is Max Weber's classical definition of, of basically legitimate authority. He is not someone who derives his authority from an institutional legalistic framework.

• 10:05Speaker 04

  He doesn't hearken to that. He, he's much more charismatic in his approach. And that means that he is almost always in opposition of institutional authority, something that was built through a set of institutions. He almost always is at odds with it. As such, this idea that some piece of paper is going to prevent him from meddling in the Fed is nonsense. It's not, we've already seen it. And so I think that that pressure is one of the reasons you have to be very careful in expecting equities to go down. But there are things that are gonna go down. And I think that whenever a central bank kind of starts losing its independence, you know, It's a currency. That's the escape valve. And equities are a nominal asset.

• 10:50Speaker 04

  If you think about it, and so currency move is going to be positive for equities, not just from that pathway of, you know, foreign sourced earnings, but also from the perspective that, you know, you're pricing this in dollars is going to go higher.

• 11:08Anthony Pompliano?

  There's talk now that they are going to name Jerome Powell's successor and do so in 2025 and essentially create like a shadow fed chairman. Do you think that'll happen? And what would the ramifications of having this kind of shadow fed president be?

• 11:24Speaker 04

  Yeah, no, I mean, that's, that's what I was referring to. I didn't know how, how deep you wanted to go, but that's where I was referring to.

• 11:29Anthony Pompliano?

  Very deep, very deep, Marco.

• 11:31Speaker 04

  All right, let's go deep. Uh, look, again, I'm a heretic on this. No one's going to agree with me, but I've always thought that, you know, I, I think we, we, we effectively tell ourselves fairy tales in our industry. By the way, I, I come from a different world. I mean, my background is political science. I worked in political risk before I joined B C A Research and built their geopolitical research platform. And then I went to asset management and so on. But my background, you know, is I got three degrees in political science with yes, yes, three too many. I get it. The jokes are great. But I gotta tell you, when I joined finance and I actually saw my colleagues who are seeped in like mathematical knowledge, something that I thought was like magic.

• 12:13Speaker 04

  And then they would read an FOMC statement and do basically like literature post Marxist interpretation of verbiage of humans. I was like, wait, is this, is this what you guys do here? Cause like, I can do this, you know, this is nonsense. And, and that's, you know, that's seeped in this lore that we pass on to each other in the sort of soft glow of the Bloomberg terminal. You know, you huddle with your young analysts and you tell them like, oh, and then Paul Volcker came and he smited the dragon of inflation and we created this narrative that, you know, we should take these people seriously and not take the macro context that forces them to do what's inevitable.

• 12:56Speaker 04

  The context today is that you have a very, very powerful president who is using a very charismatic form of authority and he wants interest rates lower. So the shadow chair is absolutely what I was referring to in answering your last question, which is like, yeah, President Trump is going to put pressure. What is he going to do? Well, monetary policy is not about the next six months. It's really about the long-term trajectory. And if you think about the 10-year yield, the 10-year yield is ultimately about the 10 years worth of, you know, individual forecasts of where like growth, inflation, dynamics, interim premium are going to settle. And so I think people are effectively going to stop listening to Jay Powell and focusing on what the shadow chair says because the dots, I mean, are about the future. They're not about the present.

• 13:41Anthony Pompliano?

  When you look at the current market, both from a political element, but also a finance element, what is the thing that scares you the most right now?

• 13:49Speaker 04

  I think what scares me the most is, um, what scares me the most is that there are pockets of the markets that are not really visible to us. Um, I think that allocation to the private markets has really ballooned, obviously, over the last 25 years. And, uh, you know, the disintermediation of banks from corporate lending, which seemed like a really smart thing after the GFC, has led to an explosion of private credit. And so what worries me a lot is that I have no visibility into that pocket of financial markets that's absolutely enormous. And, uh, I would say that that's probably where we're going to have some, um, pretty

• 14:33Speaker 04

  significant disruptions when we get the next serious recession.

• 14:39Speaker 04

  I would say that that's what scares me the most.

• 14:41Anthony Pompliano?

  When you see that recession right now, uh, or maybe six weeks ago, eight weeks ago, a lot of people thought there was going to be a recession. Now it looks like nobody thinks there's going to be a recession. Uh, where do you fall on that spectrum in terms of, uh, could we have asset prices at all-time highs and a recession at the same time? Like, what, how does this play out?

• 14:58Speaker 04

  You know what that happened to Germany effectively? That was the case with the DAX last year. And so, German economy was doing extremely bad last year, and yet the DAX was reaching all-time highs. Now, you might say, well, look, the DAX is very externally focused, but so is the S and P 500. So, yeah, you could absolutely have, you know, a shallow recession, but where earnings are basically, where they hold up. And there's a couple of reasons for that. First and foremost, when we think about a recession, it's really GDP growth and unemployment. I can see some form of a rise in unemployment. I could see that happen. But if it's being driven by AI and robotics, is it really going to cause you to pull

• 15:43Speaker 04

  money out of risk assets, out of equities? Because earnings could actually be holding up precisely because unemployment rate is rising. So, that's, that's one of the issues that I would say. The second issue is that there is a rebalancing of growth happening in the world away from the US. And that's because my view is that over the last five years, the US hasn't really been that exceptional. US exceptionalism is about productivity. It's about ease of doing business, entrepreneurship, technology, R and D. But last five years, the US didn't really outperform the rest of the world because of that. It really outperformed because the Biden administration became enamored with the pro-cyclical fiscal policy that they learned from the Trump administration.

• 16:26Speaker 04

  Or should we call it the Trump-Pelosi administration of 2020, which really was kind of like a symbiosis of the two parties? And so, this like pro-cyclicality of fiscal policy is what I think has allowed the US to outperform the rest of the world. As that abates, because this bill is, in my view, not at all really stimulative in any way. So, we're not going to actually have any more additional fiscal stimulus. The vast majority of one big, beautiful bill is really just extending 2017 tax cuts. So, when you think about that, that growth engine in the US is slowing down. But that's forcing the rest of the world. To pick up the slack. And so in a way, President Trump's focus on tariffs, on aggressive foreign policy,

• 17:10Speaker 04

  and on quite prudent fiscal policy relative to the last five years is forcing the rest of the world to get their own houses in order, to boost investments, to boost fiscal. And so growth could be picking up in the rest of the world, allowing export-oriented American companies to get, to take advantage of both the growth reorientation to the rest of the world and a cheaper dollar.

• 17:33Anthony Pompliano?

  Tariffs obviously have been a huge part of the global economy. One of the things that I think you've been concerned with is tariffing kind of our economic competitors is one thing, but when you start to tariff the entire world, there's the potential that you could push some of the people who may be on the middle ground, to give use to India and a couple of other countries as examples, to realign their economic alliances in a way that would actually be less advantageous for America. Can you talk through how you view, not specifically tariffs, but maybe the impact of the tariffs that we have gotten so far on these economic alliances?

• 18:07Speaker 04

  Well, you know, I think, yeah, I mean, in a way, I think the tariffs are going to cause a lot of countries around the world to look within themselves and say, wait a minute, have we been riding America's coattails for too long? And, you know, there's a fiscal side of that story. The US over the last five years has basically just spent like a drunken sailor. And so of course China hasn't fixed its consumption story. Of course, Europe has under-invested. Why would they spend any of their money when they can just produce goods and sell it to the Americans? So there's that. There's also another issue. Structural reform is really important, like constantly seeking to improve productivity domestically. That's something that a lot of countries haven't done. I mean, look at Canada.

• 18:50Speaker 04

  Canada doesn't have free trade between provinces. I don't know how many of your viewers and listeners know this. Like, Canada as a country, there's actual interprovincial trade barriers between states. And that's been the case for 250 years. And Mark Carney has just submitted to you, Prime Minister, just now, after 250 years of Canada, and by the way, it's appropriate, we're recording this on Canada Day, July 1st, Canada has finally decided to actually break those barriers down. I think without Donald Trump, they wouldn't have done that. So what I would say is that the first element of tariffs is that it's almost like good for the rest of the world. You know, I call President Trump, I say that for the rest of the world, he's cod liver oil. You know, our grandparents used to basically take a spoonful of this really stinky,

• 19:35Speaker 04

  really bad foul tasting medicine. It was for their own good. That's what Donald Trump is for the rest of the world. He's forcing the rest of the world to do structural reforms and actually boost productivity and final demand. That's good. On the other hand, your point is, yeah, but there might be a geopolitical downside to this. U.S. loses allies. And I think that you saw in Brussels with NATO, like, that's not really happening. Ultimately, it's not really up to President Trump. It's not up to them. The world is becoming more complicated place. The U.S. is either unwilling or really incapable of just being that kind of global hegemon in a global police force that it used to be in the 90s and early 2000s. Even with Iran, I mean, it's very clear. President

• 20:19Speaker 04

  Trump has said, look, we'll bomb these nuclear sites, but we're not going to go any further than that. We don't want regime change. Sorry, Israel. We're not going to do that. And so because of that, I don't think that President Trump is really pushing anyone away. I think they already got pushed away by the multipolar distribution of power.

• 20:37Anthony Pompliano?

  Now, I want to talk about the dollar, Bitcoin, and gold. Obviously, central banks have been buying a lot of gold. The market cap continues to expand very rapidly. The dollar is down about 10% to start the year. It's the worst start since, you know, last 40, 50 years. Bitcoin, at one point, was lagging gold. I think people were kind of like, hey, why is gold breaking out and Bitcoin's not? Now it seems like Bitcoin's got its engine kind of revved up and is starting to really run. And really Bitcoin, I think, has significantly appreciated since the approval of the BlackRock ETFs and kind of the institutionalization of that asset. How do you look at those three things? Is there anything, you know, kind of noteworthy to keep in mind as we watch the dollar, Bitcoin, and gold over the next couple of years?

• 21:18Speaker 04

  You know, to me, they're kind of, gold and Bitcoin are interesting. Bitcoin is sort of like risk on gold.

• 21:29Speaker 04

  I don't know if that makes sense, but it appears that Bitcoin rallies in risk-off environments. It's not a great risk-off asset. And maybe the underlying logic behind that is that the two sources of demand, the demand for gold is more mature, literally. It's like older human beings, more well-capitalized buyers, such as central banks. Whereas Bitcoin is a little bit more of a, you know, saving tool for the less mature part of the financial system, the younger part. Either way, that means in risk-off environments, that cohort has less savings to deploy into Bitcoin. But I am bullish Bitcoin, and I'm bullish gold as well, because I'm bearish dollar.

• 22:13Speaker 04

  And I mean egregiously bearish dollar, like 30% more down over the next five years. My target for the euro, which is sort of the anti-dollar in the currency in the fiat system, is 140. That's where my sort of view is, it's 117 now, so significant more downside to the US dollar. Not because it loses reserve currency, just to be clear, it's just that the dollar was very expensive last year, extremely historically expensive, and I think it came from this view that everyone priced American assets in general for perfection. There's a lot of foreign capital that's going to move out of the US as the US financial, as it's, sorry, as its current account deficit reduces, its capital account is going to have to come down, the surplus.

• 22:57Speaker 04

  This is going to lead to outflows out of the US, no matter what President Trump does or whatever the next president is. And that's going to lead currency to depreciate. This is actually very positive for the US. I think that the US dollar was too elevated, and I think that the US dollar in many ways contributed to the manufacturing problems inside the US, to investment decisions, to move businesses back into the US. It's very difficult to do that. At the valuation of the currency that the US had, I think the best thing that can happen to the US is another 20, 25% decline in the currency. That will set the US up for really interesting gains in the 2030s. Now, the parallel to this that I would tell your

• 23:41Speaker 04

  viewers, because a lot of them are probably thinking, whoa, that's a lot. It's actually not. This happened from 2002 to 2007, the US, the US dollar went down 34%. It's a, you know, a trade weighted version. So these moments do happen. It don't have to be accompanied by some geopolitical calamity or some sort of loss of reserve currency status. And it's not necessarily negative for the US economy.

• 24:06Anthony Pompliano?

  When you see the dollar going down that much, what happens to Bitcoin?

• 24:11Speaker 04

  Well, definitely, as I said, it's bullish. But I would say that-

• 24:15Anthony Pompliano?

  How bullish though?

• 24:16Speaker 04

  Um, I would say quite bullish.

• 24:18Anthony Pompliano?

  Like 250 Bitcoin, a million, 200, not so much a price, not so much a price prediction as much as, with the way I think about Bitcoin is you said risk on gold. I've always said it's like gold with wings, right? When they, when they rally Bitcoin goes up more than gold goes up, et cetera. And so if the dollar's going to go down 30%, it's almost like, is there like a multiplier effect, right? For every 10% the dollar goes down, you should expect Bitcoin to add a zero or go up, you know, double in price. Or like, how do you think about the relationship between those two?

• 24:46Speaker 04

  So the dollar's going to go down, but just to be clear, you know, when the dollar goes down, it's not that people are selling US dollars. Some people are selling US dollars and then you got to buy something that's alternative to a dollar, which, you know, Bitcoin could be a good alternative to a dollar. But if you're selling US equities, you're not going to buy Bitcoin. If you're selling US equities, you're going to buy emerging market equities, you're going to buy European equities. If you're selling US bonds, you might want to pick up an Australian bond, which yields pretty much the same thing, but it's not in, denominated in a dollar because you're a fixed income investor. You see what I mean? So because of that, I don't think that when you hear 30% decline in dollar, it must mean that a million dollar Bitcoin. It just means that yes, those of us who have

• 25:29Speaker 04

  like actual cash might decide to diversify it into Bitcoin, but that's a very small portion of the global portfolio that will exit the US. And so I would say that I'm not in the million dollar Bitcoin camp over the next five years, but I'm probably in like the 250K.

• 25:47Anthony Pompliano?

  Yeah, I mean, but it's still, you know, whatever, two and a half times from from where we are approximately.

• 25:51Speaker 04

  I'm also not, I'm also not an expert at that. I would just say like, so, so if anyone out there has a really high conviction of you about a million dollar Bitcoin, God bless you. I'm not gonna try to dissuade you from that.

• 26:01Anthony Pompliano?

  Yeah. Well, now let me ask this. If Bitcoin does go up to two and a half times, let's say over the next five years, what happens to gold? Does gold continue to appreciate? And I ask you from the perspective of what I used to think, you know, maybe five years ago or so, was that Bitcoin would be worth more than gold at some point, but they were actually gonna cross somewhere in the high, single-digit trillion dollars market cap? Because gold was gonna get demonetized and Bitcoin was gonna expand. The exact opposite has happened. Like, I was completely wrong. Instead, Bitcoin has expanded and gold has accelerated as well and almost doubled in market cap during that time period. And so how do you think about the relationship between Bitcoin and gold moving forward in a world where the dollar's losing, you know, so much value?

• 26:40Speaker 04

  You know, it's not just Bitcoin and gold. It's also copper. It's also iron. It's also commodities broadly. It's real assets. I think that dollar decline will lead to all real assets rising in value. And in fact, you know, I have one of these very cute 150-year charts of like financial assets relative to real assets. And we're at like 150-year low of real assets relative to financial. And so what you should think of gold is that it definitely should appreciate in this environment. In fact, of dollar debasement, effectively, that's, that's what we're saying, even though it's a non-yielding asset.

• 27:21Speaker 04

  Because ultimately so is, you know, so is the dollar in many ways and has been for, for a long time. So I think that, I think that gold has a lot more upside. I will say, though, it's difficult to put a price target on it. And actually, I closed my gold long.

• 27:42Speaker 04

  A month ago, not so much for any other reason than profit taking. I mean, I've been off and on long gold for two and a half years and with a high conviction view, my conviction is abating a little bit, just because I do think that there's a moment when central bank, central bank buying might shift from gold to a little bit more crypto and then a little bit more other currencies. In other words, a lot of folks sold their dollars and got, got gold, but I think going forward, they might start diversifying into other fiat currencies as well.

• 28:16Anthony Pompliano?

  It's interesting to think about this because that's what you saw individuals do first, then you saw public companies and financial institutions. It kind of just makes sense, right? It's like eventually the central banks are going to do the same thing that was good enough for the people and for the companies. And so naturally they're going to say, hey, maybe I'm still going to buy gold, I'm just going to buy less of the gold and I'm going to start adding some of these other assets. Also with Bitcoin, one of the interesting components is like the higher the price goes, the less risky it becomes to the central banks. And usually it's the opposite, right? Like the higher Nvidia stock goes, the more everyone's like, oh my God, you know, it's a bubble, it's going to crash, whatever. And so there is this like Goldilocks zone, if you will, whereas Bitcoin kind of reaches a certain threshold, now it's big enough to allocate to, but as it gets bigger, it actually becomes safer.

• 28:58Anthony Pompliano?

  And so I don't know how that'll play out, but definitely feels like that is a key component.

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• 31:58Speaker 04

  Well, a lot of my clients are, you know, very much institutional investors, pension funds, endowments, sovereign wealth funds. And I can tell you that many of them have started to embrace digital assets. So especially Bitcoin as a sort of anchor, but even more than that. And there's a whole sophisticated institutional investment ecosystem now for digital assets that didn't exist five years ago. And so I think you're absolutely correct. Central banks are going to adopt that as well. I think there's going to be an interesting sort of battle between, you know, central bank issued digital assets and sort of privately issued ones.

• 32:41Speaker 04

  So that's going to be also an interesting battle that maybe some of them are going to favor one over the other. We're certainly seeing some of that in the US. But I think that definitely just as gold has gotten a bid over the, since the Ukraine-Russia war, for obvious reasons, so gold got a bid as their alternative to the dollar in the vaults of central banks, so will digital currencies. The question for me is when do we cross over to transactions? You know, because a lot of your viewers are going to confuse, as many people do, reserve currency for literally currency in the vaults. That's just one component of what a reserve currency is. And I would argue it's the least relevant one. The least relevant component of the dollar as a reserve currency

• 33:27Speaker 04

  is that some central bank is holding some dollars in its vaults. That's petty. That's not that interesting. The US dollar could go down to 25% of global reserves and it could still be a reserve currency in the fact that it's used for financial transactions. We have to price goods and services in something, we price it in dollars. So like when I go and look at what's the price of copper, I'm not looking at the euros or renminbi's, I look at it in dollars. The United Kingdom, the pound.

• 33:55Speaker 04

  Remain the reserve currency globally, really until after Second World War because of the stickiness of that financial transaction and trade transaction usage. So it wasn't that people were storing their wealth in British pounds. It was that they were using the British pound as sort of a pricing mechanism. And so my question to the digital asset community is like, when is it that we start using those assets to price goods and services? I'm not sure Bitcoin is capable of doing that because it's a little bit too geared towards a store of value role, which means it has a deflationary property, which isn't good for an expanding growth and expanding economy.

• 34:40Speaker 04

  I think, however, that there could be some digital solution to a pricing mechanism that anchors itself to more than just the US dollar. I don't know, but I'm not the guy to solve that.

• 34:51Anthony Pompliano?

  Well, what's interesting is stable coins, I think, have been that digital solution up until this point, but it's just really taking the dollar and saying, hey, now let's go use this on digital rails, right? So in a weird way, like maybe stable coins are the intersection point that is allowing for the old world to get dollar exposure, but do it in this new world. And then obviously, new world, as much as they want to yell and scream and say Bitcoin is the thing I'm going to use to buy coffee or whatever, they still want to use dollars because the dollars are going to be worth less in the future, the Bitcoin is going to be worth more in the future, like hold the thing that will appreciate, sell the thing that will depreciate. Do you see any other impacts around the world when it comes to stable coins in particular?

• 35:28Speaker 04

  Well, we're seeing it here in the US. I think that the adoption of stable coins and the legislative push in the US by the White House to really embrace them should create a tailwind to US Treasuries. So right now, this administration is clearly

• 35:46Speaker 04

  Clearly focused on keeping the long end of the yield curve down for political reasons, for financial reasons, fiduciary reasons. Makes a lot of sense. I mean, obviously mortgage rates are elevated. Nobody in America wants to buy a home. You got to bring borrowing rates for the government down if you're going to bring them down for the private sector. And this is the point about the Fed. You know, we're talking about the shadow chair. There's only so much the Fed can do on the short end. The long end can also not respond to those moves as we saw September, October, November, December of 2024. So I think that what they're doing on the long end, there's macro prudential legislative efforts right now. There's the S L R, which is the ratios

• 36:24Speaker 04

  for the banks. There's also this legislation on stable coins. I think all of those are going to shave maybe 20, 30 bips each off of the long end. So it's not like extraordinary, but it's not insignificant. I think there could be a suppression of the term premium, not through usual blunt mechanisms like QE, but rather through creating this demand in the banking system, in the stable community, a stable coin community for for treasuries in general. And, and you know, a lot of, a lot of folks say, well, a lot of that is going to be on the short end, you know, bills, T bills, not the tenure, but as we know, that doesn't matter. Then the Fed will, the treasury

• 37:07Speaker 04

  simply will finance itself at a short end and issue less long end, thus, again, reducing demand, reducing supply, which will obviously bring yields down. So I think this is a, this is very relevant from a macro perspective, particularly because there's a lot of just bond bears right now, you know, who expected the bond market is going to riot due to deficits and debt levels. And I don't think the world kind of works that way. And what I mean by that is that I'm not sure that bond yields need to go to 6%. For them to extract like a tax on American economy, they're already doing it. You know, just ask your your peers like if they're buying a home, there's already a, you know,

• 37:48Speaker 04

  price being extracted through yields at current levels that the government has to start behaving, both more responsibly on the fiscal side, which I think actually has happened ironically, but then also try to use some of this macro prudential stuff to shave off 20 basis points here, 30 here, there off the long end.

• 38:07Anthony Pompliano?

  Let's talk Russia, Ukraine and Israel, Iran and Gaza, Hamas, Palestine, etc. There's kind of two big geopolitical conflicts. One of them, I think, is very direct, two countries, you know, engaged in conflict. The other one in the Middle East is a little bit more messy in terms of there's multiple players, some of them are state actors, some of them are not. How do you look at their impact on an economic basis in the United States? Obviously, we're spending money, we're kind of fighting these like proxy wars. We obviously dropped, you know, the bombs in Iran. What's kind of your take on these two geopolitical conflicts?

• 38:42Speaker 04

  You know, I'm laughing because this is the first time anyone was asking me that question in that way. It's just blunt, it's to the point like, hey, how does this impact the US economy? And this is what I do for a living. I don't, I don't sit around thinking about the importance of a geopolitical event from some sort of normative moral perspective. My, my, my anchor is the market. So thank you for asking it that way.

• 39:04Anthony Pompliano?

  The market is the truth. The market is the truth.

• 39:07Speaker 04

  It is. And you know what it is? Now, look, look, 60,000 people being killed in Gaza is a tragedy, even if it doesn't impact the market, you know, so like, that is, that is correct. However, we're here to talk about the markets. We're not here to make the world a better place. That's just a fact. And so I always tell investors, they need to separate the humanity of observing an issue and what their job is and what their fiduciary duty is. And so let's talk about Middle East first because it's cleaner in a way, even though you're pointing out that it's messier, but from a perspective of market relevance, I think it's simpler. Anything that happens in the Middle East, if you want to look at it from an investment perspective, you're going to ask yourself a very simple question.

• 39:50Speaker 04

  Will this impact the transit of an oil barrel from oil fields?

• 39:56Speaker 04

  In Saudi Arabia, through the Strait of Hormuz. If the answer is no, you should not care about it. You should not incorporate it into your daily routine as someone with a fiduciary duty to yourself or for your clients. I mean, it's that simple. And so, on October 8th, one day after the Hamas terrorist attack against Israel, one day after, I wrote a note to my client saying that the next six months, year, two years, three years of cacophony of geopolitical risk is not going to matter. Why? Because Iran-Israel enmity has to basically boil over and spread into the oil-producing and oil-transportation parts of the Middle East. And the fact is that in 2022,

• 40:41Speaker 04

  Iran and Saudi Arabia concluded a detente that nobody talks about, nobody mentions at all. But it's a detente that's held and that works, and it's fundamentally about this. Saudi Arabia has decided to become a modern economy to undertake very significant socioeconomic reforms. And it has given up a large portion of its former sphere of influence to Iran and just said, "Look, you want Iraq? Go ahead, knock yourself out, we don't care." Saudi Arabia has effectively said they don't care about the Sunni-Sheikh split, they care about becoming a modern economy. And it's that detente that has meant that every piece of retaliation by Iran and its allies has not impacted what matters for the markets. You know, so in other words,

• 41:26Speaker 04

  Houthis are targeting the Red Sea not because they can't reach the Persian Gulf, but because they don't want to upset this detente. And, you know, the media is just not talking about this because I think in the US we have a very, very discriminatory and honestly, a stereotyping view of this region. We see it as very backwards and riven with sectarian violence. And so, we cannot possibly imagine that these two countries basically came down of their own volition, really without any help from the US or anyone else, and said, "Look, sectarian conflict between us is unsustainable and it's holding us back." And so, I am actually very bullish in the region. I would go as far as to say Iran and Israel can go ahead and lob missiles at each other for the next five years. You, as an ambassador, should probably not care.

• 42:13Speaker 04

  Now, Russia-Ukraine, I think that war is effectively already a frozen conflict. And so, you know, there's nothing really, there's no way for it to really change. Both sides are really stuck. And too many commentators over-index on President Trump's role in this. You know, they see him as trying to hold Ukraine back, which is nonsense, because Ukraine was already held back by its own troop deficiencies, by its own, you know, material weakness relative to Russia. And I think that a forever war does not serve Kiev's interests, because they cannot possibly maintain a forever war with Russia.

• 42:55Speaker 04

  So, in other words, you could just think of President Trump as kind of like the man of the moment. The moment is the war is frozen. And these lines have to be delineated, these sort of sphere of influence lines. So I do think that over the next six to 12 months, we're going to have some sort of a tacit ceasefire, some sort of a, you know, frozen conflict. Peace treaties seems too far-fetched to me, but I mean, both sides have been talking about it, so maybe I'm too bearish in that. But I don't think that you're going to see more risk emanating out of the Russia-Ukraine conflict. And no, I don't think Russia's going to evade anyone else. They've had their hands full with Ukraine. And while they did conquer a fifth of its territory, you know, I would not classify their military performance as excellent.

• 43:39Anthony Pompliano?

  You did not mention whatsoever the American technology or the American spending of

• 43:46Speaker 04

  Oh, yeah.

• 43:47Anthony Pompliano?

  bombs, weapons, technology, etc., going there, which I take as you don't think it's really that important in the evaluation for investors in the market. Is that true?

• 43:57Speaker 04

  Yeah, I don't think so. You know, it's a little bit of a broken-window view. I mean, yes, US sends money to Ukraine, but like, let's not kid ourselves, they're spending it on US weapons. So I don't think this is a huge drain on US Treasury. Certainly nowhere near the fiscal outlays that the US has done on itself. You know, this is a pittance compared to what the US has spent on, just woeful spending domestically, in many ways, on inefficient ways as well. And also, the reason I don't think it's a big deal is because I think it's ending. You know, effectively, the war is ending, so I don't see the trajectory of this going to a further burden, financial burden on the US.

• 44:40Anthony Pompliano?

  One of the geopolitical risks that I don't hear a lot of people talk about from the finance community, but I hear all of my national security friends, you know, I was in the military, I got tons of friends that were in intelligence positions, all this kind of stuff, is domestic terrorism. And one of the things, there's a gentleman on Twitter, he always says, you know, how many foreign sabotage teams are on our homeland soil? And we're starting to see, you know, there was obviously the forest fires in LA where it seemed like some of them were natural. And then there was like, okay, now, now people are going to try to start these. They're, they're actually going to destroy property. They're going to create problems. We recently saw a situation, I think it was in Idaho,

• 45:22Anthony Pompliano?

  somebody set a fire, they called in firemen, they started shooting at them. Yeah, there's many of these attacks that have happened kind of across the United States. Usually, they tend to be fairly unorganized. They tend to have somewhat controlled amount of people who are affected. A car drives into a parade or whatever. It's very sad. It's very, I think, you know, we wish that we didn't live in that society. But also, it's not like, you know, kind of very large events that have happened in American history. And so is that something that you pay attention to? You worry about? Is that something from a financial standpoint, you think kind of falls in that geopolitical, is actually like, it's really domestic, but there's still this like terrorism component to it?

• 46:01Speaker 04

  Well, you know, I actually landed in Spokane, actually, the day that that fire broke out in Idaho. I'm in interior British Columbia, spending July 1, Canada Day, and July 4, Independence Day, out here in the woods, teaching my, teaching my kids how to survive in the wilderness, you know, which is, I guess what you would expect a geopolitical strategist to be teaching their kids. So to answer your question, I'm very familiar with this, and I think about it all the time. But as we saw after 9/11, or any really momentous geopolitical calamity, it's very, very, very important not to be bearish.

• 46:37Speaker 04

  Like that's, that's my number one advice. Why? Because when there's a geopolitical calamity, particularly a terrorist attack, it's no holds barred. Like, you know, like you can't be like, well, the Fed is going to be prudent because of inflation concerns. No, they're not. You know, the country just got attacked by terrorists. It's almost invariably bullish for assets and for the economy. It's going to stimulate activity. Things are going to move. Things are going to catalyze. If something was inefficient, it's going to become efficient. I mean, think, think about COVID and the pandemic. Like President Trump enacted Operation Warp Speed,

• 47:16Speaker 04

  where he effectively told, he put a general, General Perna, incredible hero that nobody really knows about, but General Perna was put in charge and he said, okay, what do you guys need in the biotech space? Okay, you need this. What do you guys need to regulate? How much money? Let's go. And so, that's why, like, if you think about nine 11, you know, it wasn't bearish for the US economy or US markets. And the answer is absolutely no. There's a period where, of course, markets have to digest the agita and then policymakers react to that. And that's why we all have to be that second order investors, you know, that second and third order. We can't be stuck in the first order. So should you fear terrorist attacks domestically?

• 47:59Speaker 04

  Absolutely. But as a human, not as an investor.

• 48:04Anthony Pompliano?

  Marco, where can we send people to find all your great work online? It's always, whenever you put something out, it's kind of like a stop everything and go read. Where can people find that stuff?

• 48:13Speaker 04

  You know, most of my written work is behind a paywall because of course I, I have to, I have to finance these visits to the, to the woods by my children. So most of it goes to clients. However, I do have a podcast. It's called Geopolitical Cousins. So if you want to just listen to some, you know, it's a mix of humor and I hope useful analysis and it's not really focused on investing on the markets. It's more just my geopolitical thoughts. And then I'm very active on LinkedIn and X as well. And of course you can just reach, reach out to me. You can go to my website, geopoliticalalpha.com or bcrresearch.com and, and read up more about what I'm doing.

• 48:54Anthony Pompliano?

  Amazing. Well, thank you so much for taking the time to do this. I always enjoy talking and the world is a crazy, complex, uncertain and chaotic environment these days. And so somebody like you is obviously very valuable in terms of your insights. So we'll do it again in the future.

• 49:06Speaker 04

  Okay, that's very kind of you. Thank you so much. And happy 4th of July and July 1st.