#847 How Russian Sanctions Will Affect The U.S. w/Darius Dale

Darius Dale is the Founder & CEO of 42 Macro, the leading macro risk manager adviser. For today's episode, my brothers Joe and John helped fill-in and conduct the interview. In this conversation, they discuss the macro economy, reaction to Russia/Ukraine war, The Fed raising interest rates, and what you should be considering as you're investing your capital during these uncertain times. Darius joins us every Thursday on "The Best Business Show." This week, Darius joined us in our Miami studio. To see the video of the interview, go to "The Best Business Show: LIVE" YouTube Channel ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone. Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= Today’s episode is sponsored by Abra. Based in California and backed by top VC firms, Abra is an all-in-one simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Join nearly 2 million users by downloading Abra from the Google Play or Apple App store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested — now conquer. ======================= DeFi Technologies represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at defi.tech =======================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Darius Dale is the founder and CEO of 42 Macro, the leading macro risk management advisor. In this conversation, we talk about what's going on in the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and also what you at home should be thinking about as you invest your capital. I really enjoyed this conversation with Darius, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. Today's episode is brought to you by Exodus, the world's leading desktop, mobile, and hardware crypto wallet. They offer beautiful, user-friendly blockchain products that sync across all of your devices, making it easier

• 0:46Anthony Pompliano?

  to send, receive, and exchange over 150 or more crypto assets in one place. And with world-class customer service available to you 24/7, Exodus always has your back. But the fun doesn't stop with staking and trading. They recently launched a new NFT marketplace where you can buy and sell your favorite NFTs on the Solana network. By partnering with the popular NFT platform, Magic Eden, they're offering the Full Monte Unverified Collections, with more added every single day. Ready to check it out for yourself? Run, don't walk. Over to exodus.com/pomp for your free download today. Again, if you want the world's leading desktop, mobile, and hardware crypto wallet, go to exodus.com/pomp today. Today's episode is sponsored by Abra. They're based in California, and they're backed by

• 1:30Anthony Pompliano?

  top VC firms. Abra is an all-in-one, simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral, and earn interest with up to 13% APY on stablecoins, and 7.15% APY on Bitcoin. You can join nearly 2 million users by downloading Abra from the Google Play or Apple App Store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested, now conquer. Abra, conquer crypto. Go check it out today. This episode is brought to you by DeFi Technologies. DeFi Technologies represents what's next in the digital economy. They're providing simplified trusted access to crypto, decentralized finance, and web three investment opportunities.

• 2:16Anthony Pompliano?

  Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single stock purchase on a regulated exchange. DeFi Technologies is currently listed on the U.S. Exchange at DEFTF Stock Ticker and the Canadian NEO Exchange at DEFI. For more information or to subscribe to receive company updates and financial information, visit their website at defi.tech. I'm really excited about what these guys are doing. I've become an advisor to the business and I highly suggest you go check them out. Go to their website at defi.tech today. All right, let's get into this episode. I hope you guys enjoy this one.

• 2:57Speaker 01

  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.

• 3:20Anthony Pompliano?

  All right, we have Darius in studio today. Darius, how are you doing?

• 3:22Speaker 02

  I'm wonderful, Joe. What's up, man? How you doing?

• 3:24Anthony Pompliano?

  Good. Thanks for coming in, man. Are you still in Miami?

• 3:26Speaker 02

  Yeah, I'll be in Miami till, uh, till May, till May.

• 3:28Anthony Pompliano?

  Oh, shit. Oh, long, long term. Last time you were in studio, I thought, uh, were you here last week or no?

• 3:34Speaker 02

  Yeah, last week.

• 3:35Anthony Pompliano?

  Oh, you came in studio.

• 3:36Speaker 02

  Where were you last week? You were traveling around the world, dude.

• 3:38Anthony Pompliano?

  See, I was talking shit earlier, like, like no one tells me things. But little did I know that you were actually here last week and I, uh, I was gone. Uh, I was in Tanzania.

• 3:47Speaker 02

  Tanzania? What the hell is in Tanzania?

• 3:49Anthony Pompliano?

  Uh, I was climbing Mount Kilimanjaro.

• 3:51Speaker 02

  Did you call, did you summit it?

• 3:53Anthony Pompliano?

  Summited, yes.

• 3:53Speaker 02

  Congratulations, man.

• 3:54Anthony Pompliano?

  Thank you. I appreciate that. And I was with, you know who Chris Long is, the NFL player?

• 3:58Speaker 02

  Oh, yeah.

• 3:59Anthony Pompliano?

  Uh, so we were with his, I was with his, uh, charity organization, his foundation. And we were raising money to install water wells.

• 4:06Speaker 02

  Oh, dude, that's awesome, man. Good for you, man.

• 4:07Anthony Pompliano?

  So we, uh, it was a group of me and 10 other people. We raised about $140,000. Uh, we went and saw a bunch of sites, some villages, some schools, and saw what the wells did. And it'll pay for, uh, two to three wells.

• 4:20Speaker 02

  Dude, that is awesome, man. Really good for you.

• 4:21Speaker 03

  It's a good trip, man. Yeah, it was 10 to 12 days, but happy to be back here in Miami now.

• 4:25Speaker 02

  Oh, of course, man. Look, dude, give back, pay it forward. That's the most important thing we can do as human beings.

• 4:31Speaker 03

  It's fun, man. All right, let's get to it. What is going on? First off, let's just get your view of, I was gone, right? So I came down the mountain and they're like, yo, Russia invaded Ukraine.

• 4:44Speaker 03

  I'm like, oh shit, I had no idea. Like, my phone was off. I'm like, all right, cool. Let's talk about that first. So what is going on when it comes to the US's role in this from a financial perspective, right? When it comes to Jerome Powell, everything that's happening in the market, like, how should people think about the US's role in what's happening in Russia and Ukraine?

• 5:01Speaker 02

  Yeah, so the US is definitely asserting its dominance in terms of, you know, being the global reserve currency and, you know, kind of the world's largest military and kind of pressing their thumb on top of, you know, a couple really key organizations. If you think about NATO, you think about SWIFT, which is the kind of bank messaging platform that everyone trades and settles finance with. And so, you know, kind of being the kind of lead dog there, you know, they can put that influence over the whole world and say, hey, look, we're effectively going to iron curtain, put an iron curtain around Russia, the Russian economy, Russian oligarchs, you know, Putin himself in terms of his assets and making it very difficult, making it very painful for them to continue what they're doing. Obviously Putin is pretty, uh, pretty resolute in his game plan here, but the reality is the Russian economy is going to suffer tremendously as a function of this if it's not

• 5:46Speaker 02

  already suffering.

• 5:47Speaker 03

  And how much of a role does that play, do you believe, right? You're not a war strategist by any means, I don't believe. But when it comes to the financial implications, right? I think part of this is like, let's cause some harm without dropping troops off and starting to go to war ourselves from a financial perspective. How does this play out? Does Russia renege on this pretty quickly and say, hey, look, this is much worse than we expected. We weren't able to move as quickly as we thought we could from a military perspective. Our citizens are really hurting financially now. We're cut off from the world. Just talk me through kind of how you see that playing out.

• 6:14Speaker 02

  Yeah, so there's a lot. It's a loaded question. I'll do my best to kind of summarize the different aspects of it, but, you know, so let's start by saying Putin is a psychopath. It's pretty clear. And I don't mean that like as a joke. I mean, like, if you look at any sort of like studies, psychopathy, like, he very much checks all the boxes. I know a few people who check all those boxes. Anyway, so, um...

• 6:33Speaker 03

  You could say John's name.

• 6:36Speaker 02

  Definitely not John, definitely not John.

• 6:40Speaker 02

  Anyway, so my point is, you know, Putin's not going to feel any remorse, no matter how bad it gets for the Russian economy or the Russian people. So, you know, his military objectives are his primary objective, right? And, you know, kind of showing that force. And so we have to carry on, okay? If this continues and these guys continue to go, it's very likely that the Ukraine eventually loses whatever, you know, resistance that they're putting up. You know, just a matter of time, not a matter of if. And so in that regard, you know, as long as, you know, Russia is occupying Ukraine, which could be indefinitely, right? They're not particularly popular in Ukraine. It's not like they're liberating a bunch of Russians, they're actually pissing off a bunch of Ukrainians. And so as long as they're occupying Ukraine, you could expect to have Russia sort of cut off from global financial markets for an extended period of time. And so what does that do? You think about the second and third order effects, right?

• 7:24Speaker 02

  You know, you've already seen the price action Bitcoin, was that yesterday or two days ago? Where stocks were down and Bitcoin was up a tremendous amount. You know, you're going to see, you know, assets like that become sources of liquidity for, for, you know, Russians, both citizens and people who are politically connected to Putin. And then there's also the third order effect of, you know, kicking Russia out of these indices, you know, kicking Russia out of, you know, basically the global economy, you know, really sort of kind of rejiggers the entire puzzle, if you will, in terms of the weightings for other countries and indices, the, you know, the weightings for other countries in terms of the supplies of commodities and goods. You know, so it kind of puts a lot of, you know, costly friction on top of the global

• 8:07Speaker 02

  economy and on top of global financial markets at a very kind of awkward time, right?

• 8:11Speaker 03

  And how do you think, so there's been a lot that's happening, obviously, from, from companies, products, all this stuff kind of moving out and removing themselves from circulation in Russia, saying we're not going to sell goods, services there, we're not going to do those things. But when it comes to the US dollar specifically, right? As the global reserve currency of the world, how does this work in Russia if they actually get cut off?

• 8:30Speaker 02

  Yeah, I mean, so you can, they're effectively cut off now, right? Like, it's, you know, they're not, all of Russia's major banks, I think, with maybe the lone exception of one bank or something like that, are effectively cut off from SWIFT. So that means, I mean, their assets are frozen. And so if they try to, you know, if they, I mean, they're bankrupt. There's no other way to describe it. I mean, you know, if you can't meet your liquidity and your daily financing needs, particularly as a bank, obviously in a fractional reserve banking system, you're bankrupt. So that's an issue. Obviously, you're going to see runs on Russian banks, but it doesn't really matter. Like, what, there's no, like, what even is a Russian bank if it's cut off from SWIFT? What even is a bank if it's cut off from SWIFT, right? So like, I think, you know, this is, this is the key takeaway.

• 9:11Speaker 02

  It's like, they can inflict a tremendous amount of force upon Russia, like the Western society, Western world, US, NATO, all those societies, without ever actually, you know, firing a gun or shooting a missile. And I think that's exactly what's going to happen. And we're, we're early in this process. I mean, as long as Russia remains cut off from global dollar financing and is not having that materially replaced, because it's not clear that China, President Xi, is really on board with what's happening right now. And as long as China's not really offsetting that to a tremendous degree, the Russian economy is going to shrink and continue to shrink and shrink and shrink and shrink.

• 9:44Speaker 03

  And is this something where you think that they'll eventually turn to a digital asset like Bitcoin? Or you think that they'll eventually try to make their own currency digitally or something else like that?

• 9:53Speaker 02

  Yeah, so they have their own version of SWIFT, right? Russia started working on that a few years ago. It's, it's the Russian version of SWIFT, so you can imagine. It's not exactly what you want. It's not the same thing. Yeah, exactly. You know, you have like the iPhone that's made in Taiwan, and then there's the knockoff iPhone made in Russia, and I'm guessing it's a little bit worse. Touchscreen doesn't work. And so that's exactly what's happening, right? Like, there's, you know, there, I want to say it's something like 400 or something, financial institutions that are on that, but none of the major ones, none of the ones you, you need to do business with if you're trying to do global international markets. I mean, Russia was the world's largest economy before the start of.

• 10:31Speaker 03

  Yeah.

• 10:31Speaker 02

  You know, so this is a major, you know, it's a major blow to the global economy, but it's not as big of a deal to the global economy to lose Russia as it is for Russia to lose the global economy. Now, I say that to say this, like, clearly there's an issue here with respect to energy prices. You know, one analysis I was doing, I see your brother's charts, I'm not sure if you guys have them or not, but. The one, when you look at energy price spikes, you know, historically, you know, and how we sort of, how I measure energy price spikes is sort of, you can look at the, the speed of the change in price, right? Like, um, and so kind of like the, the class, the, what tends to line up best with, with having impact on the economy in terms of perpetuating recessions or perpetuating big drawdowns in the equity market. Anytime you look at it to

• 11:14Speaker 02

  energy price spike over, you know, a hundred percent on a two-year basis, like, so, you know, you tend to get some economic slowdown or recession or a big drawdown in the equity market. And we're already over that. But more importantly, we're about to hit the two-year anniversary of the negative energy price for March of 2020, right? And so not only are we going to be like up, you know, a hundred and some percent, but we're going to be like up, you know, maybe several hundred percent, you know, from that particular low, obviously, that's a short-term trading low. But, you know, this is, um, I say all that to say this, which is, look, we were already in an environment where growth is trending lower. Now, it's bouncing now. Again, I've talked about this at nauseam, so I don't need to bring it up here, but it's bouncing now, but the trend is lower in growth. And it's very likely that the trend is lower to a place that's below, below trend, below, below

• 11:59Speaker 02

  our potential growth rate, just as a function of all the tightening we've seen in the economy already from monetary policy, in terms of rates repricing, already from fiscal policy in terms of not, you know, uh, you know, uh, getting the Build Back Better program passed and basically returning back to our normal fiscal state. So this is an economy that is already weak and is about to get its knees chopped off, right?

• 12:21Speaker 03

  Yeah.

• 12:22Speaker 02

  As a function of, of this crude oil energy price spike.

• 12:24Speaker 03

  Yeah, I think that's a good way to put it because when you look at what was expected this year, right? I think we all saw that maybe six, seven rate hikes were expected at some point. Jerome Powell spoke yesterday and said that instead of a 50 basis point or a half a point hike, now they're going to think about a, here, he's going to recommend a quarter of a point hike or a 25 basis point hike. How difficult does what's going on in Russia and Ukraine make Jerome Powell's job now? Or is it kind of separate in your mind?

• 12:47Speaker 02

  Dude, he has the worst job in the world. It's like, so like, if you, he's getting grilled by the senators today, too. Like, and like, on one hand, you have the sort of, he's trying to sort of promote like, hey, look, this is what we did. This is why we maintain such easy policy. Policy, we have wage growth at a 20 year high, we have unemployment rate, you know, back down at our long run projections, da, da, da, da, da, da, da. And then all the Republican senators are like, dude, but like I have families in South Carolina, I have families in Pennsylvania who can't afford, you know, heating bills or put gas in their car and food in their tables or can't afford their medicine, their prescriptions and things like that. Like, you know, like there's a real challenge and a real crisis of inflation in the country right now. And obviously that made him uncomfortable and he effectively was forced to say, hey, look, we, we, we're going to prioritize inflation

• 13:32Speaker 02

  more so than those things I just highlighted, which is all the fun stuff. And this is why the market's not, not appreciating that now, because the reality is, look, we're, I said this yesterday on Real Vision, which is the inflation is not, we all know as economists that inflation is going to come down on a year over year rate of change basis in 2022. It's because we were.

• 13:52Speaker 03

  You can't compound that for multiple.

• 13:53Speaker 02

  Exactly. We're comping against, you know, very, very elevated rates of inflation. The problem is not the year over year rate of change of inflation. It has nothing to do with anything where the Fed's considering or the financial markets are considering. What matters is the momentum in inflation. And the problem is we're actually building momentum and inflation, not losing it, which means that wherever we bottom in terms of this year over year or this mechanical process of, of accumulating base effects, you know, increases in base effects. We're going to bottom at a much higher level. That's very uncomfortable and significantly higher than the Fed's mandate. So long as this, this momentum continues. I mean, a couple of stats on that. Median Fed or the median CPI, which is median CPI for everything in the consumer price index basket is accelerating at a 7.1% annualized pace in January. That's the highest number we've seen of all time.

• 14:38Speaker 02

  And then sticky CPI, so stuff that doesn't fluctuate very much, that number is accelerating at a 7.5% annualized pace. That's the fastest rate we've seen since in 30 years. So like the, they, not only do they need to do something to get inflation down back to their target, but they need to do something to stop the buildup of inflation. They haven't even stopped the buildup of inflation, which is something I think people are missing as it relates to the kind of next three to six months of Fed policy.

• 15:04Speaker 03

  Yeah. What do you got, John?

• 15:06Speaker 04

  Yeah, it looks like Russia's been planning this almost. It looks like China's not really on board, but they were growing their gold in their reserves. So as an investor, like. It looks like this is affecting the US markets. The US markets have been pretty volatile in the last week or so. But are people already have people already priced like the rate hike in enough? And like, kind of the uncertainty that's going on right now globally? Like, it affects because CPI will go up, gas and energy will go up. But the overall like technology company, how much will they really lose? And like, as an investor, should you be nervous about that right now?

• 15:42Speaker 02

  Yeah, great question. So this has less to do with sort of company fundamentals and more to do with the ecosystem. That is the global financial markets, right? And so, you know, tightening liquidity, all else, all things being equal, will reduce asset market valuations, you know, and particularly in risk assets and things that you have to take credit risk or duration risk, any sort of risk, liquidity risk to take advantage of. And so, you know, something like a Russia, Ukraine, you know, in an environment where growth is trending lower, is something that can have a, you know, real deleterious and potentially meaningful impact on that ecosystem because the sort of foundational principle of growth slowing is an issue, right?

• 16:24Speaker 02

  If we were doing this in like, the summer of 2020, or even, you know, first half of 2021, it would have been absorbed. It would have been a few headlines, a few weeks of headlines, but then it would fade to the background because we're all high fiving each other about how good corporate profits are, and how robust GDP growth is, and how good the labor market is. The problem is, we're on the backside of those sign curves. And, you know, in terms of how our brains are wired to think, you know, Danny Kahneman, Amos Tversky's done a tremendous amount of work on this with respect to prospect theory. But our brains are effectively wired to think in rate of change terms and to think it relative to the outcomes as opposed to what the actual outcome is. And so, we're just in a bad point in the broader growth, inflation, policy, valuation, positioning cycles.

• 17:07Speaker 02

  For this not to be a problem and that that's the real issue, John.

• 17:11Speaker 04

  That makes a lot of sense. And what do you think about Jerome Powell's comments about two global reserve currencies and the possibility of them coexisting?

• 17:18Speaker 02

  Oh, I didn't see that, but to me, that sounds more like heresy. And it's not to say that I have a view on that or disagree with it. It's just to say that, again, the US, and this is my foundational view for a really long period of time, which is the US has the biggest guns and the biggest military and the highest sort of incentive structure associated with maintaining the status quo in terms of the global reserve currency system. So you can expect a nuclear war before we get rid of that, that, that status, get rid, give that, that, that exorbitant privilege up. That's Mark Darius Dale said that.

• 17:52Speaker 03

  Yeah. Are you concerned about the nuclear side when it comes to what's going on now? Do you think that's the main reason why the US and other strong countries have stayed out of kind of dropping troops off and doing these things is because Russia's vast nuclear weapons?

• 18:06Speaker 02

  Yes. Putin, again, Putin is a psychopath, he's a thug. And I think, you know, when thugs get pushed, you know, their image becomes the most important aspect of what it is that they're doing, right? It's not about sort of thoughtful calculation of is this the right choice? Is this going to have consequences or not? It's more about I have to portray this image as a tough guy. I have to portray whatever, you know, legacy view or legacy image that I've already put out there. And so to me, that heightens the chance that we do have some sort of nuclear conflict. Now, is that probability more than 10%? Probably not. You know, again, like I said, it's, it's very unlikely that Ukraine can hold off Russian forces, Russian forces of, you know, that magnitude for an extended period of time.

• 18:48Speaker 02

  You know, they're having a trouble because they miscalculated on how much resistance they were going to initially get, right? You know, you got, they got popped in the mouth a little bit. It's like trying to, you know, tackle a little guy and it's like, oh, no, little guy.

• 18:58Speaker 03

  They're stealing your tanks and stuff. John saw they were selling them on eBay.

• 19:06Speaker 02

  400 grand, you could have it.

• 19:09Speaker 03

  I think it was like Ukraine or someone might've said, like, if you sell it, you don't have to pay capital gains tax.

• 19:17Speaker 03

  So they're incentivizing people to take and steal the tanks, which is funny.

• 19:20Speaker 02

  Yeah, no, they should. I mean, but look, at the end of the day, so summarizing what I was trying to say, which is, look, I think Putin will use whatever force is necessary because his image is at stake. His tough guy image is at stake. Has nothing to do with what's happening in Ukraine and how much they need to take over Ukraine. I think he's willing to do whatever's necessary. Will he need to do whatever's necessary? Most likely not. They're gonna, you know, it's probably a matter of days or weeks before they ultimately succeed in this mission. But the problem is, what does success look like on the back end? You know, what is, are you gonna occupy Ukraine indefinitely? That's a, that's a tall order. I mean, we had a very difficult time occupying Iraq and, you know, kind of keeping boots on the ground in Afghanistan with very little to no success. I mean, actually, sorry, I wouldn't say no success, but you saw the second we pulled out of Afghanistan,

• 20:05Speaker 02

  how unsuccessful that was.

• 20:06Speaker 04

  Under two weeks, it was already.

• 20:07Speaker 02

  It was like two days.

• 20:10Speaker 02

  And so, and so the reality is, it's, this is just a bad choice by Putin in terms of trying to take advantage of a real weak in, of a real, you know, pernicious time in the global financial structure, right? Like, we have already high inflation, we already got policy tightening coming ahead of this. But my financial markets are volatile, economic growth is trending lower. You know, this, you know, talk of recession and by the back end of the year, beginning of next year, which by the way, I think I was on your program a couple of months ago, and I think I was, remember I said that?

• 20:39Speaker 03

  Yeah.

• 20:39Speaker 02

  Two months ago, I was like, you know, but everyone's gonna be talking about recession by the end of this year, and now it's like a.

• 20:43Speaker 03

  That's because you're smart.

• 20:46Speaker 02

  Forty-two macro.

• 20:49Speaker 02

  No, no, no, it's, I just wake up early and do a lot of work.

• 20:53Speaker 04

  What could, what could get the Russian economy, like, back to where it was without, with these sanctions in place? Is there anything that he can do?

• 21:00Speaker 03

  Stop doing dumb shit?

• 21:00Speaker 02

  Yeah, doing dumb shit would be the first thing. Assuming they don't stop doing dumb shit. The reality is, is you need to replace those customers, right? And to me, this is, this is something that is. Part of the, this is something I'm not shocked by. It's just, it's so cool to see and be alive in this particular time because we're seeing the social media era and the social media itself really have an impact. Like companies even are front running the sanctions. The sanctions are a lot largely, to a large degree, are catching up where a lot of these companies have moved in terms of, you know, basically cutting off Russian, you know, Russian demand for Russian products and, and access and financing to Russian entities. Like it's, it's, you know, it's like a whole global movement to shun Russia and kick Russia out of the system for their bad behavior.

• 21:45Speaker 02

  And so, you know, to me, it's like, I, I don't know what Russia can do if, if, you know, individuals and entities are making conscious choices at the micro level to say, I don't want Russian goods or services. And that, that to me is a real death, death no.

• 21:59Speaker 03

  Well, I think there's a couple of things too. Like obviously to your point, the speed of information is fascinating to see in real time when it comes to a war that's happening in 2022, right? You're literally seeing things on social media. Uh, sanctions are getting released and to your point before, people are front running them and doing these different things. It's just never been like that before with the age of social media and the speed and the technology that we use today to get information. So I think that's, that's obviously interesting. But then the companies, to me, it almost feels like some of them are just piling on at this point, right? Like, uh, the one I was looking at earlier was Nike. Nike said, we're not doing online sales anymore in Russia. And everyone's like, yeah, congratulations. Like, good for you. And it just turns out that all the delivery companies already removed themselves. So they can't deliver products. So it's like, all right. So if you can't deliver anything, then you can't do online orders.

• 22:42Speaker 02

  Taking a stand.

• 22:42Speaker 03

  Yeah. But, uh, so I think there's some of that for sure.

• 22:46Speaker 02

  Definitely.

• 22:46Speaker 03

  But, but yeah, but when it comes to, uh, individual investors, right? I think a lot of people like to look at kind of what the Federal Reserve is doing, what Russia is doing, what Ukraine is doing. But personally, most people probably just care about what their finances are doing and their investments are doing. How do you recommend as someone who sits in a chair that watches all of this, how an individual thinks about these, these, uh, actions and what's exactly happening?

• 23:06Speaker 02

  You'd be better off not having any thoughts as an individual. I mean, that's for sure. Like this is, I mean, even as professionals, the geopolitical risk is the number one thing that we don't, um, have models for and they can't forecast, but that can impact markets. Right? And so, you know, you know, typically what we, the general rule of thumb on Wall Street, and I think it's accurate, you know, most rules of thumbs are generally lead you to making money on Wall Street. General rule of thumb is, is. You know, it don't, don't invest on things that you can't have edge on. And this is clearly one of those things where we don't have edge on. Although we're starting to get more edge, right? You can start to see where the ball is going. If, all right, we take away this many barrels of Russian crude here. And we take away this, you know, access to financing for these Russian banks. Who's got the counterparty risk, things of that nature?

• 23:50Speaker 02

  Although I think, you know, it seems to be that, um, you know, the, the, the, the central banks in the, in the respective geographies will, will take care of that stuff in terms of eliminating or mitigating counterparty risk. But you can start to see how this will play out. Now that we're starting to see the West's response and some of the, some of the micro responses. So it's a little bit easier now, but you know, going back a week ago or two weeks ago was a lot harder before we kind of knew the full spate of sanctions and things of that nature.

• 24:16Speaker 03

  I think, I think it was you that was talking about the strategic oil reserves of the United States before.

• 24:20Speaker 02

  Peeing in the ocean?

• 24:22Speaker 03

  Yeah, yeah, yeah, exactly. So, but oil's up over a hundred or a hundred and ten dollars now or something like that, right? But like, and there's obviously a geopolitical aspect of this of like, kind of who has oil and who doesn't. But how does this play out? Does this just keep rising? Does gas and energy and everything else get more expensive? Or like, just in your mind, how do you think it happens? Specifically here in the United States?

• 24:41Speaker 02

  Yeah, so that's what prices are designed to do, right? Particularly for commodities, you know, they're trying to, you know, nothing cures high prices like high prices in terms of, you know, perpetuating a supply response. The strategic oil reserves or any country's oil reserves are going to be inadequate to actually, you know, offset Russian crude. I want to say was Russian, Russian crude exports are 5% of global consumption. That's an enormous number. I mean, where are you going to find 5% of global consumption, you know, overnight? There's nobody, you know, it's, it's largely rumored that OPEC, which claims to have a tremendous amount of spare capacity and could in theory turn on, you know, these, you know, their supply, um, supply spigot. Most people I talked to in and around the energy space that, you know, cover energy companies, cover, you know, commodities and things of that nature, they, they would push back against that.

• 25:25Speaker 02

  That, you know, OPEC is basically a lying, a bunch of, a bunch of charlatans, basically. You know, like, yeah, like, they, they don't have the spare capacity. And this is something, um, you know, shout out to, uh, McKinsey Davis over at Sandstone out in San Francisco. Yeah, they do really good work. In terms of understanding where, you know, kind of understanding like the geology around natural resources investing, they're probably among the world's best at that. And he said this to me probably in 2016, where he's like, yeah, they've harvested all the good acreage down there in, I'm gonna say Texas, but I'm Permian and Bakken and all these different Bakken, you know, all these different plays, Eagle Ford. And so what they did, when we had our energy boom in the US, you know, kind of like, you

• 26:10Speaker 02

  know, 2008 through 2014, if you will, you know, kind of just that, isolating that period, we basically went there, found the easiest stuff to extract and extracted it. And now, it's not that the oil doesn't exist down there in terms of our domestic production, because we are the world's second or first or second largest energy producer. It's not that it doesn't exist, it's just it's way harder to get now. And so this concept that like, you know, investors have been really surprised about the lack of supply response from, from US ENPs, energy, or US energy producers, upstream energy producers, and most people are saying, oh, they're just being disciplined, they want to return capital to shareholders, they want to raise the dividend, they're being smart

• 26:53Speaker 02

  because they don't want to crash like they did back in 2015 and 2016, or, you know, 2014 to 2016. I think that real analysis would suggest, no, it's just it's way harder to get these barrels out of the ground, the marginal cost for getting these barrels out of the ground is much higher. And so they need a much higher energy price so they can sustain that. And more importantly, they need the energy price to not be backwardated, right? The curve is backwardated, which means spot price is today's price is actually higher than the futures price, because the market is effectively demanding and scrambling for barrels. But what you need for these guys to actually start to really turn on those drills and actually start to put more capital to work to getting those harder to extract barrels out of the ground, you need an upward sloping curve, you need the curve to be in contango and that we're not there yet.

• 27:34Speaker 03

  How do you think about? I want to say Bitcoin's price specifically, but more in general, like as people who have followed Bitcoin for a long period of time, most Bitcoiners have followed a few different models, right? Plan B, stock the flow model, they've looked at halving cycles and they've been able to kind of determine or transport some prices over time. But things like this, to your point, there's no models when it comes to geopolitical conflict, right? So how do you think about this when it comes to Bitcoin or other digital assets, like pricing wise? Because to your point, there's no models for this. So how should individual investors think about price?

• 28:08Speaker 02

  Yeah, so I'll answer this question in two ways. Because that's a phenomenal question. The sort of first order effect, right, is kind of what we all would expect to see. It's digital payments, digital transactions, digital currencies will become incrementally more valuable once the world starts to realize the threat of centralized finance, right? And we've seen several examples of that year to date up in Canada and here, I think there's some guy who got his JPMorgan account frozen or something like that. We've seen several examples of weaponizing the financial system, right? And so if that's the case, then you're going to see more demand for those types of securities and those types of mediums to exchange wealth. The kind of second order effect, though, it's not just about what

• 28:52Speaker 02

  the price is, it's about the impact it has across investor portfolios, right? Like, so if you get this price lift, then you know, a lot of investors, in my opinion, if you're a hedge fund style investor or an institutional money manager and you've had crypto exposure in your portfolio at all in the last six months, you've had to take down that risk. And as a function of that volatility in your portfolio, you've had to take down a decent amount of risk elsewhere, to meet whatever your volatility target is, or there's different ways that funds do this kind of stuff. If you see price appreciation in Bitcoin and Ethereum, it can actually lessen some of that degree. But more importantly, if you actually see more price depreciation in something like Bitcoin and Ethereum, because people

• 29:35Speaker 02

  are actually selling those things to get liquidity, they can actually amplify some of that var shock, this sort of cross asset volatility. So I don't know the direct answer to the question, I don't know the directional answer to the question, but there are second and third order effects that I think everybody should be aware of.

• 29:49Speaker 03

  What do you think about Ukraine doing a GoFundMe for war through crypto?

• 29:54Speaker 02

  Great idea. Why wouldn't you? Why wouldn't you take advantage of any medium available to you to give yourself an advantage? Of course.

• 29:59Speaker 03

  Yeah. And how about airdropping stuff to people?

• 30:02Speaker 02

  That I didn't get. That was over my head.

• 30:05Speaker 03

  They canceled it. So.

• 30:06Speaker 02

  Oh, gosh. Yeah. I'm too old for that.

• 30:08Speaker 04

  You might be getting an NFT if you donate.

• 30:10Speaker 02

  I know. Yeah. I know. It's, look, I mean, I'm, I'm, I'm, look, I'm so proud of, you know, the Ukrainian forces and, and, you know, President Zelensky's bravery and standing up to Putin and his thuggery and nonsense. And it just, again, they might fall, but it's, it's really impressive to see what they've done thus far. And you can just tell there's a difference when you're, you know, you're, you're fighting for a cause versus fighting for some rich guy who is trying to play Monopoly.

• 30:35Speaker 03

  Yeah. I mean, Zelensky's in the middle of it, right? He's with the troops. He's on the front line.

• 30:39Speaker 02

  Yeah. Where the hell is Putin? He's supposed to be a thug.

• 30:41Speaker 03

  He's at the end of the table. You saw that picture of him at the, uh, yeah, the, the conference table is, you know, 50 feet long and four people are down at one end and he's at 50 feet on the other side.

• 30:50Speaker 04

  At the head of the table.

• 30:50Speaker 03

  At the head of the table.

• 30:52Speaker 02

  Can I say this? Putin's a little bitch.

• 30:55Speaker 03

  You could definitely say that.

• 30:58Speaker 02

  Tell them I said it too.

• 30:58Speaker 03

  That is.

• 30:59Speaker 04

  You know the story? He stole Robert Kraft's Super Bowl ring?

• 31:02Speaker 02

  That sounds familiar.

• 31:05Speaker 04

  Kraft basically showed it to him. He said, I like this. And then just walked away.

• 31:09Speaker 02

  Wait, what?

• 31:09Speaker 04

  Yeah.

• 31:10Speaker 03

  Yeah. Supposedly he stole his Super Bowl.

• 31:12Speaker 02

  Kraft, oh, you ran off on him like that?

• 31:14Speaker 03

  Yeah, Kraft, you gotta do something.

• 31:16Speaker 04

  He was like in Russia, obviously.

• 31:19Speaker 02

  That's, well, I mean, that's, someone fought for going to Russia. I was told not to go to Russia 10, 12 years ago. And it seems like that was the right choice.

• 31:26Speaker 03

  Yeah. I don't think I'm.

• 31:28Speaker 02

  I was told this by a Russian.

• 31:31Speaker 03

  I don't, I don't think I'm going to be going to Russia anytime soon.

• 31:33Speaker 02

  No. Russia and China, I think are two places off my list.

• 31:37Speaker 04

  It might be forever.

• 31:38Speaker 02

  For a decent, for a decent while. Yeah.

• 31:40Speaker 03

  I tweeted about the, the Olympic food in China. And the bots came after me.

• 31:46Speaker 02

  Oh, really?

• 31:46Speaker 03

  Yeah, they were.

• 31:48Speaker 02

  Oh, yeah.

• 31:48Speaker 03

  It got like, once it got to the point of like, you know, 10,000 likes, something like that, they all started coming in. It was accounts that were literally, you know, on Twitter, it says made, I tweeted it in February, it was February 2022 started. No followers, we're following no one. And basically, they all just had these like, fuck you, screw you, you know, all the normal stuff. And we're just like, you know, you're spreading lies, propaganda, all this stuff. I don't think I'm going to China anytime soon. I'm definitely on a list or something.

• 32:16Speaker 02

  Yeah, definitely. Hey, I gotta believe that anybody with, you know, free speech and free thought is on a list in China, right?

• 32:25Speaker 02

  They're short, they're short liberty there.

• 32:27Speaker 03

  Somewhere for sure. All right, Darius, thanks for doing this again. Guys, if you go to, what is it? 42macro.com, 42macro.com. I would say that you're the best analyst on Wall Street, but you live in Miami for now, so.

• 32:41Speaker 02

  I'm neither, I'm neither the best analyst on Wall Street, nor do I live on Wall Street.

• 32:46Speaker 03

  Yeah, that's right, you're in Miami.

• 32:47Speaker 02

  We're good at what we do, you know, we help, we help, we help regular people compete against Wall Street. Actionable macro research. Yeah, appreciate that, man. I'll let you guys next week, yeah.

• 32:57Speaker 03

  It's, it's very good. Make sure everyone go checks it out. Thank you.

• 33:00Speaker 02

  Follow you on Twitter as well. Oh, yeah, I'm at Twitter at 42macroddale. Appreciate y'all.

• 33:04Speaker 03

  Unbelievable follow. Thanks, Darius, for coming in again.

• 33:06Speaker 02

  Cheers, guys. You.

• 33:08Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.